By now, the performance of a 3PL provider and its effect on current assets should be apparent. However, use of a 3PL firm should also be contingent upon its ability to help a company drive down fixed assets. Financially speaking, the deployment of fixed assets across supply chains must be done with caution due to the fact that they appear not only on the balance sheet but also on the income statement in the form of depreciation. Taking the financial ramifications of fixed assets a step further, they can also have period-specific impact on the cash flow statement. Given the transcendental effect of fixed assets on supply chains, the use of a 3PL firm and its assets can bring considerable benefits to global organizations.The most significant investment that 3PL companies make in their own infrastructure is in the form of warehouses, equipment (forklifts and materials handling apparatus), systems hardware/software and trucks. When a 3PL firm has the sufficient depth and breadth of geographic coverage, asset substitution moves the customer from a fixed cost structure to one that is based on the volume of weight, cases or pallets moved through the 3PL network.The upside for the 3PL firm is that it can build critical mass into its models by utilizing facilities, equipment and manpower in a multi-user structure. Thus, whereas an individual company may use dedicated facilities rife with fixed costs, the 3PL model espouses the idea of multiple customers in a facility. This arrangement spreads fixed costs across a greater volume of transactions, with the financial benefit accruing to all of the clients of a facility. As such, the ideal situation for a client is one where variable costs are reduced due to the critical mass achieved by the 3PL firm and its fixed costs are eliminated completely.The use of 3PL firms has grown considerably in the last 15 years, a trend that has been fueled by companies that either "rationalize" their distribution networks or move 100% to an outsourced model. There are many instances where companies have divested themselves of truck fleets or sold off company-owned distribution centers, choosing to sign contracts with global 3PL firms instead. Again, this model offers income statement, balance sheet and cash flow statement benefits to the contracting party. Variable costs are reduced on the income statement due to greater efficiencies achieved by the 3PL firm, with additional savings in depreciation coming from fewer fixed assets. Second, balance sheets gain relief when huge investments in land, physical plant, handling equipment and trucks are no longer part of the model. Finally, cash flow statements can be affected as assets are sold off (a source of cash) and investments in additional assets are no longer required (a use of cash).
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