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December 2021

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My Motto..

  • "If you tell the truth, you don't have to remember anything." Mark Twain (1835-1910)

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3PLs--Investing in the Next Generation of Outsourced Supply Chain Solutions

3PLs (Third-Party Logistics Companies) have been around supply chains, well, forever. Using outside logistics capacity to supplement (or replace) in-house distribution capabilities is a lower cost (think operating, not capital costs) way to add extra trucks or warehousing space during peak shipping cycles or in new regions where product demand is still emerging. With the growth of eCommerce, 3PLs have taken on entirely new roles for many organizations, providing next-day/same-day shipping when such capabilities do not exist in-house. A number of our e-commerce investments--Shipmonk, Alaiko, and Mercado Labs are also some form of 3PL--either asset owning, or asset-light--and focused on the e-commerce space. Other of our 3PL investments are more generalists or focused on a specific industry segment, like cold chain logistics or cross-border freight.

Our investments in 3PLs started about five years ago when we invested in Lineage Logistics. Founded in 2008, Lineage has grown to the largest global cold-chain logistics company. Lineage is the Journey of Food. Reimagined. They are transforming the supply chain by preserving, protecting, and optimizing the distribution of food around the world - in a way that hasn't been done before. In 2021, Lineage acquired another of our portfolio companies Perishable Shipping Solutions to enhance its Producer-to-Consumer (P2C) cold chain direct offerings.

Transplace, was our second 3PL investment in 2017, partnering with the TPG Industrial Fund, investing, and joining the Board of Directors (Dan). Transplace powers one of the largest managed transportation and logistics networks in the world with ~$15 billion of Freight Under Management (FUM) and 62,000 unique users on their platform. They are committed to achieving supply chain excellence for customers by providing greater visibility and control of logistics networks to drive continuous performance improvement. Companies of all sizes rely on Transplace to deliver trusted outcomes through best-in-class logistics management, strategic capacity, and cross-border services. They deliver on the customer promise with our tech-enabled solutions platform that is backed by the unrivaled combination of innovative technology and a dedicated team of domain experts, engineers, and data scientists. Transplace was sold to Uber Freight in November 2021.

In 2021, we invested in Capstone Logistics along with H.I.G Capital and Dan joined the Board. From inbound logistics through last-mile delivery and returns, Capstone's integrated logistics services optimize supply chain performance for their partners by reducing costs, adding unique value, and mitigating risk. They offer a full suite of warehousing and fulfillment solutions that enable their manufacturing and distribution partners to outsource supply chain activities and create efficiencies. Through their freight management and last-mile divisions, we provide a wide range of reliable, high-touch transportation capacity services.

What do we look for in new 3PL investments? Here are a few criteria:

  • Unique Markets--we look for providers who serve higher margin and stable companies, ones that understand the logistics in the space
  • Fewer Competitors--There are thousands of companies that call themselves 3PLs. Many are very generic providers with no service specialties. We prefer 3PLs with a narrower focus that can meet emerging market needs profitably.
  • Advanced Technologies--3PLs with world-class planning and execution technologies, coupled with sufficient (but not excessive) automation, will be the winners over the next decade.