Logistics - What's in a Word?
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“Logistics” has been a buzz word for a few
years now and the label has evolved into 3PL (“Third
Party Logistics”) and 4PL (“Fourth Party
Logistics”). Dare I say that 5PL is next on the
horizon? What really is logistics, what makes it such
a hot sector and why should it have importance to manufacturers
and consumers alike?
The dictionary defines logistics as the procurement,
distribution, maintenance, and replacement of materiel
and personnel. What’s the make up of a logistics
company, whether 3PL, 4PL or otherwise? The fact of
the matter is there is no blue print or hard set guideline
that defines a logistics company. Bob, the owner of
a single flatbed truck in Bedford, IN operates as Midwestern
Expedited Logistics. How does he distinguish himself
from UPS, the $30+ billion industry giant? Logistics
is just a marketing term that encompasses every aspect
of supply chain management. From transportation of raw
materials to factory to forwarding of finished goods
overseas to warehousing the product to the local distribution
to the retailer, logistics embodies the complete flow
of the supply chain. Not to mention the customs brokerage,
local dray, airport to airport transfers and supply
chain software. The label logistics can apply to companies
offering any and all of these services. Where does Bob
fit into all of this? If you need to make a local move
in Bedford, Bob’s probably the only game in town
and he fits the description.
The sector has seen increased interest from the financial
community. Logistics is one of the last bastions of
business process outsourcing that has not already been
fully consolidated. There is tremendous opportunity
for growth and consolidation is far from over. The industry
is extremely fragmented and even with UPS generating
$30 billion in revenue, it only controls a small percentage
of the whole industry. There are many market niches
that represent growth opportunity.
Improvement and efficiency in the supply chain affects
all of us. As shippers get more sophisticated and better
manager their processes, they can dramatically reduce
their costs. Though the entire savings may not be passed
on to consumers, competition will eventually trickle
some of the pennies on to the consumers. On the flip
side, better inventory management may decrease the frequency
of “clearance sales”, but did you really
need to buy the argyle sweater at 85% off? Logistics
may just be a buzz word and the en vogue industry for
many private equity groups, but it does have major importance
to the everyday working stiff.
