From beginnings in the 1980s as humble additions to road, sea, and air carrier services, third-party logistics providers (3PLs) have built a $100 billion industry that plays an increasingly important role in the world economy. Determined to save money and to focus on core businesses, companies in the automotive, electronics, chemical, and fast-moving consumer goods sectors, among others, are outsourcing more and more of their warehousing, distribution, and other supply chain activities to these 3PLs. In Western Europe, they already handle more than a quarter of the total volume of shipments, while in the United States the figure isn't far behind. In the world as a whole, the market the 3PLs serve has grown at a compounded annual rate of more than 10 percent since the mid-1990s—a level of expansion that will probably be sustained (Exhibit 1).

Yet customers want more. They are starting, for example, to ask 3PLs to redesign their supply chains and to make those chains as efficient and inexpensive as possible. And as customers move from local to regional and then global scale, they want logistics specialists to serve them with consistent skills wherever they do business. Although the industry is at...