You Say You Want a Co-Evolution?

In human evolution, scientists theorize that primitive man existed 3.8 million years ago. Progress was slow until 200,000 years ago, when modern man made his appearance. Then came a spark of progress: animal domestication, farming, global expansion, refined toolmaking, and more.

What we today call the third-party logistics (3PL) sector followed that same evolutionary process. The concept of having a transportation partner that offers services beyond the move has been around for hundreds of years, and not much changed during those eons. Then, about 20 years ago (when Inbound Logistics published its first annual 3PL issue and related research), the 3PL sector experienced a blindingly quick burst of progress in a very short time. Shipper demand ignited a rapid change in 3PL operations, market approach, and solutions.

Manufacturers, retailers, wholesalers, and distributors who partnered with a warehouse, integrator, forwarder, carrier, or truck lease company asked for additional services, which drove the buildout of new solutions, and gradually transformed those single-solution players into full-fledged 3PLs.

Shippers demanded these new services to help them come to terms with and leverage two major changes. First was the idea that you can control the inbound flow of materials from across the country or around the world; speed and reduce inventory, touches, and supporting infrastructure; and better match your demand signals to your supply. Second was the advent of what I call "supply chain impatience" on global business operations and buyer behavior, driven by the Internet and the implementation of true supply chain management operations.

For example, a basic shipper need for vehicles gradually evolved into solutions that provided drivers, technology, and network and load optimization. Or, a contract for warehouse space with basic in/out transactions, evolved into a complex Vendor Managed Inventory network with total inbound logistics control.

Carriers also evolved to offer 3PL services, driven again by shipper demand. If a shipper had a great relationship with an LTL carrier, and asked for extra capacity or a truckload solution, the carrier built out or acquired what its customer needed. Then, having made the investment in infrastructure and/or equipment, personnel, and technology, the natural progression for the carrier was to offer those new solutions to other customers and prospects. A new 3PL is born.

The business process change dynamic was from shippers to their transportation, forwarder, integrator, or warehouse partner. Shipper demand for more solutions drove the evolution of the transportation partner’s business process. Certainly there was interplay, as shipper and provider sought to leverage new trends, practices, and buyer behaviors. Both worked together to find new solutions and, in the process, changed each other’s business operation…a co-evolution, if you will. Advanced logistics IT used by shippers, working with their transportation and logistics partners, continues to fuel this process.

So we have evolved from shippers driving the process based on their needs, to collaboratively working with their 3PLs, creating new solutions. They all want to change the world.

Where do we go from here on the evolutionary time line? The growing complexity of supply chain operations will continue to shift the evolutionary dynamic. 3PL operations and expertise have become so advanced that shippers will welcome more input, and change their business operations to fully leverage their 3PL’s advanced capabilities.

That will be the driving force during the coming years, and the source of the continuing co-evolution of the shipper/3PL relationship.