Traditionally, third-party logistics providers (3PLs) and their customers have enjoyed close relationships and high satisfaction levels. But the supply chain disruptions and economic volatility of the last year have put a strain on even the tightest partnerships.
The “2023 Third-Party Logistics Study,” which was released today at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE conference, found that shippers’ satisfaction with their 3PL relationship has declined by 7% from last year. While the vast majority of shipper respondents (83%) still view their 3PL relationship as “successful,” that percentage has historically hovered at 90% or more, according to the report.
According to one of the report’s authors, Sylvie Thompson of NTT Data Services, this drop occurs at the same time that demand for third-party logistics services has increased significantly and that many 3PLs have more work than they can handle. Part of the change in satisfaction level may be a reflection of this shift in power dynamics and that 3PLs may be differentiating their customer service levels, she said in an interview.
“There’s also been a macroeconomic shift, particularly in terms of wages,” added Andy Moses, senior vice president of global products for Penske Logistics, a sponsor of the study. “3PLs can’t insulate their customers from these macroeconomic shifts, and there may be some tension there.”
The report was founded 27 years ago by John Langley, currently the Clinical Professor of Supply Chain Management at Penn State University to provide an in-depth look at the trends and developments in 3PL market. This year’s report—which is now also authored by NTT Data Services and sponsored by Penske Logistics—details a market that has had to deal with unexpected challenges at the same time that customer expectations have grown.
In spite of the slip in overall satisfaction level, the report indicated that 71% of shippers believe that their 3PL has contributed to improving customer service, and 71% have also found that 3PLs provide new and innovative ways to improve logistics effectiveness. It is perhaps not surprising then, that slightly more than half of all shippers (55%) are increasing their use of outsourced logistics services. However, 71% are considering consolidating the number of 3PLs used.
In addition to reviewing the current state of the market, this year’s study also delved deep into three key themes: the talent crisis, reverse logistics, and seven basic principles that the researchers believe are essential to supply chain success.
The scramble for talent
The report paints a picture of a supply chain sector feeling the effects of the current labor shortages. According to survey results, 56% of 3PLs and 78% of shippers said labor shortages have impacted their supply chain operations, with many respondents seeing the labor shortages as a long-term crisis.
According to survey respondents, the hardest positions to fill are certified licensed hourly workers, such as truck drivers and equipment operators, as well as pickers and packers. Interestingly the study found that 3PLs are better able to fill hourly worker positions than shippers. According to the report, 49% of 3PLs say they take less than a month to fill an hourly position, compared to 32% of shippers. Perhaps in acknowledgement of this fact, 73% of 3PLs and 46% of shippers report that companies are seeking out 3PL partners to offset labor shortages.
“This is an area of fanatic focus for 3PLs that they have no choice but to navigate,” said Penske’s Moses. “It’s one of the reasons why shippers choose to outsource to a 3PL, because they can’t have the same fanatic focus.”
Going in reverse
Another trend in the logistics field is the growing importance of reverse logistics, particularly as e-commerce sales increase.
To take a closer look at this segment of the supply chain, the report divided shippers into two groups: those that accept both consumer and business returns and those that only accept business returns. A significant majority (61%) of consumer-facing shippers expect their returns volume to grow in the next three years, while only 43% of business-exclusive shippers expect them to grow. However, high percentages of both groups (65% for consumer-facing shippers and 60% of business-exclusive shippers) said that their customers’ expectations for the returns process is growing.
In spite of this growth, the majority of shippers are handling reverse logistics operations in house as opposed to outsourcing to a 3PL. Furthermore, only about a third expect to outsource a greater portion of their reverse logistics operations over the next three years. According to Thompson, many 3PLs struggle to provide shippers with a viable reverse logistics solution given the fact that the focus of reverse logistics often involves reducing losses as opposed to adding value. Additionally reverse logistics and returns management processes are often highly category-specific making it difficult to provide a single solution.
7 success principles
Finally, the report authors highlight what they call the “Seven Immutable Laws of Supply Chain Success,” which include
- Customer focus
- Supply chain relationships
- Data and analytics
- Innovation and transformation
- Survivability and sustainability
- Talent, and
- End-to-end supply chain
The authors felt that this “back to basics” section serves as good reminder to both 3PLs and shippers on the building blocks of a good supply chain partnership. The report did find that there are some difference among 3PLs and shippers on which of these principles are perceived to be the top priority and how mature the companies are in each area. Shippers, for example, rank data and analysis as most important, while 3PL rated innovation and transformation is as the top principle.
The study and past versions are available for download at www.3PLStudy.com.
