The Third-Party Logistics Arena is Booming

How do 3PLs create more value?
Third-party logistics providers create value by providing basic, value-added, and innovative services needed by their clients and customers. 

As potential customers are becoming better and better at understanding their own supply chain core competencies, this will continue to be reflected in increased business opportunities for 3PLs and 4PLs.

How has Amazon changed the 3PL landscape? Are there now lower barriers of entry?
Amazon is changing the 3PL landscape in at least a couple of significant ways.

First, and as a 3PL customer, Amazon has asked its external providers of supply chain services for a needed mix of operations- and solutions-based services. 

Second, considering the extraordinary range of resources available at Amazon, they also need to be recognized as a very viable potential provider of commercial logistics services.

Considering some of the unique, solutions-based supply chain needs evidenced at Amazon, there are a range of strategic decisions that they may contemplate in the future.

Considering the results of our current research into the use of 3PL/4PL services, the range of capabilities that are necessary to have is increasing significantly.  Thus, the barriers to entry actually are increasing rather than diminishing.

What changes in information technology are expected?
Based on the research we have conducted, shippers are asking their 3PLs and 4PLs for competency in a wide range of IT-based services.

In fact, the availability of capable IT-based services already has become a key differentiating factor for commercial providers of 3PL and 4PL services.

Among the types of IT-based services that are growing in popularity are supply chain visibility; execution-based capabilities; meaningful use of descriptive, predictive, and prescriptive analytics; and integration technologies.

Are we seeing new patterns in consumerism?
It will be interesting to observe how all of this evolves, as clearly there are examples of consumerism to which the 3PL sector is busy responding. 

The current emphasis on omni-channel capabilities, for example, is in response to customer and consumer needs for more highly-innovative and effective supply chain services. 

As this pattern continues, we will see growth in the use of effective and innovative social media capabilities to facilitate the planning and functioning of supply chains.

Will e-commerce gain or lose traction this year?
Most likely, the coming year will show increases in the diffusion of e-commerce services. 

This is a very interesting area, and one that will continue to develop and evolve. Even though there are a wide range of significant players who are involved in e-commerce, we continue to search for effective operational and strategic approaches to facilitate the needs of e-commerce.

Should we expect to see more near-shoring and cross-border trade?
This is a tough one, as any answer to this question would need to assess the net impact of global and political trends on a worldwide basis. 

There are good arguments for the growth of near-shoring, as well as the alternative of cross-border trade.

Another major factor regarding this topic will be the extent to which supply chain participants ramp up their abilities to understand and utilize the principles relating to total landed cost.

Use of this approach will help to make more rational sourcing, manufacturing, and marketing decisions, and then the next bridge to cross will be what future directions will become evident in terms of the forces impacting our supply chains.

Finallly, where do we see the greatest regional variance in manufacturing and production?
This is a challenging question, as the range of answers depends not only on global import and export trends, but also how much is manufactured and produced for local consumption.

Big question marks include:  how much of global imports and exports are impacted by near-shoring vs. offshoring trends; and how will manufacturing and production for local consumption impact regional variances.

Current State of the 3PL Market
The 2016 20th Annual Third Party Logistics Study shows continued collaborative and positive relationships between shippers and third-party logistics providers, which have been developing since the study began 20 years ago.

This year’s survey suggests 3PLs and their customers are becoming more proficient at what they do, individually as well as together, which is improving the quality of their relationships.

Both parties - 93% of 3PL users and 94% of 3PL providers - reported that their relationships are successful and that their work is yielding positive
results.

The 2016 3PL Study showed that 70% of those who use logistics services (shippers) and 85% of 3PL providers said the use of 3PL services has contributed to overall logistics cost reductions, and 83% of shippers and 94% of 3PL providers said the use of 3PLs has contributed to improved customer service.

Moreover, the majority of both groups - 75% of shippers and 88% of 3PL providers - said 3PLs offer new and innovative ways to improve logistics effectiveness.

Gainsharing and collaboration remain important to many relationships, and 46% of shippers and 81% of 3PL providers agree that collaborating with other companies, even competitors, to achieve logistics cost and service improvements holds value.

As seen in recent years, 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.

Although relationships between shippers and 3PLs are successful overall, there are some areas in which they could improve. Many shippers are still working to shift management structures to better reflect the role supply chains play in the business.

Shippers continue to rely heavily on the IT services 3PLs provide, and the ability to manage the provision of IT-based services is a necessary core competency of 3PL providers. 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.

Download: The 2016 Third-Party Logistics Study