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The nature of the commercial relationships between shippers and transportation logistic service providers is becoming more and more prevalent. The globalization of business has increased the need for global supply chains that are longer, more complex, and costlier. Businesses will need to seek transportation logistics service suppliers that can meet their global transport logistics needs. This development as contributed to the growth of global third-party transport logistics (3PL) providers that provide a full portfolio of transportation logistics services. It also has encouraged the development of modern and efficient transport infrastructures to minimize the cost of transport operations on major trade routes. These infrastructures include right of way, intermodal facilities, and communications links for all modes of travel.
Outsourcing non-core activities previously involved a single logistics service, such as transportation. Today, 3PL providers offer an array of bundled shipping logistics services, including strategic planning and control of the logistics process. The attractiveness of outsourcing is evidenced by the rapid growth of the 3PL industry from $10 billion in gross revenue in 1992 to $40 billion in 1998. Some of the leading suppliers are subsidiaries of transportation companies, and most large transportation companies offer comprehensive transport logistics services through subsidiaries or affiliates.
Shippers traditionally purchased transportation from asset-based transportation carriers that could provide service at less cost because of economies of scale, utilization, and specialization.
However, non-asset-based transport logistics suppliers are increasingly important as information technology plays an ever-greater role in supply chain integration and as operations research models become more sophisticated. Increasingly, economies of scope, or the benefits arising from being able to manage and integrate complementary transport logistics services, have become the source of reduced cost or improved service and therefore are prime criteria for choosing transportation logistics service provider.
Traditional transport firms face the dilemma of expanding their capabilities and becoming 3PLs or becoming suppliers to 3PL providers that represent the end customer.
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