strategicinsight OUTSOURCING
gins have made the industry less appealing to entrepreneurs. At the same time, more customers are looking for a
one-stop shop solution that can provide global reach at a
low cost. Under the circumstances, it seems appropriate to
ask: Is there still a future for the family-owned 3PL?
SIZE MATTERS
There’s no getting around the fact that there are competitive disadvantages to being small. Few family-owned 3PLs
can offer the same geographic reach or end-to-end solutions that a global 3PL can.
“The biggest [challenge facing family-owned 3PLs] is
they don’t have the asset base,” says Tom Speh, professor of
distribution at Miami University in Oxford, Ohio. “When
you’re talking about IT systems, advanced handling sys-
tems, or [the capacity for] rapid expansion should a major
client want that, they’re really constrained in terms of their
ability to do that because of the capital requirements.”
Similarly, the smaller players are at a disadvantage when
it comes to leveraging economies of scale. “We don’t have
the buying power to compete in a large-volume, low-cost
scenario,” admits Nicholas Carretta, president of Ultra
Logistics, a family-owned 3PL based in Fairlawn, N.J.
But just as there are disadvantages to being a small play-
er, there are also advantages, these 3PLs say. For instance,
they don’t have to worry about pleasing Wall Street. “I’ve
heard a lot of stories [suggesting that] multinational 3PLs
can lose sight of who pays the bills,” says John Ness, presi-
dent of ODW Logistics, headquartered in Columbus, Ohio.
“Consolidation in the industry has brought a lot of private
equity players into our market, and I wonder how many
CEOs spend their time and energy working to please boards
versus their customers. That’s a tough battle. But that’s not
an issue for us; we know who our customer is.”
That kind of freedom can translate to service advantages
for customers, these smaller 3PLs say. For one thing, there’s
the small players’ agility and responsiveness to clients’
requests. “Family-owned companies typically can make
quick decisions,” says Bill Butler, CEO of fourth-generation
family-owned Weber Logistics, which is headquartered in
Santa Fe Springs, Calif. “When the managers are also the
shareholders, you don’t have a lot of processes or bureau-
cracy that you have to deal with. You don’t have to call
someone back at the corporate office before you can make
a decision.”
For another, there’s management stability. Carretta notes
that in the wider world, career advancement often comes
through hopping from one competitor to another. In a
family-owned business, there’s a greater likelihood that sen-
ior managers will be at the company for the long haul.
FORTNA
They help drive our business
When O’Reilly Auto Parts acquired CSK Automotive, the race
was on to merge both companies’ distribution operations. So
O’Reilly called Fortna to help them shift into overdrive. In just
two short years, seven additional facilities were integrated into
a distribution network that now serves more than 3,500 stores
with up to 120,000 SKUs.
“Given the magnitude of the project and its importance to
our customers and investors, we knew Fortna was the
partner we wanted. They have the talent, the tools and the
commitment to deliver on their promises.”
– Greg Johnson, SVP Distribution Ops
To learn how we drive results for clients like O’Reilly Auto Parts,
check out more stories at www.fortna.com.
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