Logistics customers want more environmentally-friendly services and better security standards butare not necessarily ready to pay for these, according to an in-depth survey of 1,600 companies
across the world. Integrated logistics and improved technology are also high up the customerwish-list.These are the main results of the 13th annual Third Party Logistics (3PL) Study just releasedby Capgemini, the Georgia Institute of Technology, Oracle and DHL, which surveyed 1,644 logisticsexecutives from North America, Europe, Asia Pacific and Latin America about logistics issues andtheir 3PL requirements.
Among the key findings are:
* Green supply chain initiatives are essential for future business success according to 98%of logistics executives, yet the majority are unwilling to invest any additional funds in thegreening of the supply chain.
* The theft of material goods continues to be the top security concern. But the changingbusiness environment means that companies must focus more attention on other causes of supply chaindisruption from the theft of intellectual capital and natural disasters, to the closure of portsand product tampering.
* Underpinning sustainability and security are strong relationships across the differentparties in the supply chain achieved through integrated systems and services. Through deliberateefforts to form solid relationships with logistics providers using detailed contracts and metrics,companies can achieve significant cost savings, shorter order cycles, better customer service andimproved business efficiency.
Although the survey shows that 3PLs and their users believe the associated costs of creatinga more secure, integrated, environmentally-friendly supply chain should be split, there iscontinued resistance to collaboration and the unspoken assumption that costs will ultimately becarried by the customer.
Companies are almost unanimous in their belief that green supply chain initiatives, such aslocal sourcing, are important but there is widespread uncertainty about how to move forward withsustainable supply chain operations. The survey shows that the ‘greening’ of the supply chain willhave an increasing impact on network design, transport modes used, selection of equipment, businessprocesses, behaviour and balance sheets.
Yet few users rate green capabilities as a deciding factor when choosing 3PL partners. Only46% of respondents said that the effect of supply chain operations on the environment was a factorconsidered when selecting a 3PL. Collaboration is key; only when the source and impact of emissionscan be accurately assessed can 3PLs and their customers become accountable and will the supplychain become more environmentally friendly.
Although 76% of respondents called their 3PLs secure, the survey reveals a gap between 3PLusers’ expectations and the current security capabilities of their 3PLs. Companies are becomingincreasingly concerned about the costs of meeting compliance mandates designed to enhance supplychain security in the face of terrorist threats. However, by working closely with 3PLs and settingup the right processes, companies can stand to gain considerable benefits that help recoup costsand improve the efficiency of the supply chain.
“Though the overall 3PL picture is similar to last year, it has become clear that greensupply chain and supply chain security are increasingly becoming key drivers for success,” saidDennis Wereldsma, Global Leader of Capgemini’s Distribution Sector. “As compliance and regulationaround green and security practices becomes increasingly prevalent, 3PLs and users that are greenerand can tout their security capabilities can gain significant market advantage.”
Hans Hickler, CEO, DHL Global Customer Solutions, commented: “3PLs and their customers mustbe open about expectations and capabilities, if they are to find innovative ways to improve supplychain security and green credentials.”
The benefits of supply chain collaboration and logistics integration can be huge, but thiscan only be achieved by putting aside fears over loss of control, visibility, internal competency,and of being too dependent on a third party service provider, according to the survey. However,through the use of comprehensive service level agreements that balance costs and risks and 3PLsinvesting in their own service offerings, companies will begin to experience the payoffs of workingso closely together.
Dr. John Langley from the Georgia Institute of Technology, stressed: “The greatest sharedchallenge is that of forming and growing successful collaborative relationships between users andproviders of logistics services. Without a commitment from both sides little progress can be madein the greening of the supply chain and supply chain security. More than three quarters of 3PLusers rate consolidation, routing, and mode selection as the top services 3PLs can contribute togreen strategies. However, just 31% indicate that their 3PLs currently offer these capabilities.”
Finally, technology is also a high priority for 3PL users. 3PLs continue to outsourceweb-enabled communications, visibility tools, warehouse/distribution management, and transportationmanagement/execution. However, the IT expectation/performance gap persists, with only 38% of therespondents satisfied with their 3PL providers’ information technology capabilities.
“The continued gap between the capabilities of 3PLs and what is required by their customersis extremely worrying,” said Sundar Swaminathan, Senior Director, Oracle. “IT capabilities arecritical to the integration of logistics services provided by 3PLs and the ability to facilitategreen supply chains and supply chain security. 3PLs need to simplify and modernize theirapplications and infrastructure so they can bring new services to market more quickly, increaseagility and operational efficiency and deliver service excellence.”
