The 22nd Annual Third-Party Logistics Study: Highlights on the Current State of the 3PL Market

Nelson CabreraExports, General, Imports, News, Ocean Freight, Warehousing2 Comments

The 22nd Annual Third-Party Logistics Study revealed a continuation of positive relationships. Shippers and third-party logistics providers (3PLs) are using new data to help forge better partnerships. Through these newfound communication lines, the shipping industry is benefitting from many innovations.

In fact, 92% of 3PL providers and 73% of 3PL users agree that these partnerships are helping to improve logistics. An even larger percentage of those surveyed found that 3PLs are helping to improve overall customer satisfaction.

By reviewing the results of the 2018 study, shippers and 3PLs can learn how to better their businesses through positive relationships. These are the most important points to consider:

Transparent Communication Between 3PLs and Shippers

One of the largest factors contributing to positive relationships between 3PLs and shippers is an open and honest line of communication. We know this because the 2018 study showed that 39% of 3PL users and 81% of 3PL providers believe that collaboration amongst businesses leads to better service for the customer.

This is of the most vital importance for those that outsource IT tasks. Based on the study, customer dissatisfaction in this area has grown from 35% last year to 46% this year, which is especially disturbing since the number of outsourced IT tasks has also grown from 17% in 2017 to 27% in 2018. The increased demand for outsourced technology tasks begs for good lines of communication to effectively improve company productivity.

Another important area of 3PL services that the study focused on was supply chain operations. There were several points of growth in this sector. Shippers are relying on 3PLs for a wider range of tasks. However, these relationships are under more pressure than ever due to an increase in quality expectancy from shippers.

This pressure only grows when you take into account time-sensitive deliveries, lean inventories, shorter product life cycles, and consumer demands. That is why it is more important than ever for those who use and provide 3PL services in this area to keep correspondence transparent. As the study shows, without effective communication, these essential relationships could be in jeopardy.

Value Added Supply Chains and Growing Relationships

The 2018 study revealed other key information about the changes happening in supply chain operations. One of these was the shift from functionality to value-adding. According to Kim Breland, director of finance for the supply chain operations of Sprouts Farmers Market, “It has gone from a box hitting a location to delivering an outcome.”

This new functionality has been proven reliant on the amount of data that each party involved has access to. If all parties have open access to real-time data, then decisions can be made faster, which results in more meaningful partnerships. Those partnerships, in turn, reap benefits for those involved. These benefits can include, but are not limited to, innovative solutions, improved customer satisfaction, and a competitive edge.

In fact, this is the 20th consecutive year that the Annual 3PL Study has showed the benefits of what 3PLs have to offer shippers. By taking advantage of 3PL services, the supply chain is maximized. In addition, the number of shippers that have seen improved customer satisfaction because of 3PLs has increased. The costs for shippers has also decreased.

Surveying the Market (Survey Results)

Other significant information regarding the changing relationships between shippers and 3PL providers was also revealed through the Annual 3PL Study. One of these insights is the impact of regional economic issues on 3PL revenues. These regional issues can explain the mixed results that shippers receive. For example, 2016 revenues for Africa were only $26.2 billion. However, Asia Pacific saw $305 billion in earnings for the same year.

The survey also showed a continuing increase in outsourced logistics. This year, 61% of shippers chose to increase their reliance on 3PLs for these services, which is a 3% increase from 2017. However, the number of shippers that are returning to insourcing has also increased. That number is up to 28% this year from 26% last year. Another 53% of users are choosing to consolidate or reduce the number of 3PLs that they use, which is a 6% increase from last year.

Despite these numbers, the ratio of those who are increasing 3PL usage to those who are decreasing it is still in favor of 3PL relationships. For the last few years, this ratio has held steady at 2:1. Keep in mind, that ratio does not include those who report no change in 3PL activity.

The 2018 study also showed little change in the types of work shippers are looking to outsource. While demand for IT outsourcing is increasing, little else has. Domestic transportation, warehousing, international transportation, customs brokerage, and freight forwarding are still the most popular outsourced services. Strategic and customer-facing services remain the least popular to outsource.

Regarding increased demand for IT services, the study found that 91% of shippers consider IT capabilities to be an essential part of 3PL knowledge. The good news is that those who do outsource these services are increasingly satisfied with the results they receive. Since 2002, that number has increased from 27% to 56%, which shows a growing trend of positive relationships and open communication lines that lead to increased satisfaction amongst all parties.

Competitive Advantage for Shippers

One of the most important revelations that the 22nd Annual Study provides us with is that shippers can gain a competitive edge by utilizing 3PL services. Through effective communication with 3PL providers, shippers can create a supply chain that is dynamic and effective. Instead of simply moving boxes from one point to the another, positive relationships with 3PLs can lead to logistics that lower costs while capitalizing on value.

Increased access to better data can also help amplify these positive effects. By making collaborative, data-based decisions with 3PL providers, shippers can streamline and maximize the efficiency of delivery networks.

Overall, the 22nd Annual 3PL Study shows positive trends for 3PL providers and users. Increased outsourcing, more variation in services provided, higher rates of satisfaction, and more personal relationships are all evidence of this change.

Nelson Cabrera
Nelson leads global business development efforts within LILLY + Associates and has been featured as a logistics expert in numerous publications, including SupplyChainBrain, The Bulletin Panama, Logistics Management, and the Miami Herald.

2 Comments on “The 22nd Annual Third-Party Logistics Study: Highlights on the Current State of the 3PL Market”

  1. Avatar
    Raj Sharma

    This article mentions how the Shippers and third-party logistics providers (3PLs) are using new data to help forge better partnerships. Through these newfound communication lines, the shipping industry is benefitting from many innovations. It is important to have a partnership as it improves the relationship with each other as well as the customer and that is beneficial for both the parties. This article has all the details about it and the graph displays how majorly it has improved the results. I found the article very interesting and educative. Thank you for posting this article.

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