To survive in this volatile business environment, third-party logistics providers and their customers must work together to build up their digital capabilities and talents while also focusing on meeting the end customer’s needs.
C. John Langley Jr. (johnlangley11@gmail.com), Ph.D., is a professor at Penn State University’s Smeal College of Business and the Department of Supply Chain and Information Systems, and founder of the “Annual Third-Party Logistics Study.”
Effectively matching supply and demand has always been challenging, but the current volatility in many supply chains has made it even harder, creating new and unique problems. Companies desperately need innovative and improved solutions to deal with supply chain complexity and create agility and responsiveness.
One key facilitator of success will be the ability of supply chain partners to be well-aligned and to optimize the capabilities of each partner within the network. Now in its 27th year, our “Annual Third-Party Logistics Study” has time and again shown the benefits of working with logistics service providers to navigate market uncertainties and achieve overall success for the supply chain.
High-level research results from this year’s study indicate three key focus areas for strengthening relationships between third-party logistics providers (3PLs) and their customers: 1) the ability to collaborate in the interest of creating value for customers and consumers, 2) the ability to create insight through digitization and analytics, and 3) the critical need for talent. (A broader and more detailed summary of the research will be presented at the CSCMP EDGE Conference in Nashville, Tennessee, on September 19.)
Creating value for the end customer
For 3PLs and shippers to have a successful relationship, both parties need to understand the overall supply chain goals and use this knowledge to create effective working relationships.
As the primary flows of products and services in supply chains are downstream toward the eventual consumers and business customers, the supply chain’s most important priorities should be related to satisfying demand and creating value for these parties.
Ideally, then, all participating supply chain organizations, including 3PLs, should have some understanding of demand patterns at the customer/consumer level that are driving requirements for the overall supply chain. One way to achieve this is by sharing available forecast and demand planning information relating to the needs of customers and consumers.
The best results are achieved when both 3PLs and their customers are working with accurate information and are well-aligned on goals, objectives, and working relationships. 3PLs and customers must also be aware of factors that may impact the ability of supply chains to meet these overall objectives. Partners should be willing to share information on potential problems and issues—these could range from a shortage of transportation capacity to unexpected volatility in the availability of needed materials and supplies.
Digitization and analytics
For many years, our “Annual Third-Party Logistics Study” has documented that shippers view IT capabilities as an essential element of their 3PLs’ expertise. That sense has intensified over the past year as 74% of customers participating in this year’s study noted that technology plays a greater role in their 3PL partnership than it did just three years ago.
Furthermore, what customers are looking for in terms of that expertise has evolved and become more sophisticated. One question for shippers that is asked in each of our yearly studies is, “Which technologies, systems, or tools are ‘must haves’ for a 3PL to successfully serve a customer in your industry?” Figure 1 compares the results from this year’s study to those of the prior year. This figure also indicates the percentages of participating 3PLs that indicate those capabilities are currently available.
[Figure 1] Importance of IT capabilities in shipper-3PL relationships Enlarge this image
While more traditional execution and transactional software—such as transportation management systems and warehouse management systems—continue to rank highly, there was a growing importance expressed for the availability of digital and analytical technologies. (In the interest of clarity, digitization refers to the conversion of information to a digital format, and analytics refers to the use of mathematical and statistical approaches to help solve problems intelligently using digital data.) A related finding from last year’s study is that 64% of customers noted that they were investing in intelligent data analytics. While there are some variations in year-over-year data, Figure 1 indicates there is a continued or growing interest in advanced analytics and data mining, warehouse automation, and global trade management solutions.
Findings from this year’s study indicate that this shift in focus toward digitization and analytics will continue to be of great importance for 3PLs as well. Referring to Figure 1, 54% of 3PLs reported having capabilities in the areas of advanced analytics and data mining tools. However, gaps are noted in the areas of automation and global trade management solutions.
We believe that to deal successfully with future supply chain challenges, 3PLs and their customers will require significant dedication to digitization and the use of analytics. Coupled with wisdom and experience, these analytical tools will facilitate the development of complex solutions to problems faced both individually by 3PLs and their customers, as well as those problems they face in collaboration.
