3PLs, What Business Are You In?

Tomorrow I will speak at a leadership forum organized by a third-party logistics provider (3PL) for its operations, IT, and sales teams. As I was preparing my presentation, a question popped into my head: 3PLs, what business are you in?

Actually, the question was inspired by a HBR blog post I read last month — The First Strategic Question Every Business Must Ask — by Anthony J. Tjan, CEO, Managing Partner and Founder of the venture capital firm Cue Ball. Here’s the opening paragraph:

What business are you in? It seems like a straightforward question, and one that should take no time to answer. But the truth is that most company leaders are too narrow in defining their competitive landscape or market space. They fail to see the potential for “non-traditional” competitors, and therefore often misperceive their basic business definition and future market space.

Mr. Tjan also writes, “Getting your business definition and competitor set right requires two things: first, an understanding of who your customer is, and second, an honest view of both the high level and detailed use-case problem you are solving for them.”

What is a 3PL? A Google search provides the following definitions:

A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides service to its customers of outsourced (or “third party”) logistics services for part, or all of their supply chain management functions — from Wikipedia

A third party logistics (3PL) company provides multiple logistic services. These services are integrated thus multimodal in nature. A 3PL would include transportation, warehousing, cross-docking, inventory management, packaging and freight forwarding — from About.com

A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or “bundled” together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding — from CSCMP

While all of these definitions are true, they are also stale and limiting. I use a simpler definition: A 3PL is an operations manager, a consultant, and IT provider all rolled into one.

My definition is not perfect either, but it reflects a more complete picture of what customers expect from their 3PLs today, and it suggests that 3PLs don’t just compete with other 3PLs anymore, but also with consulting firms and technology providers. Yes, 3PLs provide customers with “multiple logistics services” like transportation management and warehousing, but they are also in the business of providing (among other things)…

  • Software applications, trading partner connectivity, and data quality management services that provide customers with timely, accurate, and complete visibility to supply chain events, information, and intelligence.

  • Thought leadership and advice — “Tell me something I don’t already know” — so that customers can make smarter and faster decisions about their supply chain networks, strategy, and practices.

  • Risk management capabilities to help customers minimize or eliminate supply chain risks, and more importantly, to help them recover from supply chain disruptions faster and with less impact.

And a 3PL’s customer isn’t just the company that signs the contract, but also its customer’s customer — at least that’s the perspective 3PLs and their manufacturing and retail customers should take when defining their relationship and objectives. Ideally, 3PLs and customers should develop a shared vision statement that aligns with the objectives and desired outcomes of the end customer, which in many cases is the consumer.

I’m off to the airport to catch my flight for tomorrow’s meeting. “What business are you in?” will be my opening question to the audience. I can’t wait for the conversation it triggers. In the meantime, if you are a 3PL, how would you answer that question? And if you’re a 3PL customer, how would you answer it? Post a comment and let me know!