Executive Briefings

Supply Chain: 3PLs Play Key Role in Supply Chain Integration, Sustainability and Security

When surveyed about some of the more promising developments they see as well as shortcomings that are keeping them up at night, logistics executives made three key points.

Green supply chain initiatives are tied to future business success according to 98% of logistics executives, yet the majorities are not putting their money where their mouths are by pumping additional funds in the greening of the supply chain.

The theft of material goods continues to be the top security concern. But other issues are growing more worrisome, including the theft of intellectual capital, natural disasters, the closing of ports and product tampering.

Strong relationships exist between different parties in the supply chain through integrated systems and services, which provide sustainability and security. Through efforts to form solid relationships with logistics providers using detailed contracts and metrics, companies can achieve significant cost savings, shorter order cycles, better customer service and improved business efficiency.

In addition, while 3PLs and their users say the costs of creating a more secure, integrated, environmentally-friendly supply chain should be split; there is continued resistance to collaboration and the unspoken assumption that costs will ultimately be carried by the customer.

These insights were captured in the 13th annual Third Party Logistics Study from Capgemini in cooperation with the Georgia Institute of Technology, Oracle and DHL. The study, which delves into the current state of logistics outsourcing, is based on a survey of 1,644 logistics executives from North America, Europe, Asia Pacific and Latin America.

Green supply chain:
Companies are almost unanimous in their belief that green supply chain initiatives, such as local sourcing, are important but there is widespread uncertainty about how to take the initial steps toward a new business model - particularly since sourcing overseas has grown exponentially over the years. However, the report notes that companies must begin to act before it is too late. The survey shows that the greening of the supply chain will have an increasing impact on network design, transport modes used, selection of equipment, business processes, behaviors and balance sheets. Yet few users rate green capabilities as a deciding factor when choosing 3PL partners, despite the fact that collaboration between 3PLs and their users is crucial in planning for a greener supply chain. Only 46% of respondents said that the effect of supply chain operations on the environment was a factor considered when selecting a 3PL. Yet, the report notes that only when the source and impact of emissions can be accurately assessed can 3PLs and their customers become accountable and will the supply chain become more environmentally friendly.

Security in the supply chain:
Although 76% of respondents called their 3PLs secure, the survey reveals a gap between 3PL users expectations and the current security capabilities of their 3PLs. Companies are becoming increasingly concerned about the costs of meeting compliance mandates designed to enhance supply chain security in light of terrorist threats. However, by working closely with 3PLs to set up workable processes, companies can gain considerable benefits that help recoup costs and improve the efficiency of the supply chain, the report adds.

Dennis Wereldsma, Global Leader of Capgemini s Distribution Sector, said, "As compliance and regulation around green and security practices becomes increasingly prevalent, 3PLs and users that are greener and can tout their security capabilities can gain significant market advantage."

Integrated Logistics:
The benefits of supply chain collaboration and logistics integration are enormous, but this can only become a reality if companies can put aside their fears over loss of control, visibility, internal competency, and of being too dependent on a 3PL. However, comprehensive service level agreements that balance costs and risks and greater investments by 3PLs in their own service offerings should result in greater ROI on collaborative efforts. By adopting integration-enabling, open standards-based technologies together with 3PLs, companies will be able to increase agility, lower costs and ensure stronger relationships, the report explains.

Dr. John Langley from the Georgia Institute of Technology notes, "Without a commitment from both sides little progress can be made in the greening of the supply chain and supply chain security. More than three quarters of 3PL users rate consolidation, routing, and mode selection as the top services 3PLs can contribute to green strategies. However, just 31% indicate that their 3PLs currently offer these capabilities."

Finally, technology is also a high priority for 3PL users. 3PLs continue to outsource web-enabled communications, visibility tools, warehouse/distribution management, and transportation management/execution. However, the IT expectation/performance gap persists, with only 38% of the respondents satisfied with their 3PL providers information technology capabilities.

"The gap between customer s expectations and the current IT capabilities of 3PLs is a significant challenge to the industry," said Jon Chorley, Vice President Product Strategy, Oracle. "3PLs must standardize and modernize their applications and IT infrastructure so they can offer innovative, repeatable and cost effective services to the market. This applies particularly in the areas of green supply chains and supply chain security, where IT technology is a key enabler."
VCF Report

When surveyed about some of the more promising developments they see as well as shortcomings that are keeping them up at night, logistics executives made three key points.