Talent
The need for and availability of talent in supply chains have become critical issues for many organizations. This includes both shippers and 3PLs. Almost 80% of shippers stated that labor shortages have impacted their supply chain operations, and 56% of 3PLs stated that labor shortages have impacted their ability to meet customer service-level agreements (SLAs). In particular, roughly two-thirds of all respondents to the “27th Annual Third-Party Logistics Study” survey noted that recruiting and retaining both hourly and certified/licensed/skilled hourly workers is an area that they are struggling with and believe they will continue to struggle with for some time.
But retention challenges are not limited to hourly employees. Bloomberg, in the spring of 2022, reported that supply chain managers have been quitting their jobs at the highest rate since at least 2016.1} This assertion was based on calculations performed by LinkedIn. Each month, the website analyzes the number of people who left their job in the past month and then compares that number to a baseline average from 2016. The average “separation rate” for 2020–2021 for supply chain managers was 28%, the highest in the five years since the company started tracking this data. According to the article, factors for these turnovers include burnout, desire for increased compensation, and demand for experienced supply chain managers to solve supply chain problems at nontraditional supply chain organizations.
Further complicating the recruitment and retention challenges is the fact that supply chain roles are evolving quickly, and the skills and talents needed today are different than they were just a few years ago. For example, supply chains are increasingly becoming data-driven, and the need for real-time visibility continues to grow. As a result, skills related to data analytics and digital technologies are vital and in high demand.
Meeting the rising challenge
The success of 3PL–customer relationships always boils down to their ability to create value for their customers and their businesses, as well as for consumers and end customers. But as disruption and complexity increase, effectively meeting those needs has become even harder.
In response, 3PLs and their customers will need to work together to enhance their agility and responsiveness. Technology, data, and analytics certainly will help supply chain practitioners meet these shifting needs and implement new and innovative supply chain strategies. In addition, both 3PLs and their customers will need to ensure that they have the right people with the right skills and talents. 3PLs and customers will need to work together to establish technology and talent-acquisitions strategies that complement each other, as they work to create more resilient and effective supply chains.
For the past seven years, third-party service provider ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
Photo courtesy of Dematic
For the past four years, automated solutions provider Dematic has helped support students pursuing careers in the STEM (science, technology, engineering, and mathematics) fields with its FIRST Scholarship program, conducted in partnership with the corporate nonprofit FIRST (For Inspiration and Recognition of Science and Technology). This year’s scholarship recipients include Aman Amjad of Brookfield, Wisconsin, and Lily Hoopes of Bonney Lake, Washington, who were each awarded $5,000 to support their post-secondary education. Dematic also awarded $1,000 scholarships to another 10 students.
Motive, an artificial intelligence (AI)-powered integrated operations platform, has launched an initiative with PGA Tour pro Jason Day to support the Navy SEAL Foundation (NSF). For every birdie Day makes on tour, Motive will make a contribution to the NSF, which provides support for warriors, veterans, and their families. Fans can contribute to the mission by purchasing a Jason Day Tour Edition hat at https://malbongolf.com/products/m-9189-blk-wht-black-motive-rope-hat.
MTS Logistics Inc., a New York-based freight forwarding and logistics company, raised more than $120,000 for autism awareness and acceptance at its 14th annual Bike Tour with MTS for Autism. All proceeds from the June event were donated to New Jersey-based nonprofit Spectrum Works, which provides job training and opportunities for young adults with autism.
The logistics process automation provider Vanderlande has agreed to acquire Siemens Logistics for $325 million, saying its specialty in providing value-added baggage and cargo handling and digital solutions for airport operations will complement Netherlands-based Vanderlande’s business in the warehousing, airports, and parcel sectors.
According to Vanderlande, the global logistics landscape is undergoing significant change, with increasing demand for efficient, automated systems. Vanderlande, which has a strong presence in airport logistics, said it recognizes the evolving trends in the sector and sees tremendous potential for sustained growth. With passenger travel on the rise and airports investing heavily in modernization, the long-term market outlook for airport automation is highly positive.
