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2012 Third-Party Logistics Study: The State of Logistics Outsourcing
2012 Third-Party Logistics Study: The State of Logistics Outsourcing
2012 Third-Party Logistics Study: The State of Logistics Outsourcing
Contents
4 Executive Summary
15 Emerging Markets
23 Electronics
33 Talent Management
41 Strategic Assessment
50 Credits
©2012 C. John Langley, Jr., Ph.D., and Capgemini. All Rights Reserved.
no part of this document may be reproduced, displayed, modified or
distributed by any process or means without prior written permission
from Capgemini. Rightshore ® is a trademark belonging to Capgemini.
www.3plstudy.com
Balance is the state of equilibrium — a continuous and sometimes evasive quest for supply
chain executives — and the theme of this report. Whether they’re exploring emerging markets,
navigating the challenges of the electronics supply chain or in finding the right talent, attaining
equal and satisfactory distribution of resources is an ongoing challenge.
Supporting
Organizations
4 2012 16th annual THIRD-PARTY LOGISTICS study
Executive Summary
Europe 165.1
Asia-Pacific 157.6
Total 541.6
efficiency and effectiveness. Many ship- are also similar to last year. A new series of customers are returning to insourcing
pers and 3PLs agree that today’s business questions in the 2012 3PL Study asked ship- logistics activities.
challenges represent some version of a pers to report the percentages of trans-
“new normal,” driving the need for both portation and warehousing spend that are –– Reducing or consolidating the num-
types of organizations to identify and managed by third parties. As indicated in ber of 3PLs used: Slightly over one-
implement new strategies for success. In Figure 2, the overall average for transpor- half (58%) of shipper respondents are
effect, the starting line has been re-set, tation was 56%, but the regional averages consolidating the number of 3PLs they
injecting a new, highly invigorated and ranged from 41% in North America, to use, and 72% of 3PLs feel that customers
highly competitive spirit into the logistics more than 60% for shippers in Europe, in general are reducing or consolidat-
business environment. Asia-Pacific and Latin America. The aver- ing the number of 3PLs they use. This
age warehouse operations spend managed general trend toward consolidation is
“Today’s 3PL marketplace is experiencing by third parties was 39%, with only modest consistent with contemporary trends in
significant change. Established 3PLs are re- variation by individual region. procurement and strategic sourcing.
calibrating their business models to provide
greater value to their shipper-customers,” Reported Changes in Interestingly, the percentage of shippers
noted one prominent 3PL industry observ- Use of 3PL Services increasing/decreasing their use of 3PL ser-
er. “At the same time, they are looking over In recent years’ studies, we began to ask vices is very close to the figures we report-
their shoulders at emerging sources of com- shippers whether they were increasing ed in last year’s study. So, again this year,
petition and the new and innovative offer- their use of outsourced logistics services, there is strong evidence that the predomi-
ings they are bringing to market.” or returning to insourcing many of them. nant direction among shippers is to move
The responses represent an interesting toward increased use of outsourced logis-
Spending on Logistics record of the shifting use of 3PL services: tics services.
and 3PL Services
As seen in Figure 2, shipper respondents –– Increasing use of 3PL services: Nearly 3PL-Shipper Relationships
to the 2012 3PL Study report that total two-thirds (64%) of shipper respon- Continue to Progress and Improve
logistics expenditures represent an aver- dents report an increase in their use of Similar to last year’s study, 88% of shippers
age of 12% of their companies’ sales rev- outsourced logistics services, and 76% view their 3PL relationships as generally suc-
enues. Total logistics expenditures include of 3PL respondents agree this is what cessful, compared with 94% of 3PL respon-
transportation, distribution, warehousing they are seeing from their customers. dents. Shippers’ ratings are consistent across
and value-added services. Regional dif- Regionally, 58% of North America ship- regions: North America 89%; Europe 88%;
ferences range from 11% in each of three pers reported increased use, as well as Asia-Pacific 89%; and Latin America 87%.
regions to Latin America’s 14% of com- 57% of European, 78% of Asia-Pacific
pany sales revenues. and 73% of Latin American shippers. Somewhat fewer shippers, 71%, indicate
that 3PLs provide them with new and
Shippers devote an average 42% of this –– Returning to insourcing: Consistent innovative ways to improve logistics effec-
total to outsourcing, the same as reported with the churn that occurs each year tiveness; 91% of 3PL providers feel that
in last year’s study. That suggests that in with some companies increasing out- this statement accurately characterizes
comparison with the previous year, average sourcing and others bringing logistics the services they provide. The gap con-
changes in expenditures for outsourced activities back in-house, an average tinues between the ratings that shipper
logistics have been proportional to chang- of 24% of shipper respondents are respondents assign to various aspects of
es in total logistics expenditures. The returning to insourcing some of their the 3PL-shipper relationship and the more
average percentages of logistics spending logistics activities, and 37% of 3PL positive evaluations provided by the 3PL
shippers devote to outsourcing by region respondents observe that some of their respondents themselves.
North
Selected Information All Regions Europe Asia-Pacific Latin America
America
Figure 3: Shippers Continue to Experience Measurable Benefits From Use of 3PL Services that their customers expect them to be
sufficiently agile and flexible to accom-
Results All Regions
modate their (shippers’) current and
Logistics Cost Reduction (%) 13% future business needs and challenges.
But just 68% of shippers judge their
Inventory Cost Reduction (%) 9%
3PLs as sufficiently agile and flexible,
Logistics Fixed Asset Reduction (%) 25% down from 72% last year. This aspect
Changed From 70% of 3PL-customer relationships clearly
Order Fill Rate needs improvement, and deserves care-
Changed To 79% ful watching.
Changed From 80%
Order Accuracy –– Interest in “gainsharing” between 3PLs
Changed To 87% and shippers: Gainsharing comes up
Source: 2012 16th Annual Third-Party Logistics Study
frequently during our shipper work-
shops, and we are receiving mixed sig-
nals regarding this form of shipper-3PL
collaboration. This year 56% of 3PL
Success Factors: According to the survey their relationships with customers. So, respondents and 42% of shippers (ver-
findings, the following are key ingredients apparently there is a need for both par- sus 56% last year), report engaging in
to successful 3PL-shipper relationships: ties to consider the value that could be gainsharing arrangements. While many
gained by being more willing to share shippers consider gainsharing to be a
–– Openness, transparency and good appropriate information with their busi- useful incentive for themselves and their
communication: While 69% of shipper ness partners. 3PL providers to work toward agreed-
respondents are satisfied with the open- upon objectives and in keeping with the
ness, transparency, and communication –– Agility and flexibility to accommodate principles of good collaboration, others
received from 3PLs, only 62% of 3PLs current and future business needs and seem to feel that the basic agreement
are satisfied with these characteristics in challenges: Nearly all (98%) 3PLs feel with a 3PL should cover all areas where
Percentages Reported By
Information Technologies
Shippers 3PL Providers
Web Portals for Booking, Order Tracking, Inventory Management, and Billing 55 68
Bar Coding 47 56
Transportation Sourcing 41 51
RFID 21 32
Yard Management 16 26
performance is expected, and that it is services, as seen in Figure 3. Metrics relat- 3PLs feel are “must haves” for 3PLs to suc-
not necessary or appropriate to engage ing to logistics cost reduction, inventory cessfully serve customers. Overall, the most
in gainsharing practices. Interest in gain- cost reduction, and logistics fixed asset needed capabilities are those that relate
sharing may be diminishing somewhat reduction are consistent with what was directly to execution-oriented activities
due to slight improvements in the global reported in the two previous years’ studies. and processes such as transportation, ware-
business economy. We plan to follow this house/DC management, electronic data
closely in future studies. Shippers also report improvements in interchange, visibility, etc. Others that have
order fill rate and order accuracy resulting somewhat lower rankings tend to be more
–– Interest in collaborating with oth- from use of 3PLs, although the absolute strategic and analytical.
er companies, even competitors, to levels of these metrics are a little lower
achieve logistics cost and service than those reported in both the 2009 and Highlighted in Figure 5 is a ten-year view
improvements: When this question was 2010 3PL Studies. This may be an indicator of shippers’ opinions on whether they feel
asked last year for the first time, 68% of of the continuing impact of the global eco- information technologies are a necessary
shipper respondents and 80% of 3PLs nomic recession. element of 3PL expertise, and whether
expressed interest in these strategies. they are satisfied with their 3PL provid-
This year these percentages dropped to Finally, survey results showed that 60% of ers’ IT capabilities, the difference that has
44% and 67%, respectively. So, while last the shipper respondents report their use become known as the “IT Gap.” In recent
year we stated it was “reassuring to see of 3PLs has led to “year-over-year incre- years there has been a modest increase in
percentages that suggest a true interest mental benefits;” and 88% of 3PL respon- the percentages of shippers who indicate
by both parties in working with other dents agree. Despite the positive success satisfaction with the IT capabilities of their
companies, even competitors,” perhaps ratings perceived by both shippers and 3PLs; in fact, it is worth noting that the sat-
the easing of global economic condi- 3PLs, there appears to be opportunity to isfaction rate has doubled since this ques-
tions have made this less of a priority. enhance the benefits experienced by users tion was first asked in 2002. Despite this
We will continue to focus on this issue in of outsourced logistics services. improvement, the opportunity remains to
future studies. further narrow the gap between these two
Information Technology ratings. Similar to last year’s study, 68% of
Measurable Benefits: Shipper respondents Figure 4 summarizes the information tech- 3PLs feel that their customers are satisfied
experience measurable benefits from 3PL nology (IT) capabilities that shippers and with the IT services they provide.
100%
94% 93%
91% 92% 92% 92%
89% 90%
88%
85%
80%
IT Gap
60%
54% 54%
27%
20%
0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
What 3PL Users Outsource is that for the most part, the percent- of shippers outsourcing internation-
and What 3PL Providers Offer ages indicated in Figure 6 for the “all al transportation declined from 84%
Figure 6 shows the percentages of shipper regions” results are somewhat lower in 2009 to 75% in 2010, and now has
respondents that outsource specific logis- than comparable percentages from increased slightly to 78%. Over the same
tics activities. Provided below are some the previous year’s study. This may be time frame, the reported use of customs
general observations about this year’s explained somewhat by the fact that the brokerage declined from 71% to 58% to
results and the contrasts they reveal from current study yielded a higher percent- 48% and the reported use of freight for-
previous years: age of shipper respondents in the lowest warding services declined from 65% to
revenue category than in the previ- 53% and then increased to 57%.