Green supply chain initiatives are tied to future business success according to 98% of logistics executives, yet the majorities are not putting their money where their mouths are by pumping additional funds in the greening of the supply chain.

The theft of material goods continues to be the top security concern. But other issues are growing more worrisome, including the theft of intellectual capital, natural disasters, the closing of ports and product tampering.

Strong relationships exist between different parties in the supply chain through integrated systems and services, which provide sustainability and security. Through efforts to form solid relationships with logistics providers using detailed contracts and metrics, companies can achieve significant cost savings, shorter order cycles, better customer service and improved business efficiency.

In addition, while 3PLs and their users say the costs of creating a more secure, integrated, environmentally-friendly supply chain should be split; there is continued resistance to collaboration and the unspoken assumption that costs will ultimately be carried by the customer.

These insights were captured in the 13th annual Third Party Logistics Study from Capgemini in cooperation with the Georgia Institute of Technology, Oracle and DHL. The study, which delves into the current state of logistics outsourcing, is based on a survey of 1,644 logistics executives from North America, Europe, Asia Pacific and Latin America.

Green supply chain:
Companies are almost unanimous in their belief that green supply chain initiatives, such as local sourcing, are important but there is widespread uncertainty about how to take the initial steps toward a new business model - particularly since sourcing overseas has grown exponentially over the years. However, the report notes that companies must begin to act before it is too late. The survey shows that the greening of the supply chain will have an increasing impact on network design, transport modes used, selection of equipment, business processes, behaviors and balance sheets. Yet few users rate green capabilities as a deciding factor when choosing 3PL partners, despite the fact that collaboration between 3PLs and their users is crucial in planning for a greener supply chain. Only 46% of respondents said that the effect of supply chain operations on the environment was a factor considered when selecting a 3PL. Yet, the report notes that only when the source and impact of emissions can be accurately assessed can 3PLs and their customers become accountable and will the supply chain become more environmentally friendly.

Security in the supply chain:
Although 76% of respondents called their 3PLs secure, the survey reveals a gap between 3PL users expectations and the current security capabilities of their 3PLs. Companies are becoming increasingly concerned about the costs of meeting compliance mandates designed to enhance supply chain security in light of terrorist threats. However, by working closely with 3PLs to set up workable processes, companies can gain considerable benefits that help recoup costs and improve the efficiency of the supply chain, the report adds.

Dennis Wereldsma, Global Leader of Capgemini s Distribution Sector, said, "As compliance and regulation around green and security practices becomes increasingly prevalent, 3PLs and users that are greener and can tout their security capabilities can gain significant market advantage."

Integrated Logistics:
The benefits of supply chain collaboration and logistics integration are enormous, but this can only become a reality if companies can put aside their fears over loss of control, visibility, internal competency, and of being too dependent on a 3PL. However, comprehensive service level agreements that balance costs and risks and greater investments by 3PLs in their own service offerings should result in greater ROI on collaborative efforts. By adopting integration-enabling, open standards-based technologies together with 3PLs, companies will be able to increase agility, lower costs and ensure stronger relationships, the report explains.

Dr. John Langley from the Georgia Institute of Technology notes, "Without a commitment from both sides little progress can be made in the greening of the supply chain and supply chain security. More than three quarters of 3PL users rate consolidation, routing, and mode selection as the top services 3PLs can contribute to green strategies. However, just 31% indicate that their 3PLs currently offer these capabilities."

Finally, technology is also a high priority for 3PL users. 3PLs continue to outsource web-enabled communications, visibility tools, warehouse/distribution management, and transportation management/execution. However, the IT expectation/performance gap persists, with only 38% of the respondents satisfied with their 3PL providers information technology capabilities.

"The gap between customer s expectations and the current IT capabilities of 3PLs is a significant challenge to the industry," said Jon Chorley, Vice President Product Strategy, Oracle. "3PLs must standardize and modernize their applications and IT infrastructure so they can offer innovative, repeatable and cost effective services to the market. This applies particularly in the areas of green supply chains and supply chain security, where IT technology is a key enabler."
VCF Report