Looking for a one-stop globallogistics service? Is there oneavailable? While there is noone company for Wal-Mart,

there are global solutions. It’s a ques-tion of size. There are global solutionsfor smaller companies and smallshipments. For companies with cus-tomers in Europe and a few majorAsian nations, there are individual3PLs who can supply a complete solu-tion. For package shippers there aretrue global solutions.

FedEx and UPS now serve 99 percentof the global GDP. DHL has nearly thesame reach. In short, the major pack-age integrators cover the globe. Key ele-ments of these services include a widerange of value-added services for thosewho need more than transportation(see Table 1 on page 30). Most impor-tant of these services is the ability tofunction as a lead logistics provider or4PL and have very good informationtechnology solutions. The major pack-age integrators make global trackingand tracing, customs clearance andreturns easy. They will warehouse andcontrol inventory. UPS Capital has amajor service offering for which it willbuy and finance inventory. And the list

of value-added services goes on.The major shortcoming of this high

quality service is that it normally stopsat 108 inches and 70 pounds. Less-than-truckload, less-than-containerload and full load shipments don’t getthe same service. The lower hundred-weight costs of larger shipments havenot traditionally allowed room for allof the value-added activities that pack-age shipments receive. Nor have trans-portation consumers demanded them.

But the demand for services glob-ally on larger shipments continues tointensify.

Major players like Danzas/AEI, TPG,Exel, and Kuehne & Nagel have movedbeyond freight forwarding to acquiremore supply chain management capa-bilities to cover global networks. Exelserves 90 percent of the world’s GDP.Danzas/AEI and TPG have even

broader coverage with a mix of packageand logistics solutions. These largerfreight forwarding 3PLs are migratingquickly to software solutions like G-Logwith universal track-andtrace plusstrong event management. The overallvisibility of these Web-based solutionsgives the 3PL the ability to see every-thing and manage exceptions.

A third group of companies includesthose built primarily in the UnitedStates as 3PLs who are expanding tomeet the European and Asian needs oftheir customers. Companies likeRyder, Menlo and CH Robinson haveenough overseas locations to handlethe needs of North American compa-nies operating in a smaller globalrange. Many of these companies falloutside of the Fortune 200. Their totalnumber of shipments per day is in thehundreds or at most a few thousand.Optimizing transportation networks ofthis size is a standard process for the3PLs in this group.

The software threshold for most ofthese companies is i2’s suite of trans-portation management modules. Ryder,Penske, and northAmerican Logisticshave built strong transportation net-work capabilities around i2’s offerings.

SEARCHING FOR A

Global 3PLSEARCHING FOR A

Global 3PL

BY RICHARD ARMSTRONG

W O R L D T R A D E M A G A Z I N E , S E P T E M B E R 2 0 0 2 W W W . W O R L D T R A D E M A G . C O M

These companies are using the i2 appli-cations for Europe as well. Menlo hasdeveloped its own solution—LMS.

In searching for a global provider, amajor consideration is its financial sta-bility. Strong profitability is a goodindicator of quality logistics opera-tions. The financial results for theglobal 3PLs mentioned above are verymixed (see Table 2). How well off thesecompanies are now is an importantindicator of their suitability as partnersgoing forward. Several of the playersneed to show marked improvement.

Danzas/AEI is part of DeutschePost World Net. DPWN has had diffi-culty in finding the formula for pro-ducing profits outside of its mailmonopoly in Europe. It has subsi-dized its European package opera-tions from its mail profits and is beingforced to change this practice by theEuropean Union. The pieces of theDanzas/AEI merger are now inte-grated. The whole needs to restore theprofitability that existed in the partsbefore they were combined.

DHL reports only turnover in itsfinancial results. If purchased trans-portation were eliminated, DHL wouldbe about half the size it reports. DPWNhas acquired about 75 percent of DHL.Visibility into DHL’s actual financialpicture may improve as a result. DHL’slack of financial clarity should be anissue for U.S. companies used to thefinancial visibility of UPS and FedEx.

Over the next one to three years,success by Danzas/AEI and DHL will

be necessary to make DPWN a con-tinuing long-term global threat to itscompetitors.

Exel also continues to emphasize itsturnover as revenue. The revenue figurein Table 2 is inflated by more than $2billion in purchased transportationcosts. Exel does not report its net rev-enues. As a result, Exel looks larger andless profitable than it really is.

The strongest financial resultscome from UPS, Expeditors, CHRobinson and Kuehne & Nagel. UPSmakes its money in the package busi-ness. Its logistics operation is nearly$2 billion in net revenues but unprof-itable. However, UPS has a history ofmaking good on its acquisitions. Weexpect UPS Logistics to follow thesame path with Fritz and other logis-tics purchasers. But, Expeditors andKuehne & Nagel are better operationsat this time.

Kuehne & Nagel has made threeimportant moves over the last twoyears. It acquired important access inthe Asian market by selling 20 percentof its stock to SembCorp based in Sin-gapore. It then purchased USCO,which was one of the most profitableand well run U.S. warehouse-based3PLs. Finally, it became Nortel’s globallead logistics provider this spring.

TPG has also done well with itsacquisitions. CTI brings decent mar-gins and a strong background inautomotive logistics, a TPG globalspecialization. TPG’s postal opera-tions are still the cornerstone, but its

logistics operations havetheir own profitability.

CH Robinson has betterfinancial results than anyother 3PL. CHR has oper-ations in Europe butneeds to make a move ininternational freight for-warding. Like Expeditors,it does what it does verywell, but will that beenough in 5 years.

Nippon Express’ resultsare indicative of the gen-eral problems with theJapanese economy.Nippon needs to be moreglobal and open. Nipponhas the additional problem

of being a major midsized logisticscompany. Midsized companies need toget bigger or smaller. They do not sur-vive as markets grow and become moreunforgiving.

The global market is evolving. Asthis quick look at service offeringsshows, there are choices availablenow based on size considerations.The financial results indicate that afew have a much better chance thanmost of developing into the one-stopglobal providers many companies arelooking for. WT

Richard Armstrong is a transportation consul-

tant who specializes in supply chain evaluation

and outsourcing. He is the publisher of, “Who's

Who in Logistics?—Armstrong’s Guide to Global

Supply Chain Management.” He has more than

20 years’ experience as an educator, analyst and

motor carrier executive.Dick serves on the boards

of several companies including the Institute of

Logistical Management. He is licensed to prac-

tice before FMCSA and FMC. His publications

cover logistics, transportation operating effi-

ciency and DOT regulations.

TABLE 2.

Profitability and Revenue for 12 Major Logistics Companies

NET REVENUEPROFITABILITY ($ BILLIONS)

CH Robinson 19% .5Expeditors Int. 16% .6UPS 10% 30Kuehne & Nagel 9% 1.5Deutsche Post 5% 31TPG 5% 10Penske 5% 1.2DHL 4% 6FedEx 3% 21Exel 2% 6.5Nippon Express -2% 14Ryder -2% 1APL -3% .5

TABLE 1.

3PL Value-Added Services

- 4PL/Lead Logistics Provider

- Consulting

- Information Technology

- Inventory/Vendor Management

- Manufacturing and Support

- Transportation Planning

- Transportation Execution

- Carrier Management

- Customs Brokerage

- Kitting/Pick & Pack

- Call Centers

- Reverse Logistics

- Installation/Removal

- Special Commodities Handling

Global 3PL

In North America: 888-848-USCO high-tech@usco.com

Outside North America: +41-1-7869-638contract.logistics@kuehne-nagel.com Or visit us at http://hightech.usco.com