3PL Roundtable: Strengthen the Ties that Bind

In the midst of rapid 3PL market growth, cultural shifts in consumerism and technological disruptions are putting more pressure on the collaborative efforts between logistics managers and their service partners. Our panel sets out to help shippers thrive in the new era of bigger, more dynamic 3PLs.

By ·

According to a new report by titled “World Third-Party Logistics Market—Opportunities and Forecasts,” the global third-party logistics market is expected to reach more than $1 trillion, registering a compound annual growth rate of 5.16%, during the forecast period extending to 2022.

However, analysts observe that sheer revenue size is not all that matters here. For shippers seeking a way to make the most of this rolling storm, they will need to evaluate a growing list of integrated services, IT enhancements and value-added solutions. In an effort to help shippers improve the management of their third-party logistics provider (3PL) relationships in the midst of this growth trend, we’ve convened a panel of industry experts to share their impressions of the current environment.

Joining us in this roundtable discussion we have , managing principal of the supply chain consulting firm ; , president of research firm ; and ., who serves as a director of development at the

Logistics Management: As the 3PL arena becomes ever more dynamic, how will shippers seek more value in the relationship?

John Langley: That’s a complicated question, but I would say that 3PLs create value by providing basic as well as innovative services. As potential customers become better at understanding their own supply chain core competencies, they should expect 3PLs to customize their offerings.

Cathy Roberson: That’s so true, and it’s important to remember that 3PLs create more value by being more than just a vendor. Shippers should expect them to become a real partner. It’s not unrealistic to expect 3PLs to focus on their strengths and also provide value-added services such as light assembly manufacturing, vendor-managed inventory, and to identify efficiencies across the supply chain.

Art van Bodegraven: Agreed. Shippers have every right to demand that 3PLs arrange scope and scale, functional capability extensions, global operations as well as relationships. This means that there should be integration of assets like distribution, transportation, order selection and processing. At the same time, shippers should expect visibility, tracking capability, and process design.

LM: That sounds a bit like what Amazon is trying to achieve in this marketplace. How seriously should we take them now? Are there now lower barriers of entry?

Langley:  is changing the 3PL landscape in at least a couple of significant ways. First, 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 Amazon’s unique, solutions-based supply chain needs, there is a range of strategic decisions that they may contemplate in the future. Considering the results of our current research into the use of 3PL services, the range of capabilities that are necessary to have is increasing significantly. Thus, the barriers to entry are increasing rather than diminishing.

van Bodegraven: John is right on. In general, barriers to successful entry in the 3PL space will continue to grow higher. Gone are the days when two guys and a truck could throw open their doors and prosper. And keep in mind that the industry will continue to suffer in the transition away from the heritage of small family businesses as a march to consolidation continues.

Roberson: It’s critical for shippers to keep in mind that it still requires a substantial investment to build out a network that can rival a FedEx or UPS. Automating existing warehouses and other facilities is costly. For the many 3PL startups that have appeared in recent years, few of them are profitable and most are still dependent on venture capital funding.

Shipper checklist for a new era of 3PL relationships

As noted in our roundtable discussion, cultural shifts in consumerism along with technological disruption may be exerting new pressures on the collaborative efforts shared by logistics managers and their third-party logistics providers.

Here are some recommendations made by our panelists during our discussion:

  • When vetting a 3PL, shippers should give candidates all the relevant data they have. This means full disclosure regarding problems, challenges, failures and past events.
  • Have a thoughtful preliminary business case for what functions and services you wish to outsource.
  • Hold candid discussions about values, philosophies, approaches and objectives to assess compatibility.
  • Recognize that the 3PL requires a fair profit margin to remain a healthy business and reliable partner.
  • Press for all analyses to quantify (estimating when necessary) continuing value, rather than transient costs.
  • Create and maintain working/planning relationships at all levels (including CEO) in your organization and that of the 3PL.
  • Establish dispute resolution mechanisms at the beginning, before there are problems.
  • Even though the object is a mutually beneficial long-term relationship, stay abreast of any industry news and overall 3PL developments.
  • Make the service provider part of the risk management solution, but don’t play one provider against another as a ploy to squeeze margins and cut costs.

-Patrick Burnson, executive editor

LM: Can you be more specific? What kind of value-added enhancements are essential?

Roberson: Real-time visibility is one example. Shippers are insisting that they’re connected to all of their suppliers well beyond the Tier 1 level. This is vital from a risk perspective. In addition, being able to intercept or make a change while in the transport process is important.

