Those are among the findings of the 21st Annual Third-Party Logistics Study, presented at the recent meeting of the Council of Supply Chain Management Professionals by Capgemini Consulting, Penn State University and Penske Logistics.
The report shows that shippers and their 3PLs continue to move toward meaningful partnerships and steady improvement in the strategic nature of relationships. Both parties—91 percent of 3PL users and 97 percent of 3PL providers—reported that their relationships are successful and that their work is yielding positive results. This is an increase from 2012, when 88 percent of 3PL users and 94 percent of 3PL providers reported that their relationships were successful.
Relationships create value
The 2017 study showed that 75 percent of shippers and 93 percent of 3PL providers said the use of 3PL services has contributed to overall logistics cost reductions, and 86 percent of shippers and 98 percent of 3PL providers said the use of 3PLs has contributed to improved customer service. Moreover, the majority of both groups—73 percent of shippers and 90 percent of 3PL providers—said 3PLs offer new and innovative ways to improve logistics effectiveness.
This year's results show that as 3PL offerings mature, shippers are increasingly taking advantage of logistics providers' expertise. As seen in previous studies, the most frequently outsourced activities continue to be those that are more transactional, operational and repetitive. Activities that are strategic, IT-intensive and customer-facing tend to be outsourced to a lesser extent. However, this year even outsourcing in those categories is increasing over historical values. For example, in the 2017 study, 19 percent of shippers are taking advantage of supply chain consultancy services, compared to 11 percent last year and 17 percent of shippers in the 2017 study are utilizing IT services, compared to 11 percent last year.
Technology investment
Fluctuating capacity, increased shipper demands and disruptions within the industry are creating a volatile decision-making environment for shippers and logistics providers trying to optimize the supply chain. Both parties are increasingly using information and analytics to drive their decisions. Nearly three-fourths of shippers (71 percent) said real-time analytics from 3PLs help them better understand shipping alternatives, and 61 percent valued 3PLs' assessments of trade lanes and origin-destination pairs in terms of cost and service levels.
In this year's survey, nearly all 3PLs (98 percent) said improved, data-driven decision-making is essential to the future success of supply chain activities and processes, and 93 percent of shippers agreed. Both groups—86 percent of 3PLs and 81 percent of shippers—said the effective use of big data will become a core competency of their supply chain organizations.
The types of technology that 3PLs use is becoming an advantageous, differentiating factor. Shippers continue to rely heavily on 3PLs' IT services. While the "IT Gap"—the difference between what shippers feel is important and their ratings of their 3PLs' current IT capabilities—has stabilized, further opportunities for improvement remain.
3PLs broaden service offerings
Third-party logistics providers have turned to mergers and acquisitions to fill gaps in service areas, expand their global network, and leverage leading practices and technology globally. The value of M&A deals nearly doubled from 2014 to 2015, growing to$173bn from $87bn. Also, cross-border deal values have quadrupled from 2014 to 2015, growing to $115bn from $28bn.
Shippers that invest in gaining an overall competitive advantage have shown significant interest in doing so through supply chain transformation initiatives. Successful transformation efforts rely on a wide range of people, resources and technology, and 3PLs and 4PLs are playing an important role in the transformation process due to their ability to collect and analyze information related to shippers' operations.
Among respondents, 73 percent of shippers indicated meaningful involvement of 3PLs in processes relating to supply chain transformation. Transformation and continuous improvement will be a priority as shippers look for new and innovative ideas to reduce costs, enhance service and improve the management of complex supply chains. Going forward, there will likely be greater importance on the role of meaningful analytics and data within transformation initiatives.
The study report and additional materials are also presented on a dedicated Website.
