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Market for Logistics Firms Continues Annual Growth

A recent survey shows that the overall market for third-party logistics providers (3PLs) remains in transition, responding to changes in customer needs and values by expanding their service offerings, including e-commerce and other information technology capabilities. The fourth annual logistics survey was conducted by the University of Tennessee's Center for Logistics Research in conjunction with Exel Logistics and Ernst & Young. Survey participants included chief logistics executives in the automotive, chemical, computers/peripherals, consumer products, medical supplies/devices, and retail industries.

The study also found that 3PLs have historically been viewed as vendors whose themes were cost, control, and service performance. But new partnerships are emerging and the emphasis has shifted to value, innovation, and performance in an increasingly global context. Among findings of the 1999 study:

* The market for 3PL services is growing 18 percent to 22 percent annually

* Nearly 90 percent of customers are satisfied with their logistics service providers.

* More than 50 percent of survey respondents said they expected provisions for e-commerce and other technology from their logistics service provider.

* Nearly 100 percent of respondents who said they used a 3PL to meet certain objectives said objectives were met by the 3PL, including asset reduction, strategic/operational flexibility, and expansion of geographic coverage, both domestic and global.

* 3PLs most often create value through increasing efficiency and effectiveness of operations, according to respondents. Eighty percent of the respondents indicated that efficiency was the value-add, and 68 percent believe the effectiveness of their operations provides the value.

* A growing number of respondents-27 percent-believe added value will come in the form of new services that will help users of third-party services to be more unique to their customers.

* A shift is occurring from use of transportation-based providers to providers oriented toward warehousing and distribution.

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