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Supply Chain News: Highlights from the 21st Annual Third-Party Logistics Study Part 2


What Should be 3PL Role in Supply Chain Transformation and Other Focus Topics

Oct. 19, 2016
SCDigest Editorial Staff

A few weeks ago at the 2016 CSCMP conference in Orlando, the 21st edition of the annual 3PL Study was unveiled as usual, an effort led as it has been for every year in its history by Dr. John Langley of Penn State University.

Supply Chain Digest Says...

Do shippers really want 3PLs to be providers of Big Data analysis and other supply chain analytics, or do they just want 3PLs to be better sources of supply chain data in terms of integration and data quality for their own Big Data/analytics applications?

What do you say?

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Last week, we summarized highlights of the main bulk of the data, including results that showed the dreaded 3PL "IT Gap" may at long last be dissipating. (See Highlights from the 21st Annual Third-Party Logistics Study.)

This week, we look at several of the special focus topic sections included in some detail in this year's report.

First up was a discussion in the report on supply chain innovation and 3PLs. As the report notes, a logical question is "to what extent should shippers consider their 3PLs and 4PLs as potentially valuable resources to include in these initiatives?"

As shown in the chart below, 37% of shippers say that their 3PLs have significant or very significant involvement in supply chain transformation initiatives. Contrast that to just 5% of shippers who say 3PLs have minimal involvement in their supply chain transformations. Another 36% say that 3PLs play an "advisory" role in transformation initiatives.

Conversely, responses from 3PLs show they see themselves having a slightly more involved role, with 16% reporting very significant involvement, 30% significant and 38% advisory.

Shippers and 3PL were also asked to indicate ways in which 3PLs may add value by assisting with the planning of shipper supply chain transformation efforts, as shown in another graphic below. One initial observation is that larger percentages of 3PL respondents indicated value is added by each of the capabilitites that were included in the example. For example, while 65% of shipper respondents felt that 3PL industry knowledge helped to add value, a much higher number - 82% - of 3PL respondents felt similarly.


How Shippers View 3PL Role in Supply Chain Transformation



Source: 2017 Third-Party Logistics Study


Most Valuable Contributions from 3PLs in Supply Chain Transformation Programs



Source: 2017 Third-Party Logistics Study


While the data is mostly positive in terms of 3PLs having an important role in supply chain transformation, there are also some negative indicators, the report says. Those include:

• Although research indicates significant involvement of 3PLs in shippers' supply chain transformation initiatives, most of this is "advisory" in nature. A next logical question is what will it take to see more significant, meaningful involvement of 3PLs in these efforts, the report asks.

• Further improvement is needed in the extent to which 3PL involvement in transformation efforts recognizes the strategic, as well as operational, expertise and experience that 3PLs may contribute to the overall improvement process.

• While there are some notable success stories of shipper-3PL collaborations to address key issues relating to supply chain transformation, there are still many shippers which seem to prefer a more inwardly focused project scope and plan. Although there are many benefits to the utilization of internal resources, the ultimate success of any supply chain transformation will depend on the ability of the shipper organization to meaningfully involve other participants in the overall process. The earlier that these other participants may become involved, the better, the report says.

(See More Below)



The Rise of Big Data and Analytics

The second focus topic in this year's report was on "Big Data" and analytics, areas SCDigest might argue are overhyped and not well understood, yet really are starting to have important impacts on the supply chain.

The report defines Big Data as "large data sets that are analyzed to reveal patterns, trends and insights" - and adds that the ability of 3PLs to leveraging Big Data is likely to be an important element of their future success.

In this area, however, the report seems to discuss Big Data and supply chain analytics as if they are the same things, when they are not. Often if not most often, advanced analytics right now are utilized with traditional supply chain data. And when it comes to data, what shippers are most interested in from 3PLs are still just the basics, it seems.

For example, when asked what they find the most important regarding Big Data and 3PLs, 60% of shippers said improving integration across the supply chain was the most important thing, followed by 55% who said improving data quality, and in third place the 52% which said improving process quality and performance was one of the top concerns.

Of course, these are all traditional issues around data management, nothing specific to Big Data.

That said, 35% of shippers said 3PLs can help support their company's Big Data initiatives. Another 30% said 3PLs do not currently have big data capabilities, but are likely develop them in the future. Just 16% said 3PLs cannot manage the complexity of the data elements needed to effectively use Big Data.

The question not specifically asked and which seems to be the key one to SCDigest is this: Do shippers really want 3PLs to be providers of Big Data analysis and other supply chain analytics, or do they just want 3PLs to be better sources of supply chain data in terms of integration and data quality for their own Big Data/analytics applications?

Role of 3PLs in the End of Life Supply Chain

The third focus topic was on the "end-of-life supply chain," specifically in his case referring to what happens to products when they reach the end of their useful lives at business customers or regular consumers. This of course is a huge issue for makers of electronic products, but increasingly for other types of manufacturers and distributors as well, especially as electronics are being embedded in more and more types of goods.

Growing regulation across the globe on how products need to be handled at end-of-life is also a rapidly growing dimension to the challenge.

The report states that "For manufacturers, the magnitude of returns and growing environmental, economic and social pressures to recycle or properly dispose of goods represents an opportunity for significant cost reductions through proper reverse logistics management."

The trend in end-of-life product management seems to be to use third parties for the process, but not all companies are taking this approach.

The survey found 41% of shippers said they would prefer a third party to handle all aspects of end-of-lifecycle collection and processing. However, nearly one-third - 29% - would like to improve the efficiency of their internal capabilities; 20% would like to work with a third party to support product disposal; and 19% would like to work with a partner to support physical logistics/movement of end-of-lifecycle products, as shown in the graphic below from the report.


Who Should Do What for End-of-Life Product Handling?



Source: 2017 Third-Party Logistics Study


But SCDigest notes this is a complicated question, because some companies only are looking for safe/environmentally friendly disposal of end-of-life products, others want to encourage recycling, while still other are taking that recycling notion even further with "circular economy" thinking in which the manufacturers themselves might do more re-use/recycling of components and materials.

The report notes that "Ensuring a closed loop along the product lifecycle allows for greater efficiency, reduced environmental impact and lower total costs at all touch points, and there are significant savings opportunities through well-managed and optimized reverse logistics for manufacturers."

Again , full copy of this year's 3PLStudy can b found here: 2017 Annual 3PL Study

Any reaction to the data summary of this year's 3PL study? What do you think should be the 3Pl role in supply chain transformation? Let us know your thoughts at the Feedback section below.


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