As logistics providers and shippers react to the Covid-19 pandemic, they are reinventing their supply chains to reduce risk exposure to disasters, according to the results of the “25th Annual Third-Party Logistics Outsourcing Survey,” announced today.
Released in conjunction with the Council of Supply Chain Management Professionals (CSCMP) EDGE 2020 conference, this year’s study focused on four topics: 3PL/4PL future direction; technology’s direct impact on scalability and mobility; the Covid-19 effect; and risk management.
One of the greatest factors impacting the 3PL sector this year has been the pandemic, which has highlighted the need for supply chain visibility and real-time data, according to the study, which is created by Infosys Consulting, Penn State University, and Penske Logistics. “Covid-19 has revealed the vulnerability of modern supply chains. Effective risk management will be key to prepare for future disruptions and to achieve recovery and growth in the post pandemic era,” Andrew Hogenson, Infosys’ global managing partner, consumer goods, retail & logistics, said in a release.
Due to the effects of the Covid crisis, a majority of companies (58%) in the survey saw at least a 25% reduction in supply chain operations and 6% stated they experienced a total shutdown. However, impacted areas were different for shippers and their logistics providers. The two biggest shipper areas were international transportation/logistics (55%) and manufacturing (46%), while 3PLs said their largest problem areas were labor/workforce management (54%) and domestic transportation/logistics (45%).
The survey also provided research on companies’ responses to the crisis. In one approach, businesses are building increasingly outsourced supply chains, a trend which is pushing shippers and their 3PLs closer to a strategic relationship and further away from a transactional one, the study found. Respondents indicated that 71% of shippers and 83% of 3PLs are collaborating to identify changes in macro-environments and to enhance supply chain capabilities. Looking across the next five years, shippers predicted that strategic relationships with their 3PLs would increase to 45% (from the current 28%).
Another reaction to the coronavirus pandemic has been a renewed emphasis on risk management strategies, with over a third of shippers (37%) and 49% of 3PLs forecasting that future supply chains would rely less on global capabilities and more on domestic or local capabilities. Companies that pull away from globalization see “nearshoring” as a way to reduce risk exposure to disasters and retain a dynamic and responsive supply chain. But the industry shows disagreement about the best path forward. When asked if supply chains are too lean, 42% of shippers agreed while 49% disagreed with the notion and the rest were unsure.
However that trend plays out, technology spending is sure to increase as both shippers and 3PLs demand better supply chain visibility to monitor conditions, the researchers found. "Visibility is increasingly vital in the supply chain, but even more so when there is a risk of disruption or during a recovery," Andy Moses, senior vice president of sales and solutions for Penske Logistics, said in a release. "Visibility allows those within the supply chain to get ahead of an interruption, potentially mitigating problems before they have an impact on customers or other stakeholders in the supply chain.”