–– Transactional, operational, and repeti- ous year’s study, as noted in the About
tive activities tend to be the most fre- the Study chapter later in this report. –– The less-frequently reported activities
quently outsourced. These include Further analysis of the available data indicated in Figure 6 tend to be some-
international and domestic transporta- confirmed that the higher the sales cat- what more strategic, customer-facing,
tion (78% and 71% across all regions egory, the higher the average number of and IT-intensive. Examples include: IT
studied), warehousing (62%), freight logistics activities outsourced. services; supply chain consultancy servic-
forwarding (57%) and customs broker- es; order management and fulfillment;
age (48%). This usage varies across each –– Perhaps due to the globally volatile fleet management; customer service;
of the regions. Another observation business environment, the percentage and LLP/4PL services.
User Percentages
Outsourced Logistics Service North Asia- Latin
All Regions Europe
America Pacific America
Domestic Transportation 71 65 77 74 69
Warehousing 62 65 61 65 63
Freight Forwarding 57 52 54 64 65
Customs Brokerage 48 49 43 56 45
Cross-Docking 26 29 28 25 22
Inventory Management 21 20 16 27 25
Customer Service 11 9 7 14 16
Fleet Management 10 8 9 14 9
Figure 7 is a summary of the types of logis- Figure 7: 3PLs Provide a Wide Range of Outsourced Logistics Services
tics services provided by 3PLs participating
Provider Percentages
in the 2012 survey and reveals that many Outsourced Logistics Service
All Regions
3PLs provide a wide range of services.
Based on findings from last year, it is very Domestic Transportation 83%
common for 3PLs to offer many, or even Warehousing 81
most, of the range of services included in
International Transportation 70
the question: the typical model is for 3PLs
to offer a substantial number of services to Inventory Management 66
respond effectively to their customers and
Order Management and Fulfillment 65
their logistics needs.
Customer Service 64
Earlier, the 2008 3PL Study included a
Transportation Planning and Management 63
special topic focus on shippers’ expecta-
tions and usage of 3PLs as a part of their Cross-Docking 62
green supply chain initiatives. Follow-up
Product Labeling, Packaging, Assembly, Kitting 62
questions on this topic in the 2012 3PL
Study reveal that 29% of shippers rely on Freight Forwarding 58
3PLs to provide visibility to fuel efficiency
Customs Brokerage 50
and carbon emissions information. Fully
53% of shippers say fuel efficiency and Reverse Logistics (Defective, Repair, Return) 56
carbon emissions have become an impor- Information Technology (IT) Services 51
tant part of their 3PL procurement
decision processes. Supply Chain Consultancy Services Provided by 3PLs 51
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–– 3PLs Make Valued Contributions: Again in 2012, companies –– 3PL Use Pays Off: Metrics including logistics cost, inventory
across industries and around the globe regard logistics and cost, and fixed asset reductions due to use of 3PLs, as well as
supply chain management as key components of their overall order fill rate and order accuracy, validate the cost and service
business success, and many credit their 3PLs with help- improvements resulting from successful 3PL relationships.
ing to provide new and innovative ways to improve logistics
effectiveness. –– Execution-Oriented Activities Still Lead: The logistics activi-
ties most frequently outsourced continue to include those that
–– Logistics Spending is Consistent: Across all regions included in are more transactional, operational and repetitive, while those
the 2012 survey, shipper respondents report that total logistics less frequently outsourced are those that are more strate-
expenditures represent an average of 12% of sales revenues, gic, customer-facing and IT-intensive. In the future customers
and they spend on average 42% of their total logistics expendi- may be more receptive to strategic services that may be avail-
tures on outsourcing. able from 3PLs. One observation from this year’s study is that
generally, the percentages reported by shippers for outsourc-
–– Transportation Spend Dominates: Overall, survey respondents ing of individual logistics activities is down slightly from those
who use 3PL services report that their outsourcing activities reported in recent years. As indicated earlier, this is likely due
account for 56% of transportation spend and 39% of warehouse to the fact that this year’s shipper survey respondents included
operations spend. a higher percentage of respondents in the lowest annual sales
category than in the previous year’s study – and companies in
–– 3PL Use is Rising: A majority of shipper respondents, 64%, the lower annual sales categories tend to outsource fewer logis-
report they are increasing their use of 3PL services, while 24% tics services.
are returning to insourcing some 3PL services and 58% report
they are reducing or consolidating the number of 3PLs they use. –– The IT Gap Remains: Information technology remains a key com-
ponent of 3PL-shipper relationships, and the 2012 3PL Study
–– The Success Rating Perception Gap Remains: Most shipper results indicate that 54% of shipper respondents are satisfied
respondents (88%) and most 3PL providers (94%) view their with 3PL IT capabilities compared with 93% who indicate that IT
relationships as successful. In addition, just over two-thirds of capabilities are a necessary element of 3PL expertise.
shippers say 3PLs provide them with new and innovative ways to
improve logistics effectiveness – whereas 91% of 3PL providers –– New 3PL Selection Criteria: Fuel efficiency and carbon emis-
feel this is the case. sions are becoming a more important part of shippers’ 3PL
procurement decision processes.
–– Gainsharing and Collaboration Lose Ground: The 2012 3PL
Study provides insight into several factors that relate to the –– Reasons for Non-Use Persist: Non-users of 3PL services pro-
success of 3PL-shipper relationships: openness, transparency, vide reasons why they choose not to outsource to 3PLs. Among
and good communication; agility and flexibility to accommodate the most prevalent: logistics is a core competency at our firm;
current and future business needs and challenges; interest in logistics is too important to consider outsourcing; cost reduc-
“gainsharing” between 3PLs and shippers; and interest in col- tions would not be experienced; too difficult to integrate our IT
laborating with other companies, even competitors, to achieve systems with the 3PLs’ systems. Other shippers tell us these are
logistics cost and service improvements. Interestingly, results some of the same factors that are responsible for their deci-
from the current study suggest that both gainsharing and col- sions to use 3PLs.
laboration may have lost some popularity due to the recent
modest improvements in the global economic picture.
Balancing growth and opportunity
Emerging Markets 15
Emerging Markets
Opportunities for Driving Corporate Growth
For many companies, doing business in Figure 9: Most Shippers Are Active In Emerging Markets
emerging markets is no longer a nice-to-
have; it’s a must-have to fuel continued
growth. For example, General Motors I am Based in a Mature Market, 52%
sold more cars in China than it did in But I Conduct Business With
the United States last year, and PepsiCo or Within an Emerging Market 48%
captured about half of the Russian juice
market through an acquisition, accord-
ing to a CNNMoney report. As seen in 28%
I am Based in an Emerging Market
Figure 9, a substantial 80% of shippers in
29%
the survey conduct business with or with-
in an emerging market, with the major-
ity (52%) doing so from a mature market 20%
and 28% from within emerging markets. Neither
■ Shippers
Among 3PL respondents, 77% conduct 23%
■ 3PLs
business with or within an emerging mar-
ket, 48% from a mature market.
Source: 2012 16th Annual Third-Party Logistics Study
We define emerging markets as nations
with economies that are experiencing
rapid growth through industrialization.
Mature markets are largely industrial- Global trade compliance also represents Indeed, in contrast with the overall sur-
ized nations with economies growing at a a hurdle for many companies operating vey respondents, 3PL Study ASE workshop
slower, steadier rate. As seen in Figure 10 in emerging markets. For example, one participants and focus interview partici-
on page 16, shippers and 3PLs in mature Logistics Director for a US-based apparel pants assert that security and counterfeit
markets concur that their top emerging manufacturer described the application intervention are key considerations in
market opportunities are in China, India, of customs regulations in Asia as a vexing operating global supply chains: How well
Brazil and Mexico, though their rankings challenge. “The authorities can become do you know the suppliers you’re working
differ a bit. bureaucratic and are normally not very with and the quality of their due diligence?
transparent, leaving a lot of execution and Governments that are clear and consistent
Market Expansion Challenges interpretation to the field officers, and they on their security metrics and initiatives
The potential benefits of moving into an can be very erratic in their classification.” make it easier to manage risk than those
emerging market are often far more clear where security efforts are less evident,
than is the correct path to establishing busi- “Bureaucracy and local processes make notes one US manufacturer. Some shippers
ness there, particularly when making logis- working in emerging markets more chal- engage transportation security providers
tics decisions. Successfully balancing risk lenging,” says Cyrill Gaechter, Head of when they perceive a high level of risk.
and reward requires a careful assessment of Marketing and Sales for Panalpina Black
the unique characteristics of each market. and Caspian Sea. “In more mature markets In focus interviews, several experts
it is less complex, however the emerging also cited green concerns as they move
As seen in Figure 11 on page 17, for ship- markets are catching up continuously. into emerging markets. One Head of
pers based in mature markets difficult Proper preparation such as documentation Distribution for a communications equip-
laws and regulations, cultural differences, is of high importance around the world but ment manufacturer noted the difficulty in
the ability to deliver against promises or even more critical in emerging markets to reducing its CO2 footprint, which requires
agreed-to service levels and complicated achieve reliable end-to-end-service.” limiting air freight and road transporta-
tax regimes top the list of challenges. tion, while catering to the sales growth
Because of such obstacles, “I could set up Concerns vary by market and industry. For expected in the next two years. “To mini-
a new operation in a more mature market example, shippers in electronics express mize these modes we need to plan ahead
in much less time than in an emerging far more concern than the overall respon- to allow for alternative modes like sea
market,” says Gokhan Cakmak, Global dents (45% vs. 22%) about global trade freight and rail,” not always an easy task in
Logistics Manager for Oriflame. “This is compliance, as well as attracting and a fast-growing market.
mainly due to the state of laws and regula- retaining good local staff and lack of secu-
tions as well as the infrastructure and lack rity for their goods.
of international 3PL players present in
these markets.”
