Setting up a Global 3PL company

The expenditure on logistics by any country is growing rapidly each year. With the globalization of industries, logistics management has become one of the key drivers in the supply chain management. More and more companies are out-sourcing this activity to sustain focus on their core activity which has given enough boost to the development of 3PL companies all over the globe. This article would discuss about key parameters to focus on while setting up or expanding a 3PL company in any part of the world.
Type and level of service: The first thing to decide upon is the type of service you are going to provide to your customers. It may vary from freight forwarders, courier, express or parcel services. You need to define your level of services in terms of Standard 3PL provider, Service developer, The customer developer or The Customer adapter as defined by Hertz and Alfredson (2003)
Estimate Cost of initial set-up: Estimate the cost of your set-up by measuring the infrastructural investments, working capital required and sunk cost that you will have to bear before starting up any operation.
Sources of funds: Find out the sources of funds based on your financial requirements. If you are an existing company and have a reputation in the market it would be relatively easier to arrange funds else for an initial set-up you would have to make your own investment and go for loan options available.
Business complexity: Understand the complexity of operations that would be involved in your chosen services and specialization. Evaluate the need for distribution centers or central warehouses to be developed.
Transportation System: This is a key factor that determines the success of any 3PL company. Based on the type of services it is very essential to choose right type of transportation system that enables you to meet the operation demands efficiently.
Economies of scale: As the setup requires enormous initial investment in terms of infrastructure and development of transportation asset, economies of scale is always beneficial subject to the management of cash flow.
Strategy: While playing big, the decision of Out-sourcing Vs in house solutions are very critical. You need have a clear cut strategy defining the scope of your core and allied activities.
Standardization: Try making your processes standardized. This would save lot of time and money for your organization. Also it would remove most of the NVAs in the value chain. For a successful standardization in the company, you must have an easy accessible repository of all the standards clearly documented in a easy to implement manner.
Develop USP: For a successful 3PL company, you must develop a unique feature in your organization. It can range from least transport cost, least transportation time, on-time delivery record, highest overall customer satisfaction or anything which you can sell to gain more business.
Define Targets: For the internal growth and development of the company, you must set clear long-term and short-term targets to achieve and the evaluation of the staff should be done in line with the targets’ achievement. This would give you an opportunity to benchmark yourself with the industry and also would give a common direction to work on within the organization.
Maintain easy point of contact with potential clients: Have the simplest possible point of contact with the potential clients. Try making you presence in the time of their need. This can be through greater marketing efforts or other strategic initiatives that brings you closer to the customer base.
Branding: Develop your own branding strategy. Any action that brings you in the eyes of the customer is a fair branding for you. Make your presence felt across the customer segment and always try to increase the frequency of crossing the customer need path as many times as possible. This would bring in more business for your organization.

2 comments:

  1. Hi Gurav, thanks for the article. I have a question. In case of freight forwarder, you mentioned that enourmous investement are key element in the setting up of the 3PL. Can a 3PL outsource some of their services ( Trucking, warehousing etc ) as this will enable him to kick-start the business with minimal cost, you comments is much appreciated,

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  2. Although outsourcing Trucking, warehousing etc. would bring flexibility to a 3PL company but it will also have cost implications that might refrain the customer to opt for that 3PL. As the companies themselves outsource their logistics to a 3PL to focus on their core business, they would not appreciate a 3PL further going asset light and outsourcing its major services. To bridge this gap between flexibility and cost we have 4PL service providers who have got enough expertise in logistics solutions for different industries and act as a connecting thread between the needy and the provider.

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