Competition forcing logistics firms to collaborate

5 October 2015

The way shippers and third party logistics providers work together is changing as competition within the logistics industry ramps up, according to research.

The 2016 20th Annual Third-Party Logistics (3PL) Study, by Capgemini Consulting, Penn Sate University, Korn Ferry and Penske Logistics, examined the global outsourced marketplace of shippers and 3PLs in the logistics industry.

It found tightened capacity along with increased consolidation within logistics service providers has resulted in fewer partners for 3PLs and increased prices. As a result, 44 per cent of survey respondents reported they have enhanced relationships to guarantee shipping lanes and on-time shipments, and 40 per cent have increased rates.

Among shippers, 29 per cent said assets have not been available to move shipments when needed, and 29 per cent have engaged with a larger number of 3PLs to get access to capacity.

The report, based on responses from more than 260 shippers and logistics service providers in North America, Europe, Asia-Pacific and Latin America, found 87 per cent of shippers and 96 per cent of 3PLs have agreed-upon performance expectations.

Some 80 per cent of shippers and 81 per cent of 3PLs have formal performance reviews, including the measurement of and feedback on results.

“The spirit of collaboration with 3PLs and shippers has led to increased efficiencies in the supply chain,” said Bob Daymon, vice president of transportation management for Penske Logistics. “Enhanced relationships with shippers results in operational costs savings and ensures reliable coverage and better rates.”

The study said that 3PLs are also using technology and data to aid shippers in selecting the right shipment modes to maximise efficiency and reduce costs. Some 60 per cent of respondents are using technology to increase visibility within orders, shipments and inventory. And 40 per cent are using technology for planning within transportation management. A further 48 per cent are using it for scheduling within transportation management.

To meet increasing customer requirements, 58 per cent of respondents said they were investing in new capabilities for themselves, 40 per cent said they are leveraging new capabilities from other companies in different industries, and 15 per cent said they are leveraging new capabilities from competitors.

“These factors should create an interesting competitive environment, spurring significant changes to the 3PL business model,” said Shanton Wilcox, vice president and North America logistics and fulfilment lead at Capgemini Consulting. “Social, crowd-sourcing and flexible fulfilment will converge to create opportunities for alternative logistics service providers. The challenge will be how traditional, asset-based providers respond to these circumstances.”

The 3PL industry is expected to face a shortage of talent, the study predicted, but 79 per cent of 3PLs said they were unprepared for the impact of this on their supply chain. But more than half of shippers said they felt they could rely on their 3PLs to address the impact of the shortage.

“The employee skill sets and traits that logistics companies need are shifting as new technologies and distribution approaches transform the industry,” said Neil Collins, global leader of logistics, distribution and transportation for Korn Ferry. “Simultaneously, wage issues and job alternatives that didn’t exist a few years ago have increased competition for talent.

“For many companies, this means a fundamental shift in how they recruit today’s workforce for tomorrow’s needs. A strong work culture and stand-out training will be key, while creating opportunities to work across departments or regions will help employers attract and develop an agile, adaptable workforce.”

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