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2018 3PL industry study predicts more collaboration with shippers over real-time data

Shippers are demanding more connection and transparency offerings from their logistics providers

In the first week of October, Prof. C. John Langley of Penn State University released his 22nd Annual Third-Party Logistics Study, which captures the state of the industry by surveying shipping and logistics professionals worldwide and conducting intensive workshops with industry leaders at Google’s headquarters in Mountain View, CA. The study contains particularly useful findings for understanding the ever-growing role of data and analytics in the shipping and logistics industries and points to new opportunities that have so far been underexploited.

Langley’s results shows that shippers and 3PLs will strengthen their collaboration as data services grow in sophistication—the pressing need for acting on vast quantities of real-time data is forcing shippers and 3PLs to move away from transactional relationships into more meaningful partnerships. 81% of shippers using 3PLs agree that 3PLs are contributing to improving services to ultimate customers. And at the same time that shippers are recognizing the value added by robust information technology systems, they are outsourcing those capabilities to their 3PL partners.

The 3PL study is especially good at tracking the differences in opinions between the shipping and 3PLs sides of the industry—it’s a way for Langley to identify opportunities for 3PLs to enhance their performance and increase client satisfaction. For instance, while both shippers and 3PLs are in agreement that big data shows the most potential in improving supply chain operations, only 51% of shippers feel that 3PLs communicate well in responding to risks. The obvious implication is that shippers are looking for 3PLs to collaborate more closely on data analytics to help them manage risk. As Langley writes, “Supply chain and logistics executives are increasingly shifting from physical efficiency to data efficiency… Shippers have greater expectations of what they want their logistics providers to accomplish.”

Another useful metric calculated by Langley’s annual 3PL study is the so-called “IT Gap”. The IT Gap measures the difference between percentage of shippers who feel that IT capabilities are a necessary element of 3PL expertise and the percentage of shippers who say they are satisfied with their 3PL partners’ IT capabilities. The IT Gap widened this year, with 56% of shippers indicating satisfaction, which dropped somewhat from 65% last year. This could be because shipper expectations have increased as technology has improved or because shippers are seeking enhanced analytical capabilities to help drive more effective supply chain decisions.

Shippers are raising their expectations for their 3PL providers at the same time that the shippers’ spending on third party logistics services are relatively flat. The percentage of shippers’ transportation spend managed by 3PLs increased from 53% to 55% over the past year, while the proportion of shippers’ warehousing spend managed by 3PLs decreased slightly from 40% to 39% since last year. Still, the North American 3PL industry has maintained a 3.8% CAGR (compound annual growth rate) from 2010-6.

Another discrepancy between shippers and 3PLs over the perceived growth in use of 3PL providers reveals how shippers are leaning on their logistics partners even more than they realize: the study reported that 61% of shippers are increasing their use of outsourced logistics services, compared to a figure of 58% reported last year. However, 83% of 3PL providers said their customers increased their use of outsourced logistics services, compared to 88% last year.

Finally, the study points to a massive opportunity for 3PL innovators to educate shippers about information technology and close the IT Gap: blockchain. Langley’s study reveals that 67% of shippers and 62% of 3PLs admit they don’t know enough about blockchain to be able to fairly rate its potential future benefits to their business. This indicates two things—firstly, the industry is maintaining a relatively open mind with regard to blockchain, and secondly, the time is ripe for leading-edge tech firms to step in and teach shippers and 3PLs about the technology that can help solve their most stubborn, intractable problems.

Langley sums up the current state of industry interest in blockchain technology: “The study found that about one-third of shippers—36%—are interested in conversations surrounding blockchain and would like 3PLs to bring potential blockchain initiatives to the table; 30% of shippers have no interest in blockchain activities; 19% would like to see 3PLs owning or partnering in blockchain activities; and 15% believe blockchain should be completely independent of 3PLs. If a 3PL is willing to invest proactively in and partner with a blockchain provider, it may be a way to differentiate themselves in the market.”

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John Paul Hampstead

John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.