This is particularly true for temperature-controlled items. Here, shippers need the ability to adjust temperatures to meet regulatory compliance. Collaboration across the chain for efficiency as well as developing new solutions is important in an environment that is changing at a much faster pace.

Langley: Based on our research, the availability of capable IT-based services already has become a key differentiating factor for commercial providers of 3PL services. Among those that are growing in popularity are supply chain visibility; execution-based capabilities; meaningful use of descriptive, predictive, and prescriptive analytics; and integration technologies.

van Bodegraven: And let’s not forget the orderly integration of Internet-of-Things (IoT) capabilities into decision mechanisms and execution systems. With the change in consumer patterns, 3PLs will be expected to deliver simplified first-level Big Data analytics to isolate areas for further analysis

LM: What trends point in this direction? Anything you can point to as a major cultural phenomenon?

van Bodegraven: To put it simply, there are pockets of behavior that may contain clues for the future in terms of how services will be delivered. Trends related to alternative energy sources and greenhouse gas emission reduction, for example. This represents a substantial generational shift, and 3PLs will need to continue to adjust.

Roberson: That’s true. Millennials are redefining shopping preferences as well. Retailers and their 3PL partners are responding to this group by improving the experience in shopping—easier return policies, encouraging returns and pick-up of online orders in-store, and seamlessly linking the physical store to the mobile store to the online store to the catalog to the warehouse and to the last mile.

"To no one’s surprise, Amazon will figure
prominently, one way or another. They continue
to double down on facilities, availability, partner
suppliers, and delivery commitments."
— Art van Bodegraven, van Bodegraven Associates

Langley: 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 imaginative solutions. 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.

LM: And this evolutionary pattern will give e-commerce even more traction in the 3PL space?

Langley: 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 is 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.

van Bodegraven: To no one’s surprise, Amazon will figure prominently, one way or another. They continue to double down on facilities, availability, partner suppliers, and delivery commitments.

Roberson: Keep in mind that most of the focus has been on B2C, but we’re now seeing the growth of B2B, which is a much bigger opportunity. Eventually B2C and B2B e-commerce will blur to the point where there will no longer be a distinction between the two business models.

LM: So, how should shippers work with 3PLs in this B2B business? Any advice?

Roberson: Expectations by logistics managers conducting B2B transactions are similar to the way they conduct personal transactions when ordering books, music and apparel online. They should expect the same look, feel and ease of use. Amazon is moving more into this space as well. It noted in its recent earnings report that its Amazon Business serves more than 400,000 businesses and generated more than $1 billion in sales in its first year.

LM: Any other trends our readers should be tracking in regards to better optimizing their 3PL relationships?

Langely: 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 logistics and supply chain managers 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. Then the next bridge to cross will be what future directions will become evident in terms of the forces impacting our supply chains.

Roberson: I would add that global trade is slowing down and 3PLs are investing more in intra-regional transport and storage as a result. This intra-regional service is fueling cross-border trade. In the meantime, Europe and Asia present the largest intra-regional opportunities for 3PLs.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [ protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.

Article Topics

3PLs · Third Party Logistics · All Topics
Latest Whitepaper
Making the Case for Using a Transportation Management System for Parcel Shipping
We discuss the key pain points that all parcel shippers are dealing with right now and show how a multi-carrier transportation management system can help reduce costs, improve efficiencies, and improve the organizational bottom line.
Download Today!
From the June 2019 Logistics Management Magazine
Over the years, we’ve tried to steer clear of too many themed issues because we’re proud to offer our readers a wide breadth of industry information. The logistics and transportation market is so diverse, and shippers are looking to solve a multitude of challenges across a number of modes and services areas—never just one.

Warehouse Execution Systems (WES) Evolves Beyond “inside the four walls”
Got labor? How supply chain companies are recruiting talent during a labor crunch
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly newsletter!
Latest Webcast
Driving 20% More Revenue with APIs
The lack of connectivity between your systems and processes is your #1 barrier to efficiency and growth. Having helped some of the world's top logistics providers, Software AG shows how APIs can help you move faster than ever.
Register Today!
Got labor? How supply chain companies are recruiting talent during a labor crunch
How are companies faring in the race to recruit and train high-level supply chain talent in a market...
35th Annual Salary Survey: Compensation matters more than ever
While job satisfaction remains the primary reason for today’s logistics managers to stay with one...

2019 Rate Outlook: Pressure Builds
In 2019, the world economy will enter a third straight year of broad-based growth, but many...
2019 Transportation Management Systems (TMS) Market Update: Keeping pace with the times
The transportation management systems market is growing right along with the number of challenges...
Перевозки Киев


www.adulttorrent.org/search/nina lawless