Blended, ‘Asset-Driven’ 3PLs

Asset Blended 3PLs

A recent thought piece from a supply chain software executive caught our eye. The article’s focus on the importance of efficient warehousing—especially its reference to “asset light” third-party-logistics providers—hit close to home for Distribution Centers of America (DCA) and our member companies.

Asset-light 3PLs, which lease rather than own warehouses and equipment, provide a “low-cost, highly configurable model” centered on productivity and customer service, Tim Conroy of IBS wrote in a July Industrial Distribution article.

The asset-light concept is nothing new for DCA members, who have been practicing and perfecting the model for more than three decades. We don’t stick to that approach alone, however.

In contrast to asset-light, “asset-based” (or public warehousing) 3PLs own their warehouses, typically providing space to multiple customers. DCA, a cooperative of 15 “best in class” regional 3PLs, offers a blended, “asset-driven” model, with both types of arrangements available depending on customer size and needs.

Mike Holland

Mike Holland

“Many warehouse companies choose to lease facilities or equipment, or they operate a combination of company owned and leased facilities. At Midwest, we operate a combination of company owned and leased facilities,” says DCA President Mike Holland, VP, operations, for Chicago member Midwest Warehouse & Distribution.

“In our market, short term warehouse leases are not available today as space is very tight. Building owners are looking for five to 10 years leases. Finding a base customer that will match that lease with a contract for services is the trick,” Holland says. “Our preference is to own our facilities which enables us to create value thru equity and control our costs. We incur considerable start up costs installing IT equipment, racking, lift truck charging equipment, etc. and prefer to do this in a facility that we own.”

Jere Van Puffelen

DCA founder Jere Van Puffelen, president of California member companyPRISM Logistics, agrees that the asset-light approach “works best with larger customers, at volume that supports securing and operating a dedicated facility.” Jere Van Puffelen

“Three-year asset-light, or dedicated contract, warehousing fits customers needing at least 100,000 square feet and limited material handling automation,” says Tom Miralia, president of North Carolina member Distribution Technology Inc. “More technology-intensive operations call for longer-term contracts, while smaller customers are probably better off using a shared-customer warehouse,” he adds.

Tom Miralia

Tom Miralia

“Asset-light and Asset Blended 3pls have a place “in high-volume, large- space and low-margin operations,” says Erik Holck of Port Jersey Logistics. “Lately the demand for public warehousing has certainly increased along with facility costs. Managing our space costs is the key to offering competitive storage rates. More principals are realizing the advantages of outsourcing and there will always be a need for public warehousing. We have to do our part by controlling cost.”

Whether they own or lease warehouses, 3PLs make a commitment through investment in facilities and other assets, such as technology, racking systems and personnel development. By owning the real estate and building equity in the property, warehousing companies take advantage of capital improvements, which include air conditioning and specialized, controlled storage space.

Erik Holck

Erik Holck

DCA offers nationwide distribution through our network of top regional 3PLs. Our members manage some 30 million square feet of warehousing, providing customized, advanced distribution, inventory management, order fulfillment, transportation and warehousing logistics. For more information or to contact any of the fifteen regional member companies – each a best-in-class provider for their region – please go to www.teamdca.com.

Together, the member companies of DCA are a network of 15 ‘best-in-regional-market’ 3PLs with more than 30 MILLION SQ FT of warehousing capacity strategically located throughout the US.

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