16 2012 16th annual THIRD-PARTY LOGISTICS study
Case in Point: Brazil is also offering eligible corporations a 75% and Honda, as well as international 3PLs,
Brazil is representative of the risk/reward corporate tax reduction on “exploration according to a story in DC Velocity. Fast
challenges posed by an emerging econo- profits” until 2013. Brazil’s gross domestic growth in the 3PL market has enabled the
my. Brazil will play host to two mega sport- product average growth rate from 1991 emergence of modern, specially built ware-
ing events, the FIFA World Cup in 2014 through 2011 was 3.26%, according to houses that meet the needs of multiple
and the Olympics in 2016, events which Trading Economics. shippers. More than 90% of Brazilian com-
are driving a large-scale infrastructural panies outsource transportation, accord-
improvement program. The Brazilian gov- A critical step in Brazil’s growth was ing to a survey by BDP International, while
ernment plans to invest up to US $880B the formation of Mercosur, the South 75% outsource other activities, such as cus-
in an economic stimulus program by 2014 American free trade agreement. Regional toms expediting and warehousing. Quality
to propel growth, with a portion of those growth together with the tax incen- of service has become a key metric for
funds devoted to upgrading its infrastruc- tives available in free trade zones such as Brazilian shippers.
ture, primarily roads and railways, but Manaus have attracted global manufac-
also ports and waterways. The government turers such as Sony, Whirlpool, Samsung
However, for all of its opportunity, Brazil compliance in 2009, then required to fol- –– Limited Infrastructure: Brazil is best
presents some logistics challenges: low the regulation in 2010, and was once considered as different countries inside
again excused in 2011. one country in terms of its infrastruc-
–– Byzantine Tax Laws: Brazil’s complex ture and markets. In the south and
tax laws can vary significantly among In addition, companies “must get a southeast regions, there is a big satura-
regions, with at least 70 different types license for a warehouse to ship to custom- tion of providers, which generates more
of taxes, many of which require monthly ers, and then goods can only flow from competition and lower costs. The cen-
debits and credits. Enforcement is noto- that warehouse,” says Wally Shaw, Market tral west, northern (Amazon area) and
riously inconsistent. For example, regula- Group Supply Lead, Americas, for Philips northeast regions lack providers and
tory law requires products manufactured Consumer Lifestyle. “You cannot ship infrastructure, so costs are much higher.
in Brazil to be returned to their point from an overflow warehouse; you have to Many companies work with independent
of origin for disposition. One electron- ship the goods back to the main licensed drivers who own their own trucks as a
ics manufacturer was excused from warehouse, which is very inefficient.” cost efficient solution for transporting
Figure 11: Difficult Laws Top Mature-Market Shipper Challenges in Emerging Markets
50%
Difficult Laws and Regulations
42%
47%
Cultural Differences
29%
42%
Complicated Tax Regimes
28%
32%
Language Barriers
20%
31%
Inadequate Physical Infrastructure
36%
30%
Attracting and Retaining Good Local Staff
34%
28%
Global Trade Compliance
22%
20%
Corruption
22%
19%
Lack of IT Capabilities
33%
19%
Lack of Security
21%
3%
Other ■ Shippers Based in Mature Markets
5%
■ Shippers Based in Emerging Markets
Figure 12: Shippers See Global 3PLs with Local 3PL Partners as Most Successful
low-cost products such as seeds and con- Foods. A fragmented logistics infrastruc- intimate knowledge of local practices, or a
struction materials, but it’s a challenge ture often drives companies to maintain global partner with more resources to bear?
for these independent truck drivers to higher inventory levels.
secure a steady volume. Brazil’s invest- As seen in Figure 12, more than half of
ment in ports and airports has been “In Brazil we are ten hours away from shippers based in both mature and emerg-
limited over the past many years; a con- the US by air and 11 hours from the ing markets agree that a global 3PL coor-
sequence is that containers can sit in cer- main European cities by air. It takes 17 dinating with a local 3PL is the most suc-
tain ports for weeks awaiting unloading. days navigation by water to Europe and cessful operating model for 3PLs operating
Brazil’s government has resisted private 38 to 45 days to reach China ports with with or within an emerging market. “We
investment in infrastructure. direct service,” says Gilberto Zanon, look for two different types of providers,”
Head of Industry Verticals, Brazil at says Tony Xia, Senior Logistics Manager
–– Trade Zone Tradeoffs: Free trade zones Panalpina. “The longer lead times mean with Emerson Electric. One must be “big
such as Manaus encourage growth in planning to avoid stock-outs or excess enough to have good coverage and good
underdeveloped areas by attracting stock is a challenge that companies need IT, good assets, and can help growth and
large manufacturers, but also serve as an to overcome. Successful companies and expand.” The other type is “niche players,
example of how tax benefits alone do not 3PLs work together to do this.” where they are pretty good in a small piece
translate into logistics efficiency. Manaus of logistics.”
has one road in and out, which cannot Like other emerging markets, Brazil’s com-
take heavy truck traffic, forcing many pelling rate of growth and potential for The ideal, many shippers say, is to find a
shippers to use air/water freight. improvement has convinced many compa- global player with strong local knowledge.
nies that the obstacles are worth the invest- When they don’t find these qualities avail-
–– Political and Regulatory Obstacles: Like ment. As one participant at the eyefortrans- able in emerging markets, the combina-
many emerging markets, Brazil has its port workshop noted, emerging markets tion of global and local 3PLs is the next
share of political influences that impact have the opportunity to build on what the best thing. Michael Keong, Director,
supply chain efficiency. For example, developed markets have already done and Regional Logistics Asia, Levi Strauss and
Brazil’s customs and duty regulations then leapfrog over them. One example is Company, noted, “We need to ensure
have created a protectionist market for the pervasive use of cell phones for bank- 3PLs have the right resources, content
some goods. ing purposes in some emerging markets. experts, etcetera, to understand the local
flavor. A strong account manager who
–– Evolving Logistics Marketplace: Rapid Selecting a 3PL Partner understands the local area is important to
growth has fueled demand for outsourc- for Emerging Markets us. That person need not know it all, but
ing, creating a fragmented marketplace Entering any new market requires due dili- must have the right network to solve any
populated by a range of providers. Many gence; when it’s an emerging market, gain- problems that break.”
were started by individual truck drivers ing local insight is even more critical, since
who acquired more trucks and then even- conditions are often evolving rapidly. 3PLs Shippers participating in the ASE work-
tually bought a warehouse, though Brazil can play a critical role in both the plan- shops illustrated the value of local knowl-
is also served by major national and inter- ning and execution of shippers’ entry and edge: One shared the story of a global
national players. “Many logistics provid- growth in emerging markets. company that established a supply ware-
ers are individual-function oriented, with house in China to US specifications, only
few integrated supply chain, value-added Early in the process, shippers must ask to find the unloading docks to be at the
offerings,” says Mauricio Ferreira, Latin themselves: What type of 3PL partner do we wrong height for local supply trucks.
America Supply Chain Director for Kraft want? Is it best to seek out a local player with Another shipper found its pallet shifters
Emerging Markets 19
did not work in the narrow-bodied air- import/export documentation, embargoed what they need. One ASE participant
craft coming out of Panama. products/countries screening and other related how his company was seeking
compliance services. “It would be useful integrated warehouse and transporta-
Signs indicate that the combination of for 3PLs to have better relationships with tion services in an emerging market it
global and local players is working; as seen customs officers to ensure they have local was entering, ideally with the warehouses
in Figure 13 on page 20, shippers and input, etcetera,” said Levi Strauss’ Keong. located close to air hubs. But the 3PL
3PLs are pretty well aligned in what they “3PLs should engage more in customs they wanted to work with was not set up
believe are the most important services meetings and be the conduit to discuss to accommodate the shipper’s needs.
in emerging markets. Shippers’ primary customer requirements.”
needs from 3PLs in emerging markets are –– Security: Shippers in emerging markets
visibility (77% of those based in emerging Other Services Sought From 3PLs expect 3PLs to address their security
markets, 81% of those based in mature In addition to those capabilities cited in the concerns through measures such as
markets), expertise on the latest global survey, ASE workshop and focus interview delivery trucks with GPS systems, engine
trade regulations (60% and 69%) and participants concur that they would like to shut-down systems, and drivers trained
managing and optimizing shipment rout- see these additional qualities and capabili- on security protocols.
ing based on free trade agreement knowl- ties in 3PLs active in emerging markets:
edge (59% and 57%). –– Long-Term Commitment: It’s also
–– Proactive Consulting Services: At the important that 3PLs’ efforts be stra-
Visibility: With the added risk and uncer- ASE workshop held in Utrecht, shippers tegic, not tactical. “3PLs still lack a
tainty of emerging markets, the impor- concurred that the timing of 3PLs’ assis- longer term sustainable plan for com-
tance of visibility to shippers is understand- tance was also key. Very often an initia- ing into a country,” says Arun Salvi,
able. “Delivering products in Russia is tive to move into an emerging market Logistics Manager Asia Pacific, for Shell
complex,” says Panalpina’s Gaechter, “and begins with the shipper conducting ini- Lubricants. “They are taking more of
visibility over where our customers’ prod- tial research because their 3PL partners a short-term approach to make prof-
ucts are and a reliable service to ensure lack insight into that market. Then the its much quicker than they should be.
products arrive on time are two critical 3PL follows, ramping up its own investi- Global players end up being like the
aspects of our customers’ needs. This is no gation. Shippers would like to see 3PLs local players, but with a foreign name,
different than, for example, China, where take a more proactive approach — and because they have not invested properly
lead-time from factory to exporting port are willing to pay for it. in infrastructure, people and processes.”
can take many days. Visibility and reliabil-
ity play a key role there as well, and excel- –– Local Insight and Expertise: It’s the All of these points can make for a difficult
ling in this is more difficult in emerging lack of local expertise on the part of environment and require 3PLs and ship-
markets than more mature markets.” global 3PLs without a strong local pres- pers to work closely together and with high
ence, such as the best way to move prod- degrees of trust if success in emerging mar-
It’s highly important for service-centric uct in that country, that drives ship- kets is to be achieved. This might be one
computer manufacturers to be able to pers to local 3PLs and other experts. of the reasons people choose global 3PLs
provide order-level tracking to customers, Shippers want creative, informed ideas working with local players.
says the Supply Chain Director for a large to overcome local barriers, for example,
computer company, and 3PLs need this using a barge in Vietnam to circum- Free-Trade Agreements and 3PLs
capability to provide visibility to customers. vent road congestion, or overland or A free trade agreement (FTA) is a pact
Even better is a 3PL taking proactive steps cross-border trucking in India and between two or more countries or areas in
to resolve issues detected through visibility, Bangladesh – or even how to handle which they agree to lift most or all tariffs,
which many 3PLs in emerging markets do local events such as labor stoppages. quotas, special fees and taxes, and other
not do, he says. barriers to trade among them to allow
In one telecom company’s emerging faster transactions and a higher volume of
Global Trade Regulations: As noted in markets experience, “Logistics service business. According to the United Nations
Figure 13, 3PLs active in emerging markets providers fail to come up with new logis- Statistics Division, FTAs such as the
concur with shippers’ rankings, with the tics solutions or improvements,” says its North American Free Trade Agreement
exception of providing expertise on the Head of Distribution. “Any new solution (NAFTA), the European Union (EU-
latest global trade regulations. Shippers or idea is brought up ourselves. This is 27) and the Organisation for Economic
ranked this as the second most important where LSPs really fail.” Co-operation and Development (OECD)
service they would like to get, whereas 3PLs have made a definitive impact on growth
in mature and emerging markets ranked it –– Integrated Solutions: Shippers that want across sectors such as machinery, manufac-
somewhere in the middle. to amass the requisite logistics services tured goods and chemicals.
and knowledge required for an integrat-
Compliance: In emerging markets, many ed approach often find they must engage FTAs, free trade zones (FTZ) and Special
shippers rely on 3PL expertise to navigate multiple 3PLs because no single 3PL has Economic Zones (SEZ) have in turn fueled
20 2012 16th annual THIRD-PARTY LOGISTICS study
77% 81%
Providing Shipment
Visibility
81% 82%
19% 26%
Managing
10+2 Filings
19% 34%
■ Shippers
■ 3PLs
the growth of third-party logistics com- from US and Australian factories into an customs entries into one $300 entry. That
panies around these zones. For example, FTZ warehouse in Panama for distribution saves us $8,700 per month, a pretty big sav-
increasing partnerships between US and to surrounding countries, avoiding duties ings that adds up to $100K annually.”
