For the 22nd consecutive year, Dr. John Langley of Penn State University again led the annual Third Party Logistics Study, released as usual this year at the CSCMP conference in Atlanta in late September, a collaboration between Langley, again this year Penske Logistics, and new sponsors recruiting firm Korn Ferry and consultant Infosys, basically replacing Capgemini, which was a sponsor for many years.
In part 1 of our review, we focused on the core data from the survey of shippers and 3PLs, including the dreaded "IT gap" relative to the perception of 3PL IT capabilities (see Highlights from the 22nd Annual Third-Party Logistics Study.)
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In the end, the report says, "The key to future success within the supply chain is a blend of technology and human talent assets, and talent will take a lead role."
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Again this year, the report augments that core data with commentary and other survey data on what might be called special topics, which this year included use of blockchain technology in the supply chain, automation and digitization, and risk and resiliency in shipper-3PL relationships.
We provide highlights of each of these sections below.
Use of Blockchain in the Supply Chain
Blockchain, the technology that first broke into prominence as the foundation of the digital currency Bitcoin, has much promise in the supply chain by its potential ablity to make it easier and less expensive to share data across the supply chain versus traditional IT approaches.
As the 3PL study notes, the technology also "improves security because each transaction is validated and recorded by an independent third party. No one party can modify, delete or append any record without a validation of the edit from others in the network. The goal is to create one version of the truth, link information and create transparency."
For every each movement of goods across parties, blockchain could identify the parties involved, price, date, location, quality, state of the product, and other information relevant to managing shipments and the products on those shipments.
The report says "The public availability of the ledger makes it possible to trace back every product to the very origin of the raw material used." But this isn't exactly correct, as often a controlling party – say a Walmart – will restrict which parties have permission to see what information – and it seems highly unlikely to SCDigest that Walmart would open up all its supply chain data to its supplier and carrier base.
That noted, the report says "The information shared would increase visibility and minimize the potential for human error. It could also dramatically reduce time delays, eliminate added costs, minimize human error and decrease corruption," – and could even conceivably provide insight into real-time demand for goods and logistics services.
Nevertheless, the technology is very new, with conflicting standards – and is still little known or understood by most. The study found the majority of respondents - 67% of shippers and 62% of 3PL providers - said they don't know enough about blockchain to rate it at this time.
However, the report encourages 3PLs to consider adopting blockchain as a way of differentiating their offerings.
This section of the report concludes with the observation that "Costs to collect information have decreased, but it isn't free, and the value proposition [of blockchain] is yet to be defined. There is a balance of mitigating risk and improving security and the costs associated with doing so. More time is needed to determine which companies are willing to invest in the technology."
Automation and Digitization in the Supply Chain
This section covers a broad range of technologies that are impacting the supply chain, from AI and big data to autonomous trucks, with a lot of space devoted to various levels of truck driving automation.
More traditionally, the report says that there is often a lot of data in core Warehouse Management and Transportation Management systems that could be mined for the mutual benefit of shippers and 3PLs.
From a 3PL perspective, an executive from Penske Logistics notes that "Granular data related to the handling of an order and the handoff to the warehouse or the fleet, as well as the visibility out on the road and time records of deliveries, makes you much more efficient and provides insight into the costs to serve individual customers or individual stops. Then you can make better decisions on how you price your product in market."
Moving to newer technologies, the report noted the rising interest in and availability of on-line freight matching services, as the Uberization of load matching – from companies including Uber itself but a growing number of others – is already having an impact on shippers and 3PLs.
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The report survey found 20% of 3PLs and 6% of shippers said they are using "Uberization of freight" applications currently, while 41% of 3PLs and 30% of shippers said they plan to use such systems in the future.
Overall, what is holding back shippers and 3PLs from investing in automation and digitation technologies? 25% of 3PLs and 17% of
shippers cited their uncertainty in the ROI from such investments; 21% of 3PLs and 16% of shippers cited competing core IT projects; and 13% of 3PLs and 17% of shippers blamed a lack of funding.
Other reasons for not investing in digitization and automation included a lack of in-house talent to develop, implement and monitor (12% of 3PLs and 10% of shippers); insufficient dedicated resources to develop digital platforms (11% of 3PLs and 9% of shippers); and unstable or inconsistent IT infrastructure (6% of 3PLs and 4% of shippers).
Risk and Resilience in Shipper-3PL Relationships
When it comes to risk and resilience in shipper-3PL relationships, "of great relevance is the need for both parties to have the resources that will enhance their abilities to act in real-time to lessen or mitigate the consequences of supply chain disruptions," the report says, as "real-time problems require real-time solutions" in a good line.
Interestingly on this topic, only 51% of shippers and 50% of 3PLs feel that 3PLs communicate well in responding to risks and executing operating objectives.
The report says that often shipper-3PL relationships just aren't structured right to create needed levels of alignment. It presents a model for an arbitrary 30-week planning and execution framework it says can drive better alignment, as shown in the graphic below.
Source: 2018 Third Party Logistics Study
When it comes to risk management, 68% of shippers say that the 3PLs they use generally have an agreed-upon framework for risk assessment within their organization, while a smaller 52% of 3PLs indicate they have these capabilities.
Communications issues and failures between shippers and 3PLs remain a large source of problems in responding to risks and beyond, the report says. Shippers cited key issues as including still extensive use of email to communicate issues (and often a lack of context in those emails), the absence of a digital "communications hub" to present and resolve issues, lack of clarity about 3PL organizational structures, and geographically dispersed 3PL teams.
The Logistics Talent Revolution
"Technology is reframing the demands on the workforce," the report notes, but then says that "While it is natural to think automation will decrease the need for companies to invest in employees, the opposite is true. Technology won't replace human talent within the supply chain. Instead, it will enable employees to reach their full potential and make human talent even more valuable."
Let us hope that is indeed true.
But most agree that there is a supply chain talent shortage – demand is far higher than supply – and that it is likely to get worse. One answer to this scenario, the report notes, is something called strategic workforce planning.
What exactly is that?
"Strategic workforce planning is the alignment of a company's business and talent strategy and mapping the workforce needs to that strategy" the report says.
Mapping how to get there requires a deep understanding of the current workforce, sophisticated scenario planning, detailed HR analytics and suitable modeling tools, the report adds. However, because supply chain conditions change swiftly, talent strategies will have to be reviewed and updated regularly to account for opportunities and threats as they arise.
At the top, the attributes of the supply chain leader is also changing. Increasingly, the DNA of a future leader has three key strands, the report says: agility, visionary, and partner/ collaborator. Such leaders will need to be able to manage ambiguity, make situational adaptations and pivot with constantly changing environments.
In the end, the report says, "The key to future success within the supply chain is a blend of technology and human talent assets, and talent will take a lead role."
The full report is theoretically available for free download here, but SCDigest had trouble getting the email conformation function to work a few weeks ago.
Any reaction to the data summary of this year's 3PL study? Let us know your thoughts at the Feedback section below.
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