Third-Party Logistics Firms Face Fresh Supply Chain Challenges, Says Armstrong & Associates

Evan Armstrong, president of the consultancy, Armstrong & Associates, shares his views on the current state of the Third-Party Logistics (3PL) as part of Logistic Management’s (LM) feature in June on “Top 50 Global & Domestics 3PLs.” (LM is a sister publication).

In advance of that interview, he notes that there are “three phases of business problems” that currently need to be addressed.

“With the current volatile and uncertain business environment, an increasing number of logistics providers are being forced to take dramatic action to generate positive impact rapidly, or risk going out of business,” says Armstrong.

During the first phase - a strategic crisis - a business is no longer able to compete effectively. Sales numbers may be stable or even growing, yet profitability has begun to decline. Very often, management has tried a new strategy, or several, without success. In some cases, management may not recognize the scope of the problem.

If the company does not change its course, the second stage is a profit crisis. In a profit crisis, sales are stagnating or declining, while profit margins turn markedly negative. At this point, the business starts burning through cash reserves and needs to launch a turnaround.

Failure to do Phases 1 or 2, and continuing to burn cash, leads to a liquidity crisis. In a liquidity crisis, a business faces the fact that it may soon lack the financial resources it needs to keep operating. At this point, the management team typically loses the ability to make changes on its own. Various stakeholders, such as banks and other debt holders, will demand a say in trying to restructure the company.

Look here next week for an exclusive Q&A session with Armstrong on urgent trends surfacing in the 3PL sector.

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