Mexican carriers via NAFTA have led to and holding inventory closer to its markets.
growth of logistics companies on both “The 3PL does bring the knowledge, and Free trade agreements can be an impor-
sides of the border, including 3PLs, cus- it also brings consolidation of customs tant factor in choosing whether to enter an
toms brokers and forwarders. Mexico’s entries,” he says. “With FTZ we can con- emerging market, and the most advanta-
maquiladora factory system allows mate- solidate multiple $300-per-entry monthly geous ways to operate in that market.
rials to be imported into Mexican towns
near the US border, tariff and duty free;
after assembly, the finished products
are exported duty-free back to the US. Figure 14: Shippers and 3PLs Agree That 3PL Knowledge of Free Trade Agreements
The automotive, garment and electron- Is Important
ics industries make significant use of the
maquiladora system. Many partner with
3PLs for activities such as transportation 3PLs Based in Emerging Markets 54% 35% 11%
and reverse logistics.
With such high stakes, it’s not surprising 3PLs Based in Mature Markets 38% 56% 7%
that the majority of shippers in mature and
emerging markets call 3PLs’ knowledge
Shippers Based in Emerging Markets 73% 22% 5%
of FTAs very important (65% and 73%,
respectively), as seen in Figure 14. 3PLs feel
somewhat less strongly; just 54% of those Shippers Based in Mature Markets 65% 33% 3%
in emerging markets and 38% of those in
mature markets agree.
■ Very Important
Understanding and keeping up with the ■ Somewhat Important
■ Not Important
changes and nuances of each FTA can
be critical to reaping the benefits. “Free
trade is not free trade, it’s more condi- Source: 2012 16th Annual Third-Party Logistics Study
tional trade agreements,” says one apparel
manufacturer. One example of the need
for deep understanding is in China’s FTA,
he explains. “There is a ‘40% regional con-
tent’ rule, but many people do not under- Emerging Markets: Key Takeaways
stand what this means. When we ask the
experts, we find production and labor costs –– Compelling growth rates and incentives such as free trade agreements are attracting
count towards the 40%, which can signifi- many global businesses to emerging markets. But for shippers based in mature mar-
cantly impact the attractiveness of doing kets, difficult laws and regulations, cultural differences, the ability to deliver against
business there.” promises or agreed-to service levels and complicated tax regimes are just some of
the obstacles shippers cite in moving into these markets. A case in point is Brazil,
The VP of Operations at a large software where the government’s commitment to infrastructure investment and participation
and peripherals developer says FTAs have in Mercosur, the South American free trade agreement, has paid dividends in attract-
“allowed us to expand our business market, ing manufacturers including Sony and Honda. But Byzantine tax laws, political and
although they have not alleviated signifi- regulatory obstacles and immature logistics infrastructure are significant challenges
cant duties and taxes.” Others cite the sig- to overcome.
nificant paperwork that still must be filed
to qualify for the FTA benefits, requiring –– Shippers based in both mature and emerging markets concur that a global 3PL coor-
administrative resources. Shippers value dinating with a local 3PL is the most successful operating model for 3PLs operating
3PLs that can streamline these process- with or within an emerging market. The 3PL capabilities they most prefer are visibility,
es and maximize FTA/FTZ resources expertise on the latest global trade regulations and managing and optimizing ship-
through knowledge and execution of com- ment routing based on free trade agreement knowledge. Shippers would like 3PLs to
pliant processes. be more proactive in helping them learn about the nuances of new markets and offer
creative solutions and local insights that will help them succeed. The majority of ship-
Using 3PLs in free trade zones has been pers in mature and emerging markets call 3PLs’ knowledge of free trade agreements
beneficial for a large pharmaceutical com- very important, helping them to leverage significant benefits when properly applied.
pany, according to its VP Logistics. For
example, the company delivers product
Balancing long lead times with short product lifecycles
Electronics 23
Electronics
Complexity Inside and Out
Electronics products are often the rock in expediting freight and maintaining
stars of the consumer and business prod- pipeline inventory, as well as increasing
ucts worlds, with buyers eagerly anticipat- supplier and global trade compliance
ing the next release with the latest and risks. 3PLs with experience in these mar-
greatest features. But along with enviable kets can play a critical role in devising
demand comes pressure to make products strategies to overcome these obstacles.
smaller, faster, cooler and at a lower price
point. Some electronics products’ lifecycles –– Global Supply Chain Complexity and
closely resemble fashion: What’s in today Risk: Too many product lines and too
is out tomorrow. But even everyday devices many components sourced from too
are feeling the heat. Everyone wants to pro- many faraway places creates a com-
duce the next iPad. plex, costly and long supply chain. As
seen in Figure 15 on page 24, supply
Hitting these targets demands a fast and chain complexity and risk is the second-
nimble supply chain. The challenges of highest-ranked challenge for shippers.
attaining this fall into three major buckets: Figure 18 on page 30 reveals that 3PLs
global manufacturing and sourcing issues, are somewhat more confident in their
channel and network complexity and the ability to help address this challenge
implications of an intricate, high-value than shippers are (42% to 22%), per-
product set. haps because more of the cost empha-
sis is on the product itself and not the
Electronics Manufacturing and logistics wrapped around it. An excep-
Sourcing Challenges tion is Philips, which merged two divi-
Electronics products lifecycles are growing sions, both selling to retail and at times
ever shorter and margins tighter, increas- to the same customers, in an effort to
ing pressure to lower costs and manage ma- reduce complexity and lower its ware-
terial and suppliers more efficiently. This house count.
has triggered the following trends in man-
ufacturing and sourcing: –– Make to Order/Make to Stock: A make
to order production strategy enables
–– Asset Lightness: One industry trend electronics companies to customize
is toward fewer original equipment products such as computers to cus-
manufacturers (OEMs) actually manu- tomers’ exacting specifications. Dell
facturing, moving or storing their own achieved significant supply chain rec-
products. Many prefer to engage both ognition for its work toward its make to
contract manufacturers and third-party order supply chain model. The majority
logistics providers for these services. For of electronics companies in the survey
example, Sony’s adoption of an asset (78%) agree that for most electron-
light philosophy prompted the com- ics companies, a make to order supply
pany to sell off assets including a major chain model may not always be as cost
TV manufacturing facility in Mexico to effective as a make to stock model. It
Foxconn Electronics in January, 2010. can also lead to inventory obsolescence,
especially when product lifecycles are
–– Emerging Markets Sourcing: Many short. Dell maintains as many as six
electronics companies have sought out supply chains. Business products are
manufacturing and logistics partners made to order, but differing demand
in emerging markets, a move which can requirements mean some move via air
lower costs but at the same time create a freight while others leverage alternative
long, thin supply chain. Sourcing from modes, according to a Supply Chain Digest
emerging markets also often means Webcast. Dell’s retail products are made
insufficient infrastructure and emerging to stock and planned well in advance to
logistics capabilities, creating challenges get products to market cost effectively
for peak seasons.
24 2012 16th annual THIRD-PARTY LOGISTICS study
59%
Price Pressure to Reduce Operating Costs
60%
54%
Global Supply Chain Complexity
and Risk (Including Compliance) 60%
41%
Lack of Supply Chain Visibility
47%
37%
Volatile/Unpredictable Demand
37%
36%
Supply Chain Disruptions
38%
35%
Supply Chain Security
47%
30%
Short Product Lifecycles
44%
30%
Data Integration and Synchronization
28%
14%
Make/Configure to Order Products
24%
The bottom line is that one size does –– Use of Contract Manufacturers as 3PLs: Complex Networks and Channels
not fit all, even within one electronics The lines between industry groups are The electronics industry is notoriously
company, due to varying market and cus- blurring as contract manufacturers in segregated, with multiple players involved
tomer needs. emerging markets offer services that in the supply chain, not all of which are
are more traditionally associated with marching to a common beat. These play-
–– Postponement: A related strategy 3PLs, a trend noted by about two-thirds ers include:
favored by electronics manufacturers, of shippers and 3PLs in the survey. Most
which both reduces inventory and pro- common services include transportation –– Component suppliers
vides a higher level of customization, is management, warehousing and distri- –– Contract Manufacturers, Original
postponing final configuration, includ- bution services and returns manage- Design Manufacturers and Joint Ventures
ing packaging, until the product is in or ment. Some contract manufacturers are –– Original Equipment Manufacturers/
close to the market where the product offering the more “advanced” services Brand Owners
will be consumed – services that may be typically provided by 3PLs, such as sup- –– Distributors/Partners/Value-Added
performed by 3PLs in these markets. ply chain network design, logistics plan- Resellers
“People want the benefits of manufactur- ning and consulting services. Contract –– End Customers
ing in China, but are doing more pack- manufacturers see this as a logical
aging in the US,” as well as light assembly extension of their services and a higher- Electronics is also a highly dynamic indus-
where possible, says Wally Shaw, Market margin opportunity. Discussions with try: Technology changes so rapidly that
Group Supply Lead, Americas at Philips 3PLs reveal that they do not see this as many companies are driven to failure due
Consumer Lifestyle. “This helps with a major threat yet, since logistics is their to their inability to keep up with changing
forecasting by reducing the number of core competency and they believe that technologies. That in turn drives signifi-
SKUs you are planning, and also helps electronics companies will choose them cant merger, acquisition, and divestiture
reduce cube in transportation by using a over contract manufacturers for complex activity; Cisco alone has acquired more
bulk pack.” international logistics needs. than 145 companies in the last 18 years,
according to the company’s Web site.
