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15th Annual Third-Party Logistics Study Examines the Global Market for 3PL Services
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For the
fifteenth year, Georgia Tech’s Supply Chain & Logistics Institute in cooperation with Capgemini Consulting, the
global strategy and transformation consulting brand of the Capgemini Group, and
global logistics provider, Panalpina, have compiled the findings from its Third-Party
Logistics (3PL) Study,
which examines the global market for 3PL services. This year’s report, released
last month, reveals that 3PLs continue to provide important strategic and
operational value to shippers throughout the world. However, significant
uncertainty about the global economy has impacted spending, with an average of
11 percent of company sales revenues devoted to logistics, and an average of 42
percent of that directed to the outsourcing of logistics services, a decrease of
10 to 15 percentage points from recent years. At the same time, 65 percent of
shippers reported an increase in the use of outsourced logistics services
relative to total logistics services, suggesting that while outsourcing may
have increased, expenditure on 3PL services overall has decreased.
The 2010 Third-Party
Logistics Study is based on almost 1,900 responses from both shippers and
logistics service providers in regions including North America, Europe,
Asia-Pacific and Latin America, and also
provides an in-depth look at the life sciences and fast-moving consumer goods
(FMCG) industries. Supplemented with a significant number of focus interviews
with industry observers and experts, findings of the web-based survey reveal
continued progress and improvement in the shipper-3PL relationship, with 89
percent of shipper respondents overall viewing their 3PL relationships as
generally successful and 68 percent indicating that 3PLs help provide them with
new and innovative ways to improve operations. However, the report’s findings
show that shippers continue their tendency to outsource transactional,
operational, and repetitive activities and less so those that are strategic,
customer-facing, and IT-intensive despite a large proportion of 3PLs offering
more advanced services.
"Many
shippers regard logistics and supply chain management as key components of
their overall business success. Increased use of outsourcing and high
satisfaction levels suggest that 3PLs can certainly take some credit for
helping shippers to weather the economic storm,” said C. John Langley Jr., professor
of Supply Chain Management at Georgia Tech’s H. Milton Stewart School of
Industrial and System’s Engineering (ISyE). “Despite a challenging environment, 3PLs have
an opportunity to continue to mature and grow by offering an increasing number
of value-added services for shippers.”
One of the
critical capabilities most highly valued by shippers in their 3PL provider is
accurate reporting and analysis of total landed cost (TLC) – the sum of all
costs associated with making and delivering products to the point where they
produce revenue. The benefits of solid TLC calculations include more agility
and confidence in decision making, better insight into the financial performance
of products and partners, and improved supply chain visibility. However,
despite the relatively high number of shipper respondents reporting an
extensive use of TLC (45 percent), the precision and level of detail of those
calculations differ widely.Calculating
the TLC of materials and finished goods is not always an easy task. Difficulty
in defining all the factors contributing to total cost, and then obtaining all
the necessary data, can be challenging. Too often, businesses rely on only
partial data or inaccurate estimates that can lead to incorrect results, with
58 percent of 3PLs reporting a hesitance from shippers to share information
with them. That might be the reason why, despite the high value of TLC
calculations, just 23 percent of 3PL respondents reported providing extensive
TLC analysis to their customers. This level of interaction requires a high
level of trust, and considerable discussion is required among 3PLs and their
customers to better understand the factors, roles, and KPIs to be used in a shared end-to-end
calculation effort.
“TLC enables companies to capture both the
obvious and hidden costs associated with product movement, revealing the true
cost of sourcing and logistics decisions,” said Dennis Wereldsma, Global Transportation
Sector Lead, Capgemini. “Transforming from basic to more sophisticated TLC
application requires C-level leadership, process change, and systems
transformation. However, while TLC is highly important, because of the
complexities, TLC adoption must be approached as an evolutionary, rather than
revolutionary process.”
Spotlight: 3PL in the Life Sciences Industry:
Within the
Life Sciences industry, careful and expedient handling is often critical for
product safety and because of this, control and visibility is essential.
Logistics challenges here include product integrity and compliance
requirements, an inherently complex trading partner ecosystem, and demanding
customer service and cost requirements. Fifty-four percent of life sciences
shippers surveyed felt the complexity of the supply chain model represents a
significant challenge, but 87 percent felt 3PLs could add significant value
here by linking together the various different parties involved. In addition,
62 percent of shippers within the Life Sciences industry cite ensuring product
quality as a significant challenge and rank quality procedures highly (70
percent) as a service they want 3PLs to provide. Shipment visibility, quality
and compliance procedures, stringent inventory control, temperature control
capabilities, and security are important steps to ensure product integrity,
prevent counterfeiting, and ensure safe delivery, and momentum is moving
towards the use of RFID
tags here. Indeed, around half of shipper and 3PL respondents agree that there is
a strong business case for RFID in Life Sciences.
