Shippers and 3PLs align through tech and collaboration, notes 3PL Study

The pairing of shipper-3PL collaboration and the emerging technologies powering operations needed to run supply chains served as the key themes of the 30th Annual Third-Party Logistics Study, entitled “Transforming the Supply Chain: Leveraging Technology and Relationships for Success,” which was released today at the Council of Supply Chain Professionals (CSCMP) EDGE Conference in National Harbor, Maryland.

This study was created in conjunction with NTT Data, supply chain professor and researcher Dr. C. John Langley, and Penske Logistics.

The study’s findings were based on feedback from several hundred usable responses from shippers, or users of 3PL services, and non-users of 3PL services, as well as 3PL sector respondents.

As usual, the study was replete with interesting data points, highlighting the differences in how 3PLs and shippers approach the same issues.

• Relationship shifts moving from more transactional to strategic: Shippers stated that supply chain disruptions (81%), cost optimization through collaboration (76%) and digital transformation (57%) represent some of the top drivers for strategic partnerships. For 3PLs, leading the way were demand for end-to-end visibility (61%), customized/value-added services (61%) and cost optimization via collaboration (56%);
• Contracts and other financial benefits driving strategic partnerships: Service level agreements are the most common way to connect shippers and 3PLs. Other elements that shippers employ include guaranteed volume/capacity (67%), flexible terminations (62%) and contract extensions (57%). For 3PLs, the study found that there are continuous improvement targets (72%), guaranteed volume/capacity (61%) and contract extensions (56%). It added that a little more than half of all shippers explained that they do not rebid business at the end of contracts; and
• Technological advancements can augment supply chains for shippers: Many shippers (90%) view technological capabilities as among the most critical elements of selecting a 3PL. The majority of shippers (80%) and 3PLs (81%) are deploying advanced analytics at some level, it found. AI and machine learning are utilized by shippers at a 67% rate and at 73% for 3PLs. Barriers to deployment of next generation tech includes funding, unclear business cases, inadequate talent, trust of that technology, risk aversion and scalability

Assessing trade, the study found that shippers will look at various strategies to mitigate the impact of tariffs, including shifting to alternative approaches to sourcing (45%), identifying new foreign suppliers (40%), and modeling tariff risks (40%). For 3PLs, 41% indicated they don’t plan to implement short-term tariff strategies, whereas 41% said they plan to source domestically and 35% plan to purchase from premium domestic suppliers.

And over the long-term, various strategies were cited by shippers and 3PLs, including reevaluating product portfolios, which 30% of shippers and 47% of 3PLs cite, and reestablishing manufacturing bases, which 25% of shippers and 24% of 3PLs report. Roughly one-third of shippers (30%) and 3PLs (29%) indicate no plans to adopt long-term tariff strategies, which could leave them vulnerable as trade tensions persist.

“Despite the disruption tariffs are causing, shippers and 3PLs express confidence in their ability to adapt to the changes that tariffs will bring,” the study said.

On the labor front, the study said that concerns over labor are an ongoing issue in the supply chain, as the logistics sector faces a widening talent gap. To that end, it explained demand for skilled supply chain professionals outpaces supply by a wide margin, with the problem getting worse, with experienced workers retiring and taking their extensive knowledge with them.

“The 3PL industry has grown and transformed significantly over the past 30 years,” said Langley. “Both shippers and providers and managers of supply chain services have responded forcefully to the continually changing and challenging business and supply chain environments.”