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Choose wisely: Not all third-party logistics providers are the same

By David Hannon -- Purchasing, 6/14/2007

It will come as no surprise to supply chain professionals that no two logistics shipments are quite the same. But for a project-intensive construction services firm like Aristeo Rigging and Erectors, not only are no two shipments alike—they can be dramatically different and well, sometimes just dramatic.

The Flint, Mich.-based company was founded through a partnership with Aristeo Construction. The Rigging and Erectors business focuses on the shipping and installation of major process lines at major tooling manufacturers in a variety of manufacturing industries. Ever wondered who actually physically moves those plants from the U.S. to Canada or Mexico? These are the people that do that. And it means a new set of unique logistical challenges on every project.

"We work with a lot of different logistics providers," says Ken Goddard, vice president of operations at Aristeo Rigging and Erectors. And coordinating the shipment of 181 wind turbines to rural upstate New York isn't exactly the same as swinging by the local post office to drop off a package.

Aristeo's staff is aligned like its business—by project. Goddard says when he signs on to a project, it's from beginning to end and he's involved with all aspects of it, including the logistics of moving equipment. But with such a wide scope of tasks to focus on for a given project, there's a risk that the specific logistics issues may not be given the right level of attention if left only to the internal staff at Aristeo.

The solution for that issue has been establishing a strong relationship with its third-party logistics provider (3PL), Artisan, a Detroit-based division of National Logistics Management.

"Their expertise in coordinating such large shipments was a huge benefit and selling point when we were looking for a 3PL," Goddard says. "Simply unloading and loading equipment of this size can be a nightmare. So being able to hand that kind of task over to them lets us focus on any number of other areas of the project that might need more detailed attention at the time."

Goddard admits that the 3PL business model didn't make sense at first. "Originally, I thought 'why do I need this kind of partner? I can do this myself.' But I soon realized they brought a whole new level of experience in these areas. They had access to many more carriers and can work with those carriers on quoting and pricing in much more detail than we could alone."

Aristeo's typical shipments—say hauling 50-ton pieces of heavy equipment into a downtown area in midday traffic—require a greater degree of up-front work than a typical trucking container. Goddard says Artisan's ability to work with job-site personnel as well as carriers to ensure shipments are first safe and secondly expeditious is a big peace of mind.

When it comes to measuring the performance of their 3PL, Aristeo's primary concern is end-customer satisfaction, and all other metrics feed up to that. "We share schedules with Artisan so they can know all our deadlines and meet our needs," Goddard says. "At the end of the day, our customers don't care if our supplier/contractor dropped the ball—they want the project done and hold us responsible. So having a reliable partner is key."

For example, Artisan recently coordinated a shipment of several 200-ton pieces from Japan to New Orleans on an ocean tanker, then got them on a barge up the Mississippi to the Missouri River and then put them on trucks to the plant in Missouri, Goddard says. "To have something like that go smoothly tells us a lot about a 3PL."

When the project is complete, Artisan develops a transportation summary detailing all aspects of the project, including opportunities for improvement and a planned vs. actual cost analysis.

Another area of expertise the 3PL brings to the equation is border crossings, Goddard says. As various regulatory restrictions change in an era of continuing security concerns, having a logistics partner that tracks the latest requirements and ensures the shipments cross without incident is key.

 

3PL market grows to new heights in 2006

U.S. logistics buyers and managers are outsourcing more of their operations to third-party logistics providers (3PLs) than ever before.

According to the latest report from market research firm Armstrong & Associates, the U.S. 3PL industry grew 9.5% in 2006, putting the U.S. market at more than $110 billion, a record high. The U.S. remains less than one-third of the total global market, which is valued at $391 billion.

The fastest-growing sector of the U.S. 3PL market was the international transportation management sector, which saw a whopping 17% growth in 2006. Armstrong's report says this growth "is primarily a reflection of continued economic expansion in China and the Asia Pacific markets."

U.S. 3PL market growth by sector Gross revenues ($ billions) % Revenue growth
Domestic transportation management 33.8 12.0%
Intnerational transportation management 42.4 17.7%
Dedicated contract carriage 11 8.0%
Value-added warehouse and distribution 23.4 9.7%
Total 110.6 11.9%

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