–– Price Pressure: Shippers view price –– Environmental and Social Motorola recently split into a consumer
pressure to reduce operating costs as Sustainability: Like many industries, products company and a business and gov-
their top logistics challenge (59%). One electronics manufacturers are con- ernment products company while selling
increasingly common solution is to shift cerned with CO2 emissions and fuel off a division that makes network infra-
from a heavy emphasis on fast but costly consumption, particularly with long sup- structure equipment.
air freight to other modes according to ply chains. Manufacturing byproducts
specific channel needs, but this requires such as lead from printed circuit board Further complicating matters, electronics
significant advance planning. Nearly production are an additional concern; companies sell into many vertical markets,
two-thirds (65%) of electronics shippers 70% of heavy metals in US landfills each with its own unique needs. Among
in the survey favor air freight over slower come from discarded electronics prod- the most trying is retail, which offers
modes to shorten supply chain transit ucts, according to Supply Chain Brain’s opportunity but also complexity to elec-
time. 3PLs believe they can play a larger High Tech Outlook, February 2011. tronics supply chains. Among the challeng-
role in helping electronics shippers Companies – and savvy 3PLs – are get- es of interacting with retailers:
address this challenge than shippers do ting creative to solve materials and pack-
(Figure 18, 38% vs. 28% of shippers). aging problems. Dell is trying protective –– Inaccurate retail-level forecasts
packaging made of bamboo and even –– Retailers’ risk tolerance
mushrooms and is scaling down package –– Exacting vendor compliance programs
sizes to fit more on a pallet, according to with significant penalties
an April, 2011, article in Fortune. –– Consumer electronics products often
have a long lead time and a short prod-
uct cycle, which creates obsolescence or
excess stock
26 2012 16th annual THIRD-PARTY LOGISTICS study
74%
cycle time on transit legs. Fully 55% of Figure 17 reveals that improved forecast-
3PLs report that they can help electron- ing and inventory visibility is the third
ics companies redesign supply chain most-used cost-saving strategy by elec-
networks, which can help them respond tronics companies, although curiously,
to differing channel needs while shar- despite the fact that 3PLs are ideally situ-
ing common infrastructure and services ated to provide visibility to customers,
wherever cost effective. However, as seen both shippers and 3PLs report that 3PLs of electronics companies cite
in Figure 17 on page 29, only 14% of ship- are not very likely to be assisting in this visibility as the top service they
pers use 3PLs for this service. To capture improvement process. Perhaps 3PLs are would like to see from 3PLs
more of this business, 3PLs need to invest providing sufficient visibility, but work
in understanding the customer at all lev- needs to be done on the shipper side to
els in the organization. An electronics maximize its use.
Electronics 27
Figure 16: Visibility Tops Services Electronics Companies Seek from 3PLs
74%
Global Supply Chain Visibility
12%
56%
Supply Chain Security
8%
44%
Reverse Logistics
15%
40%
Vendor Managed Inventory
11%
40%
Experience with Local Product Regulations
6%
38%
Quality Certifications Such as ISO 9000
4%
34%
Service Parts Logistics
11%
32%
Kitting
8%
26%
Final Assembly/Configuration/Postponement
6%
25%
Environmental Certifications Such as ISO 14000
11%
24%
Lean/Six Sigma
12%
22%
Managing Global Production Supply
11%
22%
Willingness to Own and Manage Inventory
15%
21%
Testing
9%
21%
Warranty Processing
9%
19%
Launch of New Product
5%
Security: As seen in Figure 15, 35% of ship- are testing cost-reduction and sustainabil-
pers call security a supply chain challenge; ity strategies such as using new protective
while theft of electronics goods has steadily materials, including the mushrooms and
declined over the past five years, it still rep- bamboo mentioned on page 25, as well as
resents 1 in 5 thefts across all industries, smaller packages and postponement of
according to FreightWatch’s Annual Supply light assembly and packaging to the desti-
Chain Survey. Figure 16 reveals that security nation market — also a SKU reducer, and
is the second most important capability an opportunity for 3PLs.
that electronics companies look for when
they hire 3PLs. Security is a particular pri- Many retailers place electronics cartons
ority in emerging markets which don’t have right on the sales floor. If this packag-
all of the protections available in mature ing is too thin, it is susceptible to damage,
markets. Technologies can help, such as and glossy coatings can be slick, causing
covert and visible shipment tracking solu- cartons to shift in transit and pallets to
tions, GPS and engine shutdown systems, collapse, damaging cartons and, poten-
as well as practices including driver train- tially, contents. Sony solved this problem
ing and use of transportation security com- by improving shipment integrity through
panies such as FreightWatch. As the results the use of corner boards, banding, air bags
indicate, shippers are looking to 3PLs to and improved shrink wrapping techniques.
enact these measures.
Local Market Customization: Individual
Counterfeiting: A related need is to com- markets come with their own appetites
bat counterfeiting of goods through pre- and preferences, such as 220-volt electric
vention and detection; electronics compa- service in Europe and Asia with different
nies must thoroughly vet their suppliers electrical outlets in different countries vs.
and employ security measures for com- 110-volt in The United Sates and Canada.
ponent parts as well as finished goods. Regulation may also dictate specific design
Package seals with serial numbers are an features. 3PLs might help electronics com-
important anti-counterfeit measure. One panies with software downloads or minor
potential concept is to borrow e-pedigree localization of the hardware, such as power
practices from the pharmaceuticals indus- supply units, as well as insight into local
try; 3PLs could provide the supply chain regulations and import/export require-
integrity and manage the component pedi- ments, especially in emerging markets.
gree processes.
Short Lifecycles: Like fashion apparel,
On-Board Intelligence: Electronics compa- many electronics products are made in
nies are beginning to tap the digital supply emerging countries such as China, Taiwan,
chain for applications such as remote mon- India and Brazil and consumed in US and
itoring and diagnosis. Diebold, for exam- European markets. This means a relatively
26%
ple, enables predictive maintenance of long supply chain for lifecycles that often
ATMs via an embedded device, according run just six to 18 months, creating obsoles-
to a company white paper. The company is cence issues.
notified when a component is at risk of fail-
ure and dispatches a service repair person These short lifecycles combined with
with the correct part before it ever affects a the challenges of accurately forecasting
user, reducing costs and increasing custom- demand also means inventory obsolescence of shippers feel 3PLs can help
er service. 3PLs could act as the centralized is a significant problem for electronics them improve distribution center
depot in this scenario to receive service companies, particularly for make to stock. processes as a cost-saving
messages and send replacement parts. The majority (69%) of electronics ship- strategy, the top-ranked way
pers believe 3PLs can help them deal with they believe 3PLs can assist
Packaging: Shiny packaging for often-del- inventory obsolescence by proactively iden- them in lowering costs
icate electronics products is designed to tifying slower moving items and items that
attract customers, but often requires outer have been replaced with newer releases.
boxes to protect it. Electronics companies
Electronics 29
Figure 17: Electronics Companies Employ Many Logistics Cost Savings Methods
63%
Renegotiated Rates for Logistics Services
18%
62%
Improved Distribution Center Processes
26%
57%
Improved Forecasting and Inventory Visibility
10%
52%
Renegotiated Rates for Warehouse Services
17%
49%
Increased Outsourcing
10%
48%
Switched to Multimodal or Slower Mode of Transport
19%
47%
Redesigned Supply Chain Network
14%
45%
Improved Shipment Density/Load Utilization
18%
37%
Rationalized or Decreased the Number of SKUs
2%
31%
Moved to a Make to Order Model
6%
22%
Employed More Fuel-Efficient Transport
9% ■ Our Company Uses
■ Assisted by 3PLs
Figure 18: More 3PLs Than Shippers Believe 3PLs Can Help with Challenges
28%
Price Pressure to Reduce Operating Costs
38%
24%
Lack of Supply Chain Visibility
39%
21%
Supply Chain Security
32%
17%
Supply Chain Disruptions
27%
13%
Data Integration and Synchronization
17%
11%
Volatile/Unpredictable Demand
16%
4%
Short Product Lifecycles
14%
2%
Make/Configure to Order Products
11%
Pressure to Manufacture 0%
Onshore or Near Shore 13%
0%
Other ■ Shippers
1% ■ 3PLs
3PLs could help to identify at risk inven- The same is true in top savings methods sides need to meet in the middle: 3PLs
tory in the warehouses that they manage, used by electronics companies in Figure 17; need do a better job in selling the quality
as well as arrange intermodal and other there are significant gaps between strate- and value of their capabilities to electron-
consolidation services to increase the sup- gies used and assistance by 3PLs in those ics customers, and shippers need to be
ply chain velocity without dramatically efforts, confirmed by 3PLs themselves. more open to collaborating with 3PLs to
increasing transportation costs. “You need address their top challenges.
a very good level of integration to be adap- At the ASE workshop in Utrecht, one con-
tive and flexible to cope with these shorter tract manufacturer shed some light on Generally speaking, electronics shippers
life cycles,” says Tony Xia, Sr. Logistics one of the reasons shippers’ may not seek view 3PLs as skilled and capable at fun-
Manager with Emerson Electric. to undertake problem-solving with 3PLs. damental logistics capabilities, but don’t
“They do not bring cost reductions and necessarily turn to them for collaborative
When inventoried items become obsolete, a lean approach to the table very often,” problem-solving to address their more stra-
58% of electronics shippers in the survey he said. “They will do only what they are tegic supply chain challenges. The results
agree that online auctions are an impor- asked to do; they do not proactively offer in Figure 16 confirm that they would like
tant means for electronics companies to many value-added services.” to see more. Embedded throughout this
reclaim some value. Facilitating online chapter are suggestions for significant con-
inventory disposition is the next logical It’s clear in Figure 18 that 3PLs see oppor- tributions that 3PLs can make to address
step in a 3PL value-added service offering. tunities to support shippers in ways elec- electronics companies’ most vexing supply
A number of electronics companies use tronics shippers themselves do not. Both chain challenges.
FreeFlow, provider of online private mar-
ketplaces and auctions, to sell at-risk inven-
tory through secure channels for each
stage of the inventory aging process.