Spotlight: 3PL in the Fast-Moving Consumer Goods
Industry:
Large
volumes and low margins mean FMCG companies must respond quickly to deliver
in-demand, on-trend products to increasingly demanding shoppers. After cost
reduction, FMCG companies’ biggest priorities for logistics include perfect
order fulfillment (87 percent), rapidly sensing and responding to changes in
consumer demand (83 percent) and shortening new product time-to-market and
supply chain integration (81 percent). Also, as sustainability grows in
importance for consumers, shippers’ interest in strategies such as improving
shipment density and load utilization has also increased. Shippers within the
FMCG industry value the role 3PLs play here, as well as with reducing costs and
dealing with supply chain disruption, although they are less likely to see 3PLs
playing a key role in shortening new product time-to-market and supply chain
integration. FMCG shippers’ efforts to reduce logistics costs include warehouse
and transportation sharing. Two-thirds of those engaging in these strategies
have recognized cost savings but this has been limited, with 58 percent of
respondents recognizing less than 5 percent cost savings.
“The
differences in the priorities reported by shippers in the Life Sciences and
FMCG industries show how important it is for 3PL providers
to provide industry-specific solutions and to work closely with their
customers to really understand their needs and provide the best possible
service, ultimately helping contribute to their overall business success,” said Sven
Hoemmken, Global Head of Sales, Panalpina.
About
Capgemini
Capgemini,
one of the world's foremost providers of consulting, technology, and
outsourcing services, enables its clients to transform and perform through
technologies. Capgemini provides its clients with insights and capabilities
that boost their freedom to achieve superior results through a unique way of
working, the Collaborative Business ExperienceTM. The Group relies
on its global delivery model called Rightshore®, which
aims to get the right balance of the best talent from multiple
locations, working as one team to create and deliver the optimum solution for
clients. Present in more than 30 countries,
Capgemini reported 2009 global revenues of EUR 8.4 billion and employs 95,000
people worldwide.
Capgemini Consulting is the Global Strategy and
Transformation Consulting brand of the Capgemini Group, specializing in
advising and supporting organizations in transforming their business, from the
development of innovative strategy through to execution, with a consistent focus
on sustainable results. Capgemini Consulting proposes to leading companies and
governments a fresh approach which uses innovative methods, technology and the
talents of over 4,000 consultants world-wide.
About The Georgia Institute of
Technology
The Georgia Institute of Technology,
located in Atlanta, is a leader in supply chain and logistics education.
Through its School of Industrial and Systems Engineering and the Supply
Chain & Logistics Institute, Georgia Tech is committed to serving
logistics educational needs through its degree programs and its comprehensive
professional education program. Georgia Tech also conducts a fully accredited
Executive Masters in International Logistics and Supply Chain Strategy (EMIL
-SCS ) program, a Supply Chain Executive Forum, and a Leaders in Logistics
Research Program and will soon commence a Georgia Tech M.S. Degree in Supply
Chain Engineering. Global involvement is facilitated through The Logistics
Institute Asia Pacific, a program in partnership with the National University
of Singapore, and the SCL ’s recently developed network of Logistics Innovation
Centers in Latin America helping countries to improve logistics performance and
facilitate trade. SCL currently has centers in Costa Rica and Panama and is
developing plans for Mexico, Chile, and Brazil.
About The Panalpina Group
The
Panalpina Group is one of the world’s leading suppliers of forwarding and
logistics services, specializing in end-to-end supply chain management
solutions and intercontinental air freight and ocean freight shipments. Thanks
to its in-depth industry know-how and state-of-the-art IT systems, Panalpina
provides globally integrated door-to door services tailored to its customers’
individual needs. The Panalpina Group operates a close-knit network with some 500
branches in over 80 countries. In a further 80 countries, it cooperates closely
with partner companies. Panalpina employs over 14,000 people worldwide.
Panalpina
has extensive experience with customers in many key industries. With dedicated
experts in key global markets, Panalpina has the people, products, skills, and
capabilities to meet the demanding needs of its global customers.
Panalpina’s
business is Global Supply Chain Management. Panalpina delivers compelling
solutions that provide value to all customers - every time. Panalpina has a
passion for solutions.
Click here to read the entire study.
Status
- Workflow Status: Published
- Created By: Edie Cohen
- Created: 10/11/2010
- Modified By: Fletcher Moore
- Modified: 10/07/2016
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