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3PL to improve supply chain performance

DUBAI - AGCC unification and WTO mandates will further improve the value proposition of third party logistics (3PL) to user companies, industry experts say.

According to Damien O’Donoghue, manager, (strategy and development), GAC Logistics, 3PL is becoming more important because, consistent with highly developed economies, more companies seek to outsource logistics tasks. Companies using 3PL services tend to have a well developed supply chain strategy and will use 3PL as a key element of that strategy. Based on international experience, 3PL improves the competitiveness of customer companies.

By transitioning logistics operations to third party most aspects of supply chain performance can be significantly improved. The 3PL improves customer service and time to market. While providing full and accurate inventory visibility, it reduces inventory throughout the supply chain.

Focusing on core competencies, it also reduces logistics and inventory carrying cost relative to sales, as well as logistics infrastructure and shorten inbound and outbound lead times. Increasing scope of 3PL allows to perform different services for many different clients.

He said distributors are vertically integrating into 3PL, while new entrants are using 3PL as a market entry strategy. Increasing focus on 3PL allows to provide added value services which have greater complexity, including customisation, order processing, back-office functions, and supply chain re-engineering.

O’Donoghue, who was giving a presentation on 3PL at the Logistics Conference held in Dubai yesterday, predicted that global/international, regional supply chain strategy will affect local supply chain strategy and often be executed through the 3PL.

Regional distribution ex-Jebel Ali will continue to be a value-added supply chain strategy, particularly for emerging and developing markets, while supply chain strategy will focus on improving inventory turn and variable cost - supported by 3PL business model.

The role of 3PL will diversify and move higher up the value chain and collaborative partnering will become of greater importance to both 3PL and users, he said, adding that information technology will continue to be a key element of supply chain strategy and the 3PL value proposition.

O’Donoghue was giving a presentation on 3PL at the Third Logistics Conference on “Marketing and Logistics: The Dynamics of Distribution” held in Dubai yesterday.