Capgemini’s annual 3PL study reveals 65 percent of customers are increasing their use of 3PLs
By Anna Game-Lopata | October 9, 2012
Capgemini’s annual third-party logistics (3PL) study reveals
logistics providers continue to improve their business presence despite challenging business conditions.
The 17th Annual Third-Party Logistics
Study shows 65 percent of customers are increasing their use of 3PLs.
Based on responses from over 2,300 global shippers and logistics service providers, the study finds shippers are spending an average 12 percent of revenues on logistics with an average 39 percent of that spent on outsourced logistics services.
Both shippers (86 per cent) and 3PLs (94 per cent) largely view their relationships as successful.
Just over half (56 per cent) of shippers even say their use of 3PL provider has directly led to year-on-year incremental benefits.
They report significant savings from logistics cost reductions (15 per cent), inventory cost reductions (8 per cent) and logistics fixed asset reductions (26 per cent).
The study also confirms shippers are making increasingly complex demands of their 3PL providers, seeking bold solutions to create new routes to growth and market differentiation.
“Until recently, 3PLs could demonstrate innovation by introducing incremental process improvements, adding technology or improving execution,” the report states.
“However, shippers increasingly believe these process improvements are not sufficient to drive their supply chains and that more disruptive innovation is required to make a true difference within the marketplace or value chain.”
Shippers cite the facilitation of same-day delivery or introducing RFID tagging as examples but reveal their
lack confidence in 3PLs’ ability to operate at the strategic level necessary for such disruptive innovation.
The majority of the study’s 3PL respondents (89 per cent) believe they are ready to innovate, but just 53 per cent of shippers agree.
“Many of today’s 3PL-shipper relationships are not set up in a way that fosters innovation,” says Capgemini Consulting Vice President Dan Albright.
“Shippers commonly engage with 3PLs on a very tactical level only, so their 3PL partners lack any real visibility or insight into their organisation and its challenges.
“It takes truly collaborative, strategic relationships among all partners involved to develop the kinds of disruptive innovations it will take to solve the challenges facing today’s supply chains. This will require a considerable change from the way that many 3PL-shipper relationships are structured today.”
The report lists a number of factors, including extended supply chains, reduced inventories and shortened product lifecycles contributing to supply chain disruption becoming more likely and more costly than ever before.
Economic losses from supply chain disruptions increased 465 per cent from 2009 to 2011, with the number of companies experiencing supply chain disruption growing by 15 per cent.
The report highlights adverse weather and the threat of a pandemic as the biggest source of supply chain disruption, cited by 69 per cent of shipper respondents, and volatility in commodity, labour or energy costs as the second, cited by 59 per cent of shipper respondents.
As a result, almost half of 3PLs (44 per cent) say they are placing a greater focus on supply chain risk and mitigation than five years ago.
Closer partnerships (69 per cent), improved business continuity planning (61 per cent), advanced supply chain visibility tools (65 per cent) and better employee training (64 per cent) are the top strategies 3PLs currently employ to mitigate supply chain risk.
Despite the increased risk of supply chain disruption, the report adds many companies are still underfunding supply chain disruption mitigation planning.
“Without more advanced policies in place such as supply chain mapping and enterprise risk management, the strategies currently in use will not be as effective at minimising the risk of supply chain disruption,” the report warns.
“Those shippers that have successfully implemented an effective strategy highlight a detailed assessment of the state of the network together with a thorough plan to alleviate the biggest sources of vulnerability and outlining the response for when disruptions do occur as the best way to create a solid supply chain risk mitigation strategy.”
About the 2013 Third-Party Logistics Study
The 2013 17th Annual Third-Party Logistics (3PL) Study is compiled by Capgemini Group, in cooperation with Penn State University, executive recruiting firm, Korn/Ferry International, and global logistics provider, Panalpina.
It combines the web-based responses of 2,342 logistics executives from 3PL users and providers in North America (33 per cent), Europe (22 per cent), Asia-Pacific (14 per cent), Latin America (20 per cent) and Other (11%).
The findings are supplemented with a number of in-depth interviews with industry observers and experts, primarily relating to the special topics identified for this year. Facilitated workshop sessions that included key logistics executives also were held in New York, Paris, and Hong Kong.