To meet that growing demand, the proposed transaction will significantly enhance customer value by providing accelerated access to advanced technologies, improving global presence for better local service, and creating further customer value through synergies in technology development, Vanderlande said.
In a statement, Nuremberg, Germany-based Siemens Logistics said that merging with Vanderlande would “have no operational impact on ongoing or new projects,” but that it would offer its current customers and employees significant development and value-add potential.
"As a distinguished provider of solutions for airport logistics, Siemens Logistics enjoys a first-class reputation in the baggage and air-cargo handling areas. Together with Vanderlande and our committed global teams, we look forward to bringing fresh impetus to the airport industry and to supporting our customers' business with future-oriented technologies," Michael Schneider, CEO of Siemens Logistics, said in a release.
I recently came across a report showing that 86% of CEOs around the world see resiliency problems in their supply chains, and that business leaders are spending more time than ever tackling supply chain-related challenges. Initially I was surprised, thinking that the lessons learned from the Covid-19 pandemic surely prepared industry leaders for just about anything, helping to bake risk and resiliency planning into corporate strategies for companies of all sizes.
But then I thought about the growing number of issues that can affect supply chains today—more frequent severe weather events, accelerating cybersecurity threats, and the tangle of emerging demands and regulations around decarbonization, to name just a few. The level of potential problems seems to be increasing at lightning speed, making it difficult, if not impossible, to plan for every imaginable scenario.
What is it Mike Tyson said? Everyone has a plan until they get punched in the mouth.
It has never been more important to be able to pivot and adjust to challenges that can throw you off your game. The report I referenced—the “2024 Supply Chain Barometer” from procurement, supply chain, and sustainability consulting firm Proxima—makes the case for just that. The company surveyed 3,000 CEOs from the United Kingdom, Europe, and the United States and found that the growing complexities in global supply chains necessitate a laser-sharp focus on this area of the business. One example: Rightshoring, which is the process of moving business operations to the best location, means companies are redesigning and reconfiguring their supply chains like never before. The study found that large numbers of CEOs are grappling with the various subsets of rightshoring: 44% said they are planning to or have already undertaken onshoring, for instance; 41% said they are planning to or have undertaken nearshoring; 41% said they are planning to or have undertaken friendshoring; and 35% said they are planning to or have undertaken offshoring.
But that’s not all. CEOs are also struggling to deal with the rise of artificial intelligence (AI) and its application to business processes, the potential for abuse and labor rights issues in their supply chains, and a growing number of barriers to their companies’ decarbonization efforts. For instance:
Nearly all of those surveyed (99%) said they are either using or considering the use of AI in their supply chains, with 82% saying they are planning new initiatives this year;
More than 60% said they are concerned about the potential for human or labor rights issues in their supply chains;
And virtually all (99%) said they face barriers to decarbonization, with 30% pointing to the complexity of the work required as the biggest barrier.
Those are big issues to contend with, so it’s no surprise that 96% of the CEOs Proxima surveyed said they are dedicating equal (41%) or more time (55%) to supply chain issues this year than last year. And changing economic conditions are adding to the complexity, according to the report.
“As inflation fell throughout last year, there were glimmers of markets stabilizing,” the authors wrote. “The reality, though, has been that global market dynamics are shifting. With no clear-set position for them to land in, CEOs must continue to navigate their organizations through an ever-changing landscape. Just 4% of CEOs foresee the amount of time spent on supply chain-related topics decreasing in the year ahead.”
Simon Geale, executive vice president and chief procurement officer at Proxima, added some perspective.
“It’s fair to say that the complexities of global supply chains continue to have CEOs around the world scratching their heads,” he wrote. “The results of this year’s Barometer show that business leaders are spending more and more time tackling supply chain challenges, reflecting the multiple challenges to address.”
Perhaps the extra focus on supply chain issues will help organizations improve their ability to roll with the punches and overcome resiliency challenges in the year ahead. Only time will tell.
