Every fall for the past 27 years, Dr. John Langley of Penn State has published the Third Party Logistics Study. I have followed this study since its inception and have found it to be the annual “go-to document” for a thorough analysis of the current relationships between logistics service providers (LSPs) and their customers. Once again, this year’s report, entitled “Back to Basics”, was sponsored by Penn State, Penske, and NTT Data.
The back-to-basics discussions focused on several principles that will facilitate current and future success in managing the supply chain. As the report put it, “A fine-tuned ability to innovate, change, and transform supply chains will be a prerequisite to achieving supply chain goals and objectives.”
Langley refers to these core principles of customer focus, supply chain relationships, data and analytics, innovation and transformation, survivability and sustainability, talent, and end-to-end supply chain as the “Seven Immutable Laws of Supply Chain Success”.
As was the case last year, the five most frequently outsourced functions were domestic transportation (68%), freight forwarding (60%), international transportation (52%), customs brokerage (51%), and warehousing (43%). All trends were higher but warehousing which dropped from 62% in 2021. Another two functions, although not in the top five, were worth noting. Reverse logistics was about 28%, compared to 18% last year, and freight bill audit and payment increased from 12% in 2021, to 38% this year.
Both users and LSPs are in general agreement that their relationships have been successful, although LSPs are almost always more positive than their customers. 99% of LSPs believe this to be the case, but only 83% of users agree. 100% of the LSPs believe they have contributed to improving service. Only 71% of users agree. The major disconnect involves information technology capabilities. 81% of the providers believe their customers are satisfied with the LSPs capabilities, but only 54% of the users actually are.
Technology remains critical in these relationships. Shipper “must haves” include transportation management and scheduling, warehouse management systems, advanced analytics and data mining tools, and cloud-based solutions. The data shows that LSPs are well-aligned with these needs.
The report contains a section on understanding the talent crisis. It is a well-known fact that labor shortages have been an issue in supply chain management. 56% of LSPs and 78% of users reported that this had an effect on operations. However, there is no general agreement the labor issues will continue. 27% of users and 28% of providers believe the problem will be permanent. Others do not. Both groups however are researching methods of offsetting labor issues with new technology and/or automation.
Reverse logistics is now an integral part of day-to-day operations. Both groups of respondents believe that the handling of returns impacts customer loyalty. Returns are expected to grow, driven by online purchases increasing. 61% of consumer-focused users expect to see increased volumes over the next three years…
As reported last year, the demand for cold chain services continues to grow. 82% of users and 84% of LSPs believe it will increase over the next three years.
Finally, the report focuses on contemporary issues. The three most prominent were technology as a differentiator and the well-known shortage of truck drivers. Less discussed in supply chain circles is the shortage of maintenance technicians identified in the report.
This year’s report is well-researched and presented and a complete review is recommended. Once again, Langley and his group have succinctly summarized the current issues and opportunities in third-party relationships. A copy of the complete study may be found at www.3plstudy.com.