3PL News: IT and logistics are hot topics for annual 3PL survey

Jeff Berman, Senior Editor -- Logistics Management, 11/14/2007

PHILADELPHIA—In some industries, technology is often viewed as a panacea of sorts, but based on the findings of the 12th Annual Third Party Logistics (3PL) Study, published by Capgemini and the Georgia Institute of Technology, in conjunction with SAP and DHL, there is definitely room for improvement.

This Web-based survey polled 1,568 logistics and supply chain executives from 61 countries in various regions, North America, Asia Pacific, Europe, South America, and Latin America. 

One of main the takeaways from this survey is that more people are satisfied with the IT capabilities of 3PL providers compared to a year ago, with the gap between IT expectation and IT performance shrinking year over year. Last year’s survey revealed that IT satisfaction bottomed out at 35 percent, while this year it was up by seven percent to 42 percent.

“There continues to be a technology gap between what the 3PLs provide and what users expect from technology,” said Rod Strata, transportation and logistics industry principal at SAP, at the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Philadelphia last month. “This raises the question of if it is an expectation in performance issue or a diversion of full operational performance?”

Although technology got better marks this year, the survey’s respondents indicated that all is not well when it comes to IT satisfaction, with IT performance and insufficient IT capabilities singled out by many respondents as a major hindrance of technology. As Strata pointed out at the conference, visibility tools (91 percent) and Web-based tools (88 percent) were the two applications 3PL users wanted to see more of in the future, while RFID inched up from 12 percent in 2006 to 14 percent in 2007.

Despite the mostly encouraging numbers regarding IT, Strata said that a disconnect continues between the relationship structure and the economic and contractual structure of 3PL arrangements and underlying technology requirements.

“We find that service level agreements (SLA) may be the best places to include the technology requirements and agreements between 3PLs and end users,” said Strata.

Collaboration matters:
This type of collaboration is key to 3PL and shipper relationships for more than just technology, according to the survey. Collaboration, according to Dr. C. John Langley, The Logistics Institute Professor of Supply Chain Management at Georgia Tech, needs to have firm footing to ensure what all stakeholders want in terms of desired objectives.

“Shared decision making and the ability to reach a consensus on matters of importance is critical,” said Langley. “Collaboration can’t be a ‘touchy-feely’ type of endeavor. There needs to be well-defined goals and objectives, as well as an equitable sharing of gains, losses, and investments.”

Another key driver for collaboration cited in the study that these relationships need to extend beyond 3PLs and shippers to trading partners, suppliers, and other stakeholders.

“Strategic collaboration is not for everyone,” said Erik Van Dort, Capgemini vice president, Global Sector Leader Distribution. “Many shippers work with multiple 3PLs and transportation companies to different degrees. And shippers are taking a longer look at collaborating with parties that go beyond the ‘obvious or simple’ relationship of execution. Those companies make a more strategic commitment, which means that more senior management gets involved, and they make a plan to identify how the relationship is progressing and address any issues and problems as they arise.” 

Outsourcing logistics:
The timely topic of outsourcing also received a lot of attention in the survey, and like in past years there was not a ton of differentiation as to what the hot buttons for 3PL outsourcing are.

The survey revealed that domestic transportation and international transportation were the most outsourced 3PL services at 83 percent and 79 percent, respectively. Next were warehousing (69 percent), customs clearance and brokerage (67 percent), and forwarding (51 percent). As was the case last year, the pricing of 3PL services (87 percent) and quality of tactical and operational logistics services (87 percent) ranked high among the survey’s respondents. 

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