Third-party logistics providers are evolving in the wake of changing politics, increased public scrutiny and demand for more value-based, not asset-based, services. At the close of 2016, the 21st Annual Third-Party Logistics Study found the overall use of third-party logistics providers (3PLs) is increasing, but the types of logistics services utilized indicate the industry is entering a shift in how it operates. Since you, as a shipper, rely on having the most accurate information available and applicable to your operation, understanding the trends identified in the third party logistics study can help your business grow throughout 2017.
3PLs and Shippers Report Positive Partnership Outcomes.
The whole point of a successful 3PL-shipper relationship is a positive outcome that exceeds what a company could achieve without outsourcing anything. In this edition of the third party logistics study, 97 percent of 3PLs and 91 percent of shippers see existing partnerships as beneficial to their organization, explains Jeff Berman of Logistics Management magazine. Meanwhile, the overall type of 3PL services used has changed from transactional-based partnerships, otherwise known as asset-based partnerships, to value-added services. While up to 75 percent of shippers have seen overall logistics cost reductions through such partnerships, more or looking for better ways to take advantage of the partnership.
The Third Party Logistics Study Indicates “Working With the Enemy” Is Profitable and Acceptable.
There is a negative connotation behind working with competitors in logistics, but past years have revealed collaboration, even working with competitors, can help to drive logistics costs down. In fact, 44 percent of shippers and 86 percent of 3PLs surveyed cite collaboration with competitors as a strategic value in entering and continuing the 3PL-shipper partnership. Of course, there are still hold-outs that foresee possible problems with these relationships.
Mergers and Acquisitions Give Rise to Nervousness Among Some Shippers.
3PLs are changing globally. 3PLs in one country are merging or acquiring other logistics service providers domestically and abroad. Therefore, the competition among 3PLs themselves is decreasing, which could contribute to a monopoly in differing markets. Moreover, 34 percent of shippers believe that increasing mergers and acquisitions (M&As) among 3PLs will result in service pricing hikes and changes to the beneficial nature of 3PL-shipper partnerships. An additional 31 percent of shippers fear a loss of personalization among 3PL services will follow increased M&As. However, 27 percent of shippers look at increasing M&As as a source of added value, asserts Dr. John Langley of Supply Chain 24/7.
In other words, M&As among 3PLs globally will give smaller, regional shippers access to more resources, including technology and modes of transportation, which is essential to meeting growing demand as traditional sales channels move toward an omnichannel approach.
The IT Gap Has Reached a Record-Low.
In 2002, the third party logistics study first began surveying respondents on satisfaction with the level of information technology (IT) services available through 3PLs. The initial finding was a 22-percent satisfaction rating. Although it seems minor, it represents 78 percent of shippers that were dissatisfied with the level of IT services being offered. Fast forward to 2016, and this “IT Gap,” as it has come to be known has risen to 65-percent satisfaction rating. So, more shippers are satisfied with 3PL-offered IT services, which now includes the collection, analysis and application of Big Data and predictive analytics.
Among shippers, IT services is not a value-added service of 3PLs; it is a necessity, reports Supply Chain Digest. With 93 percent of shippers and 98 percent of 3PLs citing data-driven decisions, powered by Big Data and innovative technology, the role of IT in modern logistics cannot be overstated.
Global Growth and Use of 3PLs Outpaces Partnerships in North America.
One of the most surprising facts revealed in the 21st study revolves around global logistics trends using 3PLs. The use of 3PLs by shippers in the U.S. and the remainder of North America rose 4 percent over the past year, but the global use of 3PLs rose 4.8 percent. Now, here is where things start to get a bit unusual.
Global spending on 3PLs decreased slightly over the past year. Yet, their use increased simultaneously? The reason this works is quite simple in nature; it goes back to the supply and demand of 3PL partnerships. As these partnerships have become more common, real-world savings are becoming evident across the logistics spectrum, including benefits to both 3PLs and shippers alike. Consequently, the costs of working with 3PLs have decreased as the supply of services provided increased. In other words, the cost savings were significant to such an extent that the costs of operating decreased for both, promoting decreased spending on the part of shippers.
One of the final insights gleaned from the third party logistics study is changing preferences for modes of transportation. Throughout history, most shippers have held a clear preference for a particular mode, but most shippers, 62 percent, expressed interest in exploring alternative modes or intermodal shipping. This means that the overall logistics costs could decrease further, especially when working with a 3PL. Overall, the study points to a growing following behind the use of 3PLs and the need for a 3PL-shipper partnership to remain competitive and responsive in modern markets.
For a better visual look at some of the additional insights found within the study, check out this infographic!