A decade ago, third-party logistics (3PL) was a relatively new concept. Well established in Europe, it was just beginning to take hold in the United States. No one knew much about it, and shippers tended to view the 3PL providers' wildly optimistic projections concerning their growth potential with skepticism.

Today, third-party logistics is a key component of logistics management strategy in many industries. We also know much more about how 3PLs work with shippers, thanks in large part to two annual surveys on that subject. In 1991, Dr. Robert Lieb, professor of supply chain management in the College of Business Administration at Boston's Northeastern University, and Mercer Management Consulting launched the first comprehensive study of third-party logistics. Now in its 10th year, that two-part study, which surveys both users and providers, is currently being conducted in partnership with Accenture under the guidance of Senior Manager Brandon Schwarz.

In 1996, Dr. C. John Langley Jr., then at the University of Tennessee, began a similar study with consultants Exel Logistics. That research is now in its sixth year, with current research partners Gary R. Allen, a senior manager with Cap Gemini Ernst & Young, and Gene Tyndall, executive vice president for global markets and e-commerce at Ryder System Inc. Though research for the 2001 study was conducted at the University of Tennessee, Langley has since moved on to the Georgia Institute of Technology, where he is Logistics Institute Professor of Supply Chain Management and director of supply chain executive programs. (For that reason, this article will refer to the study he conducted as the Georgia Tech study.)

These studies cover essentially the same ground—current practices and future plans for use of third-party logistics services—so you might expect that the results would be very similar. But in fact, they represent two sides of the same coin, providing different views of a single industry.

A comparison of the two studies immediately makes clear that who you ask clearly has an impact on the answers you get. The Northeastern study surveyed the chief logistics executives of the largest manufacturers in the United States, based on Fortune magazine's annual ranking and other financial sources. (This article does not discuss the companion survey of 3PL executives.) The Georgia Tech study, by contrast, focused on top logistics executives in specific industry segments that included both manufacturers and wholesalers/distributors. These included the automotive, chemical, computers and peripherals, consumer products, electronics, medical supplies and devices, retail and telecommunications industries.

One striking difference was in the percentage of respondents who said they used 3PL services. Although the current usage rates are very close—74 percent for Northeastern and 71 percent for Georgia Tech—historical rates are quite different. Georgia Tech's numbers have been stable over the years, staying within a range of 68 to 73 percent. But Northeastern has seen a steady increase in usage during that time, rising from 38 percent in 1991, the first year of the study, to 74 percent today. That difference undoubtedly relates to the different survey populations. Langley targeted industries that became leaders in outsourcing logistics early on. The manufacturer respondents to the Northeastern survey, on the other hand, were selected based on company size and therefore are involved in a wide range of industries that may or may not be compatible with outsourcing.

Another important difference showed up in responses to questions relating to customers' satisfaction with 3PL services. Northeastern's study asked respondents how satisfied they were with provider performance regarding cost savings, service improvements, communications, overall working relationships and the 3PL managers assigned to their account. Numbers varied by category, ranging from 67 percent who said they were "very satisfied" or "satisfied" with the cost savings achieved up to 90 percent who were very satisfied or satisfied with their overall working relationship with their 3PLs.

For the first five years, the Georgia Tech study also found very high levels of satisfaction with 3PLs' performance. From 1996 to 2000, the number of respondents who reported that their experiences with logistics outsourcing were either "extremely successful" or "successful" ranged between 82 and 90 percent. This year, however, that number fell to 54 percent. The biggest drop came in the number of respondents who characterized their experiences as being extremely successful. That could turn out to be a one-time statistical blip, Langley says, but researchers suspect the sharp fall has more to do with increasing expectations of buyers and providers. "I don't think things have deteriorated. ... It's marketplace maturity," he says. "Buyers and sellers have both become a little more critical."

Both questionnaires asked respondents which 3PL services they used from a predetermined list of services (respondents could also add their own categories in both cases). The category labels and breakdowns often do not exactly correspond, but if viewed by broad subject areas, the results generally are similar. (See Figure 1.) For example, nearly two-thirds of both groups of respondents outsource some aspect of transportation management. Similarly, when it comes to information technology, services like freight payment and general IT operations received strikingly similar response rates from the two sets of respondents.

Not surprisingly given respondents' demographics, Northeastern's group largely kept its core manufacturing business in house, while almost one-third of Georgia Tech's respondents said they outsourced some manufacturing. There was also a noticeable gap between usage of warehousing and typical distribution-center services. Respondents to the Georgia Tech study, many of them in industries like retailing and computers that depend on complex distribution strategies like efficient consumer response (ECR) and just in time (JIT), were more likely to outsource warehousing and related services. Nearly three-fourths (74 percent) of those respondents said they outsourced warehousing, while just 59 percent of the manufacturers in Northeastern's study did so.

One of the hottest issues in third-party logistics today is their involvement in information technology. Both surveys investigated IT and e-commerce practices, but they asked very different questions. Northeastern focused on current usage, finding that nearly half of its survey respondents were outsourcing freight payment and transportation planning or optimization to their third parties. (See Figure 2.) Georgia Tech, however, asked respondents which IT services their 3PLs now offered and which of those they would require from 3PLs in the future. That study found that the greatest demand for IT systems in the future would be in sophisticated supply chain and supplier-management information as well as in electronic markets, indicating a shift in expectations regarding the role that 3PLs play from functional to strategic management. (See Figure 3.)

Georgia Tech also asked respondents whether they preferred to rely on 3PLs or software vendors for access to technology. Sixty-nine percent preferred to go directly to vendors; only 20 percent turned to 3PLs for that service, a number also supported by Northeastern's findings. (For more on this topic, see "Space invaders," Logistics Management, January 2002. ) Although some users still want 3PLs to manage the flow and use of information as well as integration with other technologies, only about one-fifth of respondents in both studies said they relied on 3PLs to manage information systems on their behalf, which suggests that users don't believe 3PLs are ready and able to take that job on just yet.

There are several other ways in which the studies differ. For example, Northeastern's research devotes a considerable amount of attention to the growing demand for international 3PL services, a subject Georgia Tech only mentions in passing. The latter, meanwhile, devotes a significant percentage of its coverage to 3PL-related developments in information technology and electronic commerce, which are barely touched on in the Northeastern survey.

There are numerous instances where the studies examine the same general topic but ask very different questions. They also differ in areas like focus, precision and amount of detail. Northeastern's more academic approach focuses mainly on the current state of the industry, and the researchers present both their results and their analysis in straightforward and precise language. The stylishly presented Georgia Tech study, by contrast, is more concerned with the future, sometimes suffers from ambiguous language, and includes more analysis, including three follow-up articles by the principal researchers.

In short, despite a good deal of overlap, the studies clearly complement each other. To gain a complete picture of where third-party logistics usage stands today and where it is likely to head in the future, shippers may want to read them both.