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Due to widespread labor shortages, a lack of inventory, and more, it’s no secret that the COVID-19 pandemic caused major disruptions to the global supply chain. And even after passing the two-year mark since the start of the pandemic, we continue to see the industry struggle to get back to pre-pandemic levels of operation. An eye-opening experience for manufacturers and distributors alike, this emphasized the need for supply chain players to be better equipped and prepared to withstand significant disturbances.
In addition to the unique challenges brought on by the pandemic, the distribution of the COVID-19 vaccines highlighted the delicacy of distribution. The public became hyperaware of the new vaccines coming to market, which needed to be transported and stored at very specific temperatures, under very specific conditions.
This led to increased demand for outsourced logistics services, particularly in the medical supply chain, and opened the door for third-party logistics providers (3PLs). In response, some distributors saw this as an opportunity to launch new 3PL arms or expand existing services.
But not every 3PL is derived from a large corporation. Some operate independently, serving as valuable additions to the market.
What constitutes an independent 3PL is somewhat subjective. While many industry professionals consider any 3PL that is not owned by a major wholesaler to be independent, others believe a truly independent 3PL does not fall under a larger corporation at all.
Despite these nuances, a 3PL provider should be defined by the driving forces behind its business decisions. When a provider is not incentivized by corporate considerations, it can afford to have a more independent business approach and strategy. For example, an independent 3PL can oftentimes provide customers with more transparent advice and an unbiased perspective.
Unsurprisingly, many of the benefits associated with independent 3PLs have to do with their size and agility. Independent 3PLs are often not as heavily matrixed and therefore are able to make rapid decisions and operate more efficiently.
At a very basic level, it’s important that independent 3PLs exist because monopolies and oligopolies come with downsides. If the only functioning 3PLs were run by major corporations, this would mean there is less choice in the market giving customers fewer options for their commercialization strategy.
Independent 3PLs also serve as an important asset to niche markets. For example, LogiCare3PL was launched earlier this year by specialty distributor BioCare, Inc. to deliver potentially life-saving therapies via time and temperature-sensitive logistics services. With a deep understanding of specialty drugs, LogiCare3PL leverages its unique knowledge and capabilities to service a specialty market.
Over the past couple of years, the third-party logistics sector has grown fast in the face of increased demand that, in large part, stemmed from the pandemic. Looking ahead, we can expect to see a few developments in this space.
First, it’s likely that certain 3PLs will consolidate through mergers and acquisitions. This is often unavoidable in markets that experience this kind of rapid growth. At the same time, we’re bound to see new 3PLs continue to emerge, particularly as other providers are acquired.
To be successful in this ever-expanding market, it’s important for 3PLs to uphold a “first principles” business approach and remain realistic about their bandwidth. From the perspective of an independent 3PL, it can be tempting to say yes to every customer request. Recognizing both your capabilities and limitations is important to achieving success.
Finally, distill down the complexities and focus on what’s most important for the product journey. Remember that 3PLs are on a path of rapid growth because they offer specialized, focused services that cannot be found elsewhere.
Omar Agado, Vice President of 3PL Business Strategy & Services at BioCare, Inc.