Talent Management
Overcoming the Talent Shortage
A critical shortage going on in the logis- in Figure 19, shippers and 3PLs agree that ever-more-complex supply chains. They
tics industry today has nothing to do with having the right people and leadership can get there by investing in talent man-
inventory; it’s the shortage of well-rounded in place is the number one driver of their agement, leadership skills and succession
supply chain managers prepared to step companies’ success in the next five years, planning, as well as by defining the skill
into key management positions. According slightly outranking the importance of the sets and capabilities these leaders will
to research by employment services pro- right strategy and roadmap itself. 3PLs and require and ensuring a satisfying work
vider Manpower Group, in the US, 52% shippers are aligned on all of the top driv- environment.
of employers are experiencing difficulty ers to organizational success.
filling supply chain positions within their The State of Talent
organizations, up from 14% in 2010. Fortunately, the talent gap can be reduced. Talent management is the vigorous, sys-
Shippers, 3PLs and other organizations tematic process of connecting a clear, well-
For many companies, the supply chain has active in the supply chain community defined business strategy to the recruit-
become a significant contributor to attain- have the opportunity to both develop and ment, retention and development of talent.
ing strategic business goals, making well- attract the next generation of managers At times, talent management is an over-
qualified logistics talent essential. As seen with the diverse skills required to govern used term and an underutilized discipline
61%
Having the Right People
and Leadership in Place
77%
58%
Having the Right Strategy and Roadmap
60%
41%
Having the Right Products and Services
33%
27%
Ability to Innovate
32%
14%
Having the Ability to
Drive Greater Innovation
14%
10%
Having the Right Infrastructure
12%
■ Shipper
■ 3PL
– particularly in the logistics industry. Too Logistics and the Talent Cycle plans, establishing interviewing methods
often, senior management turns to talent The Talent Cycle in Figure 20 captures the and skills and managing the talent acqui-
management in crisis mode, when a key complete lifecycle of an employee’s experi- sition investment. Often in the logistics
logistics employee has given notice and ence, not just the initial recruitment, but industry, hiring occurs through word of
they dust off that musty, dated talent man- all of the activities that occur to develop mouth or hiring from within; as seen in
agement manual sitting up high on the that person through the end of his career. Figure 21, 39% of shippers and 37% of
bookshelf. Development may consist of an The survey results suggest that many ship- 3PLs are concerned or significantly con-
annual performance review that gets filed pers and 3PLs are troubled by the current cerned that their company could do more
away in a drawer. state of talent management within their to increase diverse external perspectives,
organizations and see an opportunity to such as hiring from other industries (tal-
The experience of one manufacturer is improve it. ent recruitment).
typical of the industry: many executives on
its supply chain team boast more than 20 Identifying and Attracting skilled talent Onboarding and Integration processes
years at the company. That speaks volumes starts with creating a workforce strategy apply to the period just before and after an
about its attractiveness as a workplace. But to align with your business strategy, then employee is hired, including planning and
the company lacks a robust talent develop- devising ways to discover and communi- supporting transitions and deploying peo-
ment process; as those supply chain execu- cate what your company has to offer to ple in the right teams and leadership roles.
tives reach retirement age, the depth of attract a diverse and talented workforce.
executives on the bench may be limited. This part of the talent cycle presents tre- Continuous Learning and Development
mendous opportunity and high risk. Risk Experiences occur through formal and
Many progressive companies leading their is highest during the first 60 days of tran- informal training as well as experience-
industries focus on effective execution of sitioning a leader into a new role either and relationship-based learning and coach-
total management principles. Talent man- from inside or outside. ing, follow-through, and support. Shippers
agement becomes a strategic tool integrat- and 3PLs report similar experiences within
ed into a company’s business practices and Recruiting and Hiring entails devising their organizations; 36% of shippers and
a part of every business manager’s respon- strategies for understanding talent needs 37% of 3PLs say that their companies’ lack
sibilities. Talent is tied to business strategy, and sources, executing business/talent of a meaningful and objective process of
so that if, for example, the company was
moving into an emerging market, or enter-
ing new trade lanes, the need for talent Figure 20: The Talent Cycle
would be a part of that strategic discussion.
measuring performance and issuing con- shippers and 3PLs regarding talent man- what is necessary to address future strate-
sequent actions, such as coaching, is a con- agement is the lack of a robust system of gic challenges (skills and experience).
cern or a significant concern (talent review preparing rising leaders for the future,
process). In addition, 41% of shippers and such as through job rotations, training and Succession Planning requires defining
36% of 3PLs are concerned or significantly mentoring. (53% of shippers and 54% of roles and needs, creating evaluation crite-
concerned that their organization has a 3PLs are concerned or significantly con- ria and then developing, supporting and
number of stars, but their culture/history cerned about talent development) coaching successors. Another top-three
has not encouraged them to work collabor- concern for both shippers and 3PLs (48%
atively as a team (team effectiveness). When one telecom company outsourced of shippers and 47% of 3PLs) is that their
logistics ten years ago, it lost a lot of expe- leadership does not take an active inter-
Engaging and Retaining employees’ inter- rienced supply chain talent. So when the est in understanding the pipeline of good
est in a shipper or 3PL as an employer company later began to insource some people in the organization and ensuring
requires active communication and perfor- logistics functions, it instituted a system there is a robust succession planning pro-
mance and career management exercises. to identify and map potential logistics cess in place.
Companies need to encourage and enable leaders, ensuring a balance of gender and
a work/life balance and ensure recogni- ages, and established training programs to Transitioning means enabling smooth
tion and rewards along the way. A substan- develop their expertise. career transitions and staying connected
tial 43% of shippers and 40% of 3PLs say with alumni and retired employees.
the struggle with keeping their strongest Alignment of Leadership is all about iden-
talent in the organization is a concern or tifying and developing candidates with Organizations that embrace the activities
a significant concern (retention). high potential, including leadership devel- of the talent cycle have the opportunity to
opment and coaching. This is the third-big- ensure a continuous supply of experienced,
Promotion and Rotation means creating gest talent management concern for ship- well-rounded logistics talent.
a talent development process with clearly pers (47%), and second-biggest for 3PLs
defined promotion and rotation criteria (48%). These respondents are concerned
and a system for assessment, feedback, or significantly concerned that the capabil-
and coaching. The top concern of both ities of current leaders are not aligned with
Figure 21: 3PLs and Shippers are Concerned About Their Talent Management and Development Practices
Shippers 3PLs
3% 44% 53%
Talent 54% 43% 3%
Development
4% 48% 48%
Succession 47% 50% 3%
Planning
3% 50% 47%
Skills and 48% 51% 1%
Experience
4% 55% 41%
Team 36% 61% 3%
Effectiveness
6% 55% 39%
Talent 37% 59% 4%
Recruitment
4% 58% 36%
Talent 37% 60% 3%
Review Process
Grooming Leaders Organizations differ in the skills and attri- underestimated. But given respondents’
As supply chains grow more complex and butes they see as essential in supply chain assessment in Figure 21 of the current state
intrinsic to a company’s ability to attain its leadership. As seen in Figure 22, both ship- of talent management in their firms, it’s
business goals, they require leaders who pers and 3PLs place the highest value on clear many executives are not backing up
are more diverse and multi-faceted. operational execution in their functional this belief in people management with real
or business leaders – not surprising since structure and resources.
Unfortunately, as seen previously in many supply chain executives have come
Figure 21, a significant number of ship- up through the operations ranks. While shippers and 3PLs agree on these
pers and 3PLs feel their current leaders top two capabilities they value in a leader,
don’t have what it takes to address future Surprisingly, for both shippers and 3PLs after that the difference between a busi-
business challenges. Developing leaders this is followed by leaders’ people manage- ness where logistics is the core competency
requires devoting considerable effort and ment and development skills. People are and one where logistics supports the core
resources into defining and delivering indeed essential to logistics; the impor- competency becomes evident: 3PLs rank a
training in a broad range of competencies. tance of the daily decisions people make, leader’s ability to drive growth as a strong
as well as relationships among the people third, while shippers feel it is about equal
at both the 3PL and the shipper, cannot be to strategic planning.
Figure 22: Operational Execution the Top Skill Shippers and 3PLs Value for Leaders
51%
Operational Execution
60%
43%
People Management and Development
54%
40%
Driving Growth
47%
39%
Strategic Planning
34%
27%
Relationship Building and Networking
39%
26%
Technical Competence
18%
23%
Change Management
15%
17%
International Business Exposure
14% ■ Shippers
■ 3PL
Opportunities for Tomorrow the skills of the available workforce will be percentage of companies developing expe-
Today’s supply chain leaders have been even larger. rienced technical leaders, but struggling
required to grow well beyond their opera- with leader competencies.
tions backgrounds, developing a broad “Often we adopt a strategy that if it’s not
range of competencies including manag- broken don’t touch it,” admits the VP “At Emerson Electric, highly valued logis-
ing sophisticated technology, undertak- Operations at a large software and periph- tics leader qualities include rich experi-
ing competitive and financial analysis and erals developer. “This sometimes leads to ence in supply chain functions, willingness
managing people in multiple locations, as a scenario where investment in recruiting to drive change, and a long tenure of ser-
well as dealing with flat growth, emerging new supply chain talent is overlooked.” vice at Emerson, so that the leader is famil-
market expansion and merger and acqui- iar with people throughout the company’s
sition activity. In many organizations, top In addition, many logistics companies complex corporate and divisional orga-
logistics officers acquired these additional ceased their involvement in supply chain nization,” says Tony Xia, Senior Logistics
skills on the job and are clearly skilled at graduate and apprentice programs in the Manager at Emerson Electric. The compa-
acquiring new competencies. Despite this, mid-1990s. Today they are experiencing ny rotates its candidates through different
Figure 23 confirms that shippers and 3PLs the effects of turning off the pipeline more areas of responsibility to season them and
are concerned about the learning agility than a decade ago. give breadth of experience.
of their leaders.
Of course, depth of expertise remains One telecom company defies the trend
Tomorrow’s leaders will need to come into important to fulfill mid-level positions. toward overlooking leadership develop-
the job with an even broader set of capa- “There is a strong need for specialists as ment; the company maintains three sepa-
bilities. Figure 23 also reveals that while well because there are so many best prac- rate leadership training programs, each
the largest percentage of shippers and tices/changes happening in the industry, emphasizing the following capabilities over
3PLs feel their leaders possess solid skills which one can turn into opportunities for five different aspects of leadership:
today, and feel their current leaders pos- the company,” says Arun Salvi, Logistics
sess the required skills in relatively equal Manager Asia Pacific for Shell Lubricants. –– Customer understanding
measure, they are concerned about those –– Execution
abilities long term. While current leaders Close behind learning agility as a solid –– Strategic thinking
were learning on the job, few organizations competency in today’s supply chain lead- –– Innovation
were indoctrinating these new competen- ers are their ability to execute, deduce and –– Bringing the best out of everyone
cies into mid-management training and lead visionary change and organization –– Breaking down complexity
development. When the time comes for buy-in, although shippers and 3PLs differ –– Mobilizing teams
this cohort of managers to move up, the somewhat in their rankings of the impor- –– Adaptability
gap between the demands of the job and tance of these abilities. Also notable is the
Figure 23: Logistics Leaders: Solid Today, But Concerns for Tomorrow
Outstanding
Somehow Solid Today;
Immediate Leadership
Leadership Capability Managing Long-Term I Don’t Know
Concern for Today
Today Concern
and Future
In Search of… Figure 24: Companies Look Inside Industry First for Logistics Talent
The scarcity of supply chain talent pres-
ents a real challenge for many shippers
and 3PLs. To date, the majority of both 64%
shippers and 3PLs recruit from inside From Companies
their own industries – 64% of shippers, Inside the Industry 71%
and 71% of 3PLs, as seen in Figure 24. But
3PLs are more likely than shippers (41%
versus 37%) to look outside their own 51%
Recommendations by
industries. Companies with private equity Colleagues/Word of Mouth
63%
investment tend to be more likely to take
this tack than others. Both shippers and
3PLs may be forced to begin searching in 46%
adjacent industries as the talent pipeline Headhunters
continues to dry up. 47%
People want to work at one large com- –– Most shippers and 3PLs recruit from inside their own industries, but 3PLs are slightly
puter manufacturer, for example, because more likely than shippers to look outside their own industries, a growing need as the
it’s “constantly changing,” says its Supply talent pipeline dries up. Company success and performance, attractive salary and
Chain Director. “It’s a fast-moving compa- benefits and personal development opportunities within the company are top-three
ny and there is always a challenge. We are factors for attracting logistics talent.
constantly reinventing and reassessing how
we do supply chain and systems.”
