According to Joel Hoiland, President and CEO of the International Warehouse Logistics Association (IWLA), results of the Eighth Annual Third-Party Logistics Study found that, "Warehousing remained the logistics activity most often outsourced among North American study respondents (73 percent), followed by outbound transportation (71 percent)."

The major study of third-party logistics customers was authored by C. John Langley Jr., Ph.D., logistics institute professor of supply chain management and director of supply chain executive programs at the Georgia Institute of Technology, in conjunction with Cap Gemini Ernst & Young U.S. LLC and FedEx Supply Chain Services.

Manufacturers place a high degree of reliance upon warehouses and 3PLs, and this has created a number of sophisticated and well-rounded suppliers. Scott McWilliams, CEO of Ozburn-Hessey Logistics, points out that IT systems will be a differentiating feature among the top competitors who are working to keep up with their customers' increasingly complex supply chains. "Integrated WMS, TMS, OMS and the understanding and use of RFID will all be capabilities required to meet the demands of customers and their customers. Up-to-date system capabilities will be critical in the effectiveness and efficiency of these networks," he says.

The manufacturing boom occurring throughout Asia, especially in China, has also put pressure on suppliers. "International and domestic manufacturing firms are quickly coming up to speed and need established distribution networks that will provide access to multiple markets, without the burden of long start-up lead times and the risk of dedicated assets," notes McWilliams.

At the same time, the warehousing industry has experienced an evolution from traditional stand-alone services to an extensive array of value added services. The biggest suppliers' offerings nowadays include such options as call centers, home delivery, and IT solutions-making them a 'one-stop shop' in every respect.

Technology is very important to the customers, says the IWLA's Hoiland, who told a group of Chinese pharmaceutical executives last fall that, "Customers want to follow their products through every link in the supply chain. They not only want to 'see' their products at the point of production, assembly and delivery, but also know its location in transit." Moreover, the U.S. government's requirement for more stringent security along supply chains is also driving the demand for increased visibility that technology provides.

Customers are also on the lookout for way to enhance integration of the supply chain. A survey by consultant firm Accenture and Northeastern University found that customers and vendors many times use the same 3PL as the manufacturers they do business with.

Yet another trend gaining prominence among retailers is the concept of shared warehousing. Retailers such as Home Depot and the Bombay Company find that shared warehousing not only gives them added flexibility to deal with seasonal merchandise, but also offers a convenient backup for unexpected situations. Not all retailers are good candidates for shared warehousing arrangements, though. Operations that are high-volume pick-and-pack, for instance, would be better suited in other facilities.

When it comes to the future of the industry, the bottom line, says Hoiland, is that "3PL providers must rise to the challenge of meeting the increased expectation of delivering integrated, end-to-end solutions or face a lack of business growth...or worse. Those that meet the challenge will profit greatly, as manufacturers and suppliers become more dependent on companies they can form partnerships with to outsource non-core competencies.