Investing in artificial intelligence (AI) is a top priority for supply chain leaders as they develop their organization’s technology roadmap, according to data from research and consulting firm Gartner.
AI—including machine learning—and Generative AI (GenAI) ranked as the top two priorities for digital supply chain investments globally among more than 400 supply chain leaders surveyed earlier this year. But key differences apply regionally and by job responsibility, according to the research.
Twenty percent of the survey’s respondents said they are prioritizing investments in traditional AI—which analyzes data, identifies patterns, and makes predictions. Virtual assistants like Siri and Alexa are common examples. Slightly less (17%) said they are prioritizing investments in GenAI, which takes the process a step further by learning patterns and using them to generate text, images, and so forth. OpenAI’s ChatGPT is the most common example.
Despite that overall focus, AI lagged as a priority in Western Europe, where connected industry objectives remain paramount, according to Gartner. The survey also found that business-led roles are much less enthusiastic than their IT counterparts when it comes to prioritizing the technology.
“While enthusiasm for both traditional AI and GenAI remain high on an absolute level within supply chain, the prioritization varies greatly between different roles, geographies, and industries,” Michael Dominy, VP analyst in Gartner’s Supply Chain practice, said in a statement announcing the survey results. “European respondents were more likely to prioritize technologies that align with Industry 4.0 objectives, such as smart manufacturing. In addition to region differences, certain industries prioritize specific use cases, such as robotics or machine learning, which are currently viewed as more pragmatic investments than GenAI.”
The survey also found that:
Twenty-six percent of North American respondents identified AI, including machine learning, as their top priority, compared to 14% of Western Europeans.
Fourteen percent of Western European respondents identified robots in manufacturing as their top choice compared to just 1% of North American respondents.
Geographical variances generally correlated with industry-specific priorities; regions with a higher proportion of manufacturing respondents were less likely to select AI or GenAI as a top digital priority.
Digging deeper into job responsibilities, just 12% of respondents with business-focused roles indicated GenAI as a top priority, compared to 28% of IT roles. The data may indicate that GenAI use cases are perceived as less tangible and directly tied to core supply chain processes, according to Gartner.
“Business-led roles are traditionally more comfortable with prioritizing established technologies, and the survey data suggests that these business-led roles still question whether GenAI can deliver an adequate return on investment,” said Dominy. “However, multiple industries including retail, industrial manufacturers and high-tech manufacturers have already made GenAI their top investment priority.”
Regardless of the elected administration, the future likely holds significant changes for trade, taxes, and regulatory compliance. As a result, it’s crucial that U.S. businesses avoid making decisions contingent on election outcomes, and instead focus on resilience, agility, and growth, according to California-based Propel, which provides a product value management (PVM) platform for manufacturing, medical device, and consumer electronics industries.
“Now is not the time to wait for the dust to settle,” Ross Meyercord, CEO of Propel, said in a release. “Companies should approach this election cycle as an opportunity to thrive in the face of constant change by proactively investing in technology and talent that keeps them nimble. Businesses always need to be prepared for changing tariffs, taxes, or geopolitical tensions that lead to unexpected interruptions – that’s just the new normal.”
In Propel’s analysis, a Trump administration would bring a continuation of corporate tax cuts intended to bolster American manufacturing. However, Trump’s suggestion for spiraling tariffs may benefit certain industries, but would drive up costs for businesses reliant on global supply chains.
In contrast, a Harris administration would likely continue the current push for regulatory reforms that support sectors like AI, digital assets, and manufacturing while protecting consumer rights. Harris would also likely prioritize strategic investments in new technologies and provide tax incentives to promote growth in underserved areas.
And regardless of the new administration, the real challenge will come from a potentially divided Congress, which could impact everything from trade negotiations to tax policies, Propel said.
“The election outcome is less material for businesses,” Meyercord said. “What is important is quickly adapting to shifting policies or disruptions that address ‘what if’ scenarios and having the ability to pivot your strategy. A responsive manufacturing sector will have a significant impact on the broader economy, driving growth and favorably influencing GDP. One thing is clear: the only certainty is change.”