Talent Management 39
Figure 25: Company Success and Personal Opportunity Make For Attractive Employers
57%
Company Success and Performance
57%
57%
Personal Development Opportunities
within the Company
55%
54%
Attractive Salary/Benefits Conditions
53%
41%
Attractive Working Environment
with Engaged and Good People
48%
20%
Entrepreneurial Spirit/
Culture of Individual Ownership
30%
18%
Reputation for Innovation
18%
12%
Flexibility
10%
9%
Location ■ Shippers
7%
■ 3PLs
Strategic Assessment
In Supply Chain, the One Constant is Change
Static: It’s one word you don’t hear in sup- trend confirmed by 37% of 3PLs. Both are
ply chain circles very often, and for good consistent with past Annual 3PL Studies. So
reason: Logistics is synonymous with move- overall, there is a greater momentum for
ment, both in goods and information, and shippers to outsource logistics activities
in the design and evolution of the supply and processes than to insource them. Is
chains that make that movement pos- there a tipping point? The point at which
sible. Constantly changing economic and outsourcing reaches saturation? Possibly
political dynamics necessitate continual there is, but it is our belief that this has not
re-evaluation of supply chain decisions. yet occurred.
The job is never dull, challenging supply
chain professionals to think creatively and Shippers in Asia-Pacific (76%) and Latin
strategically. America (73%) are leading the way, with
shippers in these regions much more likely
Inspired by the findings of this year’s study, to increase their use of outsourcing than
this strategic assessment examines several those in North America (58%) and Europe
trends spurring yet more change and inno- (57%). This suggests that shippers in devel-
vation in the supply chain world. First is oping regions of the world have a greater
the overall rise in outsourcing of logis- inclination to increase their use of out-
tics, followed by the growing use of supply sourcing than those in the more developed
chain control towers – both indicators of economies in North America and Europe.
the increasingly complexity of managing
today’s supply chains. One possible reason is that 3PLs’ func-
tionality has developed to the point that
Emerging markets are a key factor in that the 3PL sector is considered a useful
complexity, and a trend to nearshoring is alternative for companies in regions that
another sign of constantly changing glob- are trying to build out logistics capabili-
al dynamics. Companies have moved pro- ties and infrastructure to support supply
duction to emerging markets in pursuit chain activities. Or, it may be that shipper
of lower costs, but that decision changed decision-makers in more mature markets
conditions in those very markets, chal- have become more defensive when making
lenging companies to reconsider the eco- outsourcing-insourcing decisions, opting
nomics and in some cases turn to near- at times for an insourcing strategy they
shoring. Finally, a change impacting every consider to be less risky. This rationale may
industry is the emergence of social media, also help to explain why many shippers
and like others, the supply chain industry appear to be risk-averse, and generally not
is in the early stages of working out how to very adventuresome, when making deci-
best leverage its power to enhance day-to- sions as to what activities and processes
day business functions while minimizing they are willing to entrust to 3PLs.
the risks.
Given all that, it might be surprising to
Global Trends in Outsourcing- hear that shippers in Asia-Pacific and Latin
Insourcing of Logistics Services America also report they are returning to
Outsourcing of logistics activities is on the insourcing some of their logistics activities
rise, according to survey findings reported to a greater extent than their counterparts
in the Current State of the Market Chapter. in North America and Europe. While this
Nearly two-thirds (64%) of shippers report could be viewed as contradictory to the
an increase in their use of outsourced findings above, it also could suggest that
logistics services, and 76% of 3PL respon- shippers in these regions are more likely
dents agree this is what they are seeing to make changes to their outsourcing-
from their customers. At the same time, insourcing strategies (one way or the other,
24% of shippers are returning to insourc- or more often) than shippers in the gener-
ing some of their logistics activities, a ally more developed regions.
42 2012 16th annual THIRD-PARTY LOGISTICS study
Overall, these results support the assertion and analysis, faster transactions, in-transit supply chain control towers. Some 4PLs
that the markets for outsourced logistics visibility and compressed cash-to-cash cycle are already offering such services, as noted
services in Asia-Pacific and Latin America times. A pharmaceutical manufacturer in the Electronics chapter. Although this
can be very attractive, and are clearly tar- used its supply chain control tower to real- concept may seem to be more applicable
gets for globally focused 3PL operations. ize increases in transit time consistency, to shippers having complex global supply
Considering the increasing complexity of efficiency in handling of insurance claims, chains, steps in this direction can help to
supply chains and the growing challenges customer service levels and increased focus enhance the efficiency, effectiveness, and
of managing global business activity, there on critical service issues while reducing professionalism of the supply chains of
is a strong argument that shippers should safety stock. firms of all types.
be looking carefully at bolstering logistics
capabilities with services and processes Such results don’t come without chal- Reconsidering Emerging
available from 3PLs and 4PLs. lenges, of course. One common mistake Near-Shore Markets
in implementing is underestimating the The term emerging markets often brings
Creating Supply Chain amount of IT collaboration needed with a list of countries to mind: Russia, India,
Control Towers trading partners to obtain the messaging China, and so on. But what if those emerg-
As addressed throughout this report, sup- and data. Companies also tend to want to ing countries are not in proximity to the
ply chain management is becoming ever track movement of goods at a level that markets where a company intends to sell
more complex. Globalization trends such is challenging in terms of granularity, its goods? As companies begin to recon-
as offshoring, nearshoring and outsourc- sider the long, thin supply chains that
ing of manufacturing and logistics, togeth- have chased the lowest prices for key input
er with increasing customer demands and factors, many are taking a second look at
42%
competitive pressures, have made visibility emerging or somewhat-more-developed
even more critical for effective decision countries near their target markets whose
making within and across organizations. proximity makes up for somewhat higher
factor costs. A case in point: The Boston
A growing number of companies are Consulting Group forecasts net labor costs
addressing this need via supply chain con- for manufacturing in the US and China to
trol towers. A supply chain control tower of shippers are already near- converge by about 2015, and total landed
is a central hub with the required technol- shoring or will within three years cost differentials to be in the single digits
ogy, organization and processes to cap- to zero.
ture and use supply chain data to provide
enhanced visibility for short- and long-term In the 2009 14th Annual Third-Party
decision making that is well-aligned with Logistics Study, a chapter on Supply Chain
strategic objectives. Once this is in place, resulting in excess cost and over-satura- Optimization noted the trend to recon-
every product ordered; every shipment tion of information. Inadequate transpor- sider sourcing strategies, fueled by several
shipped; every document created; every tation management, such as mismanaged factors. For one, after an extended period
cost accrued; and every event generated spend and use of non-integrated carri- of decline, inventory and transportation as
in the flow of product from order to final ers, means those shipments will not be a percent of the US gross domestic product
delivery is captured, organized and stored tracked effectively. has been growing. Other factors include a
in the tower. rise in labor rates in emerging markets as
Aside from the need for careful and capa- growth fuels the formation of middle class,
A well-designed supply chain control tower ble planning and implementation of the rising fuel prices, the impact of govern-
enables a company to measure and con- control tower concept, this trend should ment intervention and emerging transport
trol the effectiveness of the supply chain be viewed as a giant step forward in terms alternatives such as the Panama Canal and
in terms of agility, resilience, reliability of better understanding and managing intermodal options. Quality and security
and responsiveness. This delivers benefits overall supply chain activities and pro- concerns are also driving the trend.
across inbound and outbound logistics pro- cesses. Correspondingly, it is natural that
cesses as well as operational benefits. development of these capabilities will be The chapter reported that a critical con-
accompanied by the further emergence sideration in choosing offshoring versus
One Capgemini electronics customer, for of logistics providers who establish a core near-shoring is the role 3PLs can play in
example, leveraged a supply chain control competency in assisting shipper-customers restructuring the supply chain to better
tower to attain quick information retrieval with refining and implementing capable meet current and emerging conditions, as
strategic assessment 43
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For more information go to
www.3plstudy.com
well as serving in a more strategic capac- scalability and ease of use combined with a Those aren’t the only possibilities. Other
ity in the new infrastructure that results. low level of investment. It allows more self- potential uses of social media include:
Nearly 60% of shippers said this was the reliance while providing greater visibility
time in which to re-evaluate their relation- and more real-time information. –– Collaboration to solve problems, inno-
ships with their 3PLs and possibly drive vate solutions and set benchmarks
these relationships deeper. Social media has already found an –– Industry focus groups
important role in many businesses. A –– Procurement and sourcing
Lower freight costs, improved speed to survey by Econsultancy and Adobe found –– Personalized product offers from social
market and lower in-transit inventory costs 31% of European businesses believe social media sites linked to an order entry page
are the most attractive advantages shippers media marketing is a highly significant –– Background checks
expect when they choose near-sourcing, trend for them; 53% rated it as quite –– On-demand training
according to Alix Partners’ Low Cost Country significant. According to Gartner, by 2012,
(LCC) Analysis, 2010, a survey of compa- spending on social software to support Of course, logistics will be heading up
nies selling into the US market. That study sales, marketing and customer service a steep learning curve alongside other
found 42% of shippers are already near- processes will exceed $1 billion world- industries, working out the best ways to
shoring or will be within three years. In wide.¹ Popular business functions include leverage social media’s power. Companies
comparison, 37% are taking an offshor- marketing and advertising (i.e., crowd- will need to develop rules, formats, poli-
ing approach in that time period. Despite sourcing), speed to customer feedback cies, training programs, case studies and
concerns about security and safety, 63% of (real-time insight) and recruiting. proof of concept cases, and must learn
those moving to near-shoring and 42% of to manage user experimentation and
those moving to offshoring favor Mexico as expectations. Issues of concern likely to
their number one outsourced production emerge include liability, inter-generational
31%
location, driven largely by favorable total conflict, pockets of non-users, emerging
landed cost calculations. hacker risks and a tendency to overweight
the value of chatter compared with other
What is clear is that when it comes to pro- sources of information.
duction outsourcing, the right decisions
are growing less and less clear. As the cost “Rate negotiations and contracts are cur-
differential for factors such as component of European businesses believe rently being freely discussed on blogs,”
price and transportation costs narrows social media marketing is a highly noted eyefortransport participant Peter
among production locations, metrics such significant trend for them Starvaski, Director Product Management,
as total landed cost become critical infor- Kewill, calling attention to one of the
mation necessary to fuel decision making, trends occurring in social media. Such
alongside factors such as market pressures struggles are inevitable with any new para-
for agility, speed and increased capabil- digm. In fact, the Annual 3PL Study team is
ity. Another key decision point is the value These concepts can easily be adopted undergoing similar challenges in discern-
3PLs can offer in enabling production in by supply chain managers. For example, ing the best ways to leverage social media
near or offshore markets. crowdsourcing (leveraging the mass col- to enhance data gathering and analysis
laboration enabled by Web 2.0 technolo- as well as create a richer user experience
Leveraging Social Media gies) can drive forecasting by amassing of the study results. Ideas include use of
in the Supply Chain insights into purchase intent or price LinkedIn, Twitter and Facebook as well as
Social media are weaving themselves elasticity. Transportation carriers could location-based services, use of QR codes,
into our personal and professional lives. tap social media for real-time insight into and formats including ePubs and Kindle
As the day progressed at the ASE work- traffic issues. Social media is already serv- that enable readers to share and bookmark
shop in Chicago, social media repeatedly ing as a rich venue to locate new talent content and engage in real-time, interac-
emerged as a potentially useful compo- with the right skills for a particular posi- tive feedback. The study team welcomes
nent of logistics, so much so that by day’s tion, or generate interest in supply chain your feedback on social media venues
end, it became the focus of a special internship programs. you would find valuable, as well as on any
breakout session. aspects of this report on which you would
like to comment.
