3PL news: Volatility likely to create additional challenges for global 3PLs, says DB Schenker exec

While the economy shows some signs of improvement, increased volatility for 3PLs is likely to continue to present a challenge in the form of an increasing span of responsibilities and tasks for global supply chains, according to Dr. Detlef Trefzger, Member of the Board, Contract Logistics/SCM, at DB Schenker.

In his comments at the keynote address at last week’s eyefortransport 3PL Summit in Atlanta, Trefzger identified four new “realities” that will have a long-term impact on supply chain management:

• tremendous growth in new markets and emerging economies, with these regions, including India and China, expected to have a more significant role in the global economy and result in new opportunities for the logistics sector;
• strong fluctuations in world trade, on the commodities markets and in production costs, which will lead to fluctuations in global freight flows and demand for warehousing services and less time to plan logistics processes;
• increased growth in outsourced logistics, with 3PLs taking on more tasks from shippers that require more expertise to deliver expected quality and productivity levels; and
• strong demand for standardized logistics services on a global scale, which will become a fundamental contract logistics requirement and apply to standardized solutions and customer-specific solutions.

“Global population and the global economy are growing, and that is really the reality for all of us in the future,” said Trefzger. “The good news is the U.S. continues to be the 3PL market leader for at least for the next ten-to-15 years, according to our estimates.”

What’s more, he pointed out that 2010 U.S. GDP growth is expected to be 2.5 percent, whereas China, Russia, and Saudi Arabia expect GDP growth to be in the 8-to-12 percent range. Going forward, he said that global GDP growth will be shaped by economic expansion in India, China and other Asia-Pacific countries and will have to be addressed from a global logistics and 3PL perspective.

And with increased global growth, there is likely to be volatility with radical trend shifts becoming more of a regular thing. Among these shifts in recent years from a U.S. perspective are a struggling housing market, slowly improving consumer sending, and fluctuations in oil and gas prices, according to Trefzger.

As an example, Trefzger explained how in the past when DB Schenker did analysis of business demand, the worst case scenario was typically not lower than 20 percent. But now it is not uncommon for these analysis to be in the -50 percent to -75 percent ranges. These downward estimates are the effects of a volatile environment and the overall market, he said. And this uncertainty is subsequently forcing 3PLs to become an extension of their customers’ operations.

“We are talking abut 3PLs having to cope with order management, supplier management, invoicing, and customer-specific solutions for certain industries like automotive,” said Trefzger. “This needs to happen regardless of what country a 3PL is doing business in. We have to invest in the skills and know-how to meet these challenges.”

In summing up his comments, Trefzger said that actively driving change, exploiting talent and innovation and ensuring continuity in the provision of services and quality to customers are the new post-crisis requirements for logistics services providers.