Annual 3PL study suggests shift in focus for shippers

The ‘2014 Third-Party Logistics Study’ written by Dr John Langley of Pennsylvania State University and sponsored by Penske appears to show an industry that is stable with moderate growth in outsourcing, but bumpy progress in IT. The report is compiled annually through a continuing survey of over one thousand managers in logistics from both shippers and third party logistics providers largely in North America and Europe.

Unsurprisingly, the report cites that demand growth in regions such as Asia-Pacific and Latin America has been strong, although there is evidence that this is now slowing. However, there were also notable global trends suggesting a shift in strategy. For example the survey finds that 72% of shippers are increasing their level of outsourcing, whilst half are consolidating the number of 3PLs that they use.

One of the more interesting and high-profile conclusions of the report is that “nearly half of shippers (48%) and 61% of 3PLs say centralized procurement functions are playing more or much more of a role in the selection process compared with three years ago”. As the report admits, this might suggest that customers are becoming more focused on price than service levels; however it also cites evidence of higher levels of “collaboration”. On the other hand, the report also sees evidence of more contract churn as shippers look to shorten contract length and entertain more bidders on contracts.

The salient area of difficulty remains that of IT. Roughly only half of shippers feel satisfied with the IT capabilities delivered by their 3PL providers, whereas two thirds of 3PLs are satisfied with the service they offer. As the report states, part of the problem is that shippers tend to “view 3PLs tactically rather than strategically” which “is reflected in their views of 3PLs’ IT capabilities”. The report does mention the issue of ‘Big Data’ and its variable reception in the sector. Only 22% of shippers and 3PLs are planning initiatives in this area and more than a third are not even aware of the concept or regard it to be of little relevance. However, whether this is due to complacency or a view that the concept is over-hyped is unclear.

The report appears to describe a sector which is fairly stable but is facing a degree of pressure from more aggressive purchasing policies from its customers. In addition, there is the possibility of a number of longer-term structural issues, often related to IT, whose nature and consequences are frequently unclear.