1 Gartner, Inc.: “Predicts 2011: CRM Enters a
Among the benefits of social media such Three-Year Shake-Up”, Ed Thompson, et al 22
as LinkedIn and Facebook are a high November 2010
44 2012 16th annual THIRD-PARTY LOGISTICS study
Four streams of research make up the 2012 3PL Study methodology: –– Quantify the benefits reported by shippers
that are attributed to the use of 3PLs.
a web-based survey, desk research, focus interviews with industry
experts and facilitated shipper workshops, two of which were held at –– Document what types of information tech-
nologies and systems are needed for 3PLs
Capgemini Accelerated Solutions Environment® (ASE) locations. Study
to successfully serve customers.
respondents and participants represent a broad range of industries and
–– Comment on the importance of fuel effi-
are predominantly from North America, Europe, Asia-Pacific and Latin
ciency and carbon emissions information
America, in addition to other locations throughout the world such as in the 3PL selection process.
Australia, South Africa and the Middle East.
–– Examine why customers outsource or elect
not to outsource to 3PL providers.
Multiple research streams and a broad array of perspectives result in a
rich and heterogeneous collection of the attitudes, trends and results
experienced by 3PL users, non-users and 3PL providers. Special Topics:
–– Emerging Markets: Examine the role of
3PLs in emerging markets, the challenges
Observant readers will note that last year’s study was the 2010 15th faced by both shippers and 3PLs, and fac-
Annual Third-Party Logistics Study. The study team chose to call this tors that impact the success of conducting
year’s report the 2012 Study to better reflect the time frame in which logistics and supply chain activities in
these evolving business environments.
the results enjoy the most active and lively discussion.
–– Electronics: Conduct an in-depth analysis
of the electronics industry. To identify key
2012 Study Objective issues relating to shippers and their 3PLs
and how they work together to achieve
The overall objective of the 2012 Third-Party Logistics Study is to discov- individual and mutual objectives.
er and explore 3PL industry trends, issues, and opportunities.
–– Talent Management: Understand the stra-
tegic importance of talent management as
Each year, the study results together with developments in the global a key set of processes and activities that
economy and the logistics industry suggest trends that warrant clos- can greatly influence the success of a ship-
er examination. Included in the 2012 Study are special topic reports on per or 3PL operation. This is the first Annual
3PL Study to consider Talent Management,
emerging markets, electronics and talent management.
and the findings and recommendations
should be instructive for shipper and 3PL
The 2012 3PL Study also provides perspectives on what shippers and 3PLs organizations that place a high priority on
are doing to enhance their businesses and their business relationships. succession and sustainability of the talent
needed to manage their organizations.
about the study 45
Strategic Assessment into these changes, the study team uses four consumer products, food and beverage,
–– To provide a view of the future of the 3PL complementary streams of research. healthcare, electronics, manufacturing,
industry and shipper-3PL relationships. retail, and 3PL/4PL.
Other (73) 4%
Latin America (188) 12%
web-based survey. Many of the shipper sur- Desk Research Follow-Up Activities
vey respondents held corporate positions The research team, with the support of Cap- In addition to this publication, the results of
including Manager/Director, VP/SVP, and gemini’s Strategic Research Group, assayed the 2012 16th Annual Third-Party Logistics
Corporate Officer/President/CEO. Figure 27 a variety of published research related to the Study will be presented in a variety of venues.
and 28 provide information on the industry special topics to create survey questions and These include:
classification and anticipated total sales analyze the responses.
for 2011 as reported by respondents who –– Presentations at influential industry confer-
identified themselves as users of 3PL/4PL ences such as the Council of Supply Chain
services. A comparison of the sales break- Focus Interviews Management Professionals (CSCMP), eye-
downs in Figure 28 with those from last year’s Industry observers and experts lent their
fortransport 3PL Summit and Chief Supply
study reveals that this year there were more expertise to the study team through a signifi-
Chain Officer Summit.
respondents (37%) in the lowest sales cat- cant number of “focus interviews” primarily
egory than in the previous year’s study (29%). relating to the special topics addressed in –– Analyst briefings that are typically con-
this year’s report. These focus interviews ducted in the weeks following release of the
provided exceptionally valuable opportu- annual study results in the fall of each year.
3PL Non-Users: Included in the totals shown
nities to gather pertinent information and
in Figure 26 are non-users of 3PL services –– Magazine and journal articles in publica-
perspectives from a wide range of profes-
who provided their perspectives on why they tions such as Supply Chain Management
sionals who have knowledge about the 3PL
do not currently use 3PLs, and on a number Review, Logistics Management, Inbound
sector and these special topics.
of other topics relevant to their classification
Logistics, Logistics Quarterly, and Supply
as non-users.
Chain Quarterly.
Figure 27: Eight Industries Represent Just Over 70% of Shipper Respondents
12% 16%
■ Manufacturing
■ Automotive/Transport Equipment
■ Electronics
9%
18% ■ Consumer Products
■ Healthcare
■ Food and Beverage
9% ■ Chemical
5% ■ Retail
■ Additional
6% 10% ■ Other
8% 7%
Figure 28: Nearly 50% of Shipper Respondents Anticipated 2011 Sales in Excess of US $1 Billion
(€750 Million)
Credits The 16th Annual 3PL Study team would also like to thank all of the
companies and individuals who shared their experiences and insights
with us through focus interviews, ASE workshops and the workshop
at eyefortransport. Your contributions are invaluable to the analysis
of the survey results and the ideas expressed in this report.
Frank Arendt Procter & Gamble Theo Leuthardt Panalpina Management Ltd.
The authors of the study would like to thank eyefortransport; the The study team also thanks the north America Strategic Research
Shanghai Logistician Club (ShLC); the hungarian Association of Group (nA SRG) for their work in support of the study. The north
Logistics; the Latin America Logistics Center (LALC); EVO, the Dutch America SRG performs strategic research and analysis to support
Shippers’ Council; The Logistics Institute-Asia Pacific (TLI-AP); Supply Capgemini’s sales and delivery teams, business development and
Chain Digest; the Supply Chain Council and the national Shippers thought leadership.
Strategic Transportation Council (nASSTRAC) for serving as sup-
porting organizations for this 16th Annual Third-Party Logistics Study.
under the guidance of Executive Director Maria F. Rey, the LALC
provided contact information for Latin American executives, and
also translated the entire survey into Spanish and Portuguese.
Disclaimer:
The information contained herein is general in nature and is not intended as, and should not be construed as, professional advice or opinion
provided by the sponsors (Capgemini, Penn State, Panalpina, heidrick & Struggles and eyefortransport) to the reader. While every effort has
been made to offer current and accurate information, errors can occur. This information is provided as is, with no guaranty of completeness,
accuracy, or timeliness, and without warranty of any kind, expressed or implied, including any warranty of performance, merchantability, or
fitness for a particular purpose. In addition, changes may be made in this information from time to time without notice to the user. The reader
also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require
consideration of additional factors if any action is to be contemplated. The reader should contact a professional prior to taking any action
based upon this information. The sponsors assume no obligation to inform the reader of any changes in law, business environment, or other
factors that could affect the information contained herein.
For additional copies of this publication or for more information about the study, please contact any of the following:
Patrick Gueth
Dan Albright Senior Vice President, Global head of Industry Vertical hi-Tech
Vice President, Capgemini Consulting uS Supply Chain Leader Panalpina Welttransport Gmbh
Capgemini Consulting Frankfurt, Germany
Atlanta, GA, uSA T: +49 6105 937 0
T: +1 404 806 2169 patrick.gueth@panalpina.com
dan.albright@capgemini.com
Lucas Kuehner
Brett Fletcher Managing Director, uSA
Capgemini Consulting Panalpina Inc.
Atlanta, GA, uSA T: +1 973 254 5723
T: +1 404 277 8332 lucas.kuehner@panalpina.com
brett.fletcher@capgemini.com
Neil Collins
Dennis Wereldsma Managing Partner, Transportation & Logistics - Americas
Global Distribution and Transportation Sector Leader heidrick & Struggles
Capgemini nederland B.V. Atlanta, GA, uSA
utrecht, the netherlands T: +1 404 783 8811
T: +31 30 689 6076 ncollins@heidrick.com
dennis.wereldsma@capgemini.com
Zack Deming
Michael Alf heidrick & Struggles
Vice President, head of Sales Asia Pacific Atlanta, GA, uSA
Capgemini T: +1 404 682 7380
Melbourne, Australia zdeming@heidrick.com
T: +6 13 9613 3378
michael.alf@capgemini.com
Chris Saynor
CEO
Sven Hoemmken eyefortransport
Executive Vice President, Global head of Marketing and Sales T: 1800 814 3459 ext 7529 (from uSA);
Panalpina Management Ltd. T: 1866 996 1235 ext 7529 (from Canada);
Basel, Switzerland T: +44 20 7375 7529 (from Rest of the World)
T: +41 61 226 1111 csaynor@eft.com
sven.hoemmken@panalpina.com
Katharine O'Reilly
Theo Leuthardt Executive Director
Global head of Supply Chain Management eyefortransport
Panalpina Management Ltd. T: +44 (0)20 73757207
Basel, Switzerland T: 1800 814 3459 ext.7207
T: +41 61 226 1111 koreilly@eft.com
theo.leuthardt@panalpina.com