Distributors wary of 3PLs invading their turf

Third-party logistics providers (3PLs) are on "a collison course" with distributors for control of the supply chain. That's the conclusion of a recent survey of roughly 1,500 logistics and distribution executives conducted by Pembroke Consulting (www. pembrokeconsulting.com) on behalf of the National Association of Wholesaler-Distributors.

Over 50% of the Fortune 500 are already outsourcing some supply chain functions to 3PLs, and according to Pembroke Consulting, over 160 of the 200 largest 3PLs offer pickpack-ship services in direct competition to wholesale distribution.

"The traditional ways wholesalerdistributors make money and grow will be rewritten by a combination of external forces and the strategic responses of innovative supply chain companies," says Adam Fein, president of Pembroke Consulting.

3PLs often have higher service levels to the channel than a self-distributing manufacturer. In some cases, manufacturers can reduce or eliminate stocking requirements for their channel partners.

Outsourced logistics will have the greatest impact on industrial distributors, according to the Pembroke study. "Integrated supply has taught customers that they can get much lower prices without having to worry about value add. Industrial buyers will increasingly be tempted to negotiate directly with manufacturers, keep the price savings and hand off fulfillment to a logistics company." While wholesaler-distributors see 3PLs challenging them in such areas as warehousing, order management and order fulfillment, they don't expect to see their post-sales service and support functions seriously threatened by 3PLs... at least, not any time soon.

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