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November 8, 2018 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Highlights of the Annual 3PL Study bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Distribution Digest/Green Supply Chain
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet New Expert Columns bullet On Demand Videocasts



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October 31, 2018 Contest

See The Full Cartoon and Send in Your Entry Today!



Feature Story: Are Distribution Centers without the Need for Human Workers on the Horizon?


Weekly On-Target Newsletter:
November 7, 2018 Edition

New Cartoon, Slow RFID Growth, Planning Vision, Blockchain Wars, More

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by Richard Wilhjelm
VP, Sales & Marketing
Traverse Systems

Sustainability is (Finally) Making an Entrance

by Gary M. Barraco
Global Product Marketing
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What technology term is generally thought to have been invented in 1999 by Kevin Ashton, then of Procter & Gamble, later MIT?

Answer Found at the
Bottom of the Page

Highlights of the Annual 3PL Study

For the 23rd consecutive year, my friend Dr. John Langley of Penn State University has led the annual Third Party Logistics Study, released again this year at the CSCMP conference in Nashville about one month ago, a collaboration between Langley/Penn State and again this year Penske Logistics, recruiting firm Korn Ferry and consultancy Infosys.

Since I knew I could get a copy of the report later I didn't attend the CSCMP presentation, but I did duck my head into the large session room and it was packed as is it is every CSCMP. The interest in logistics outsourcing obviously remains high, and nothing pulls the current situation together like this study.


I also believe that many 3PLs that have deployed modern technologies often do not fully use those capabilities or present them in a way most convincing to shippers.


Send us your
Feedback here

The report is based in part on survey responses from 650 shippers and 3PLs worldwide - up 10% from last year. 38% of those were 3PLs/4PLs, 46% were shippers that use 3PLs, and 16% were shippers that do not use 3PLs - valued for their perspective on why they don't outsource any aspect of logistics.

This year 67% of respondents were from North America, with 13% from Asia and just 9% from Europe. I will say there seems to be some conscious effort this year to position the report as a more global view than has been the case in the past.

That said, in some years past there were instances that segmented responses to various survey questions by geography, so you could see the perspective of say North American versus Europe and Asia. That is no longer the case, I suspect in part because of the dominance of NA respondents and also the space needed to display the data that way. It's easier to aggregate the data across geographies than break it out.

As has been the case for many years, the report again this year focuses on a set of questions and related discussion across a set of issues that mostly stay the same every year (e.g., the famous "IT Gap" - see below), along with a new set of focus topics for this year that get some discussion and usually some survey support.

In this year's report, those focus topics include: keeping the supply chain alive and nimble; the "last yard"; omnichannel revisited; dealing with disruption; and shipper-3PL data sharing. We'll focus here today on the main general data points and insights, and visit the specialty topics next time.

The report found total logistics expenditures as a percentage of sales revenue was the same 11% in the 2018 responses as in the 2017 results, versus 10% in 2016. That seems surprising, given that most measures and anecdotal stories from many companies indicate that logistics costs were up substantially in the last year.

Over the same time frame, the percentage of shippers' transportation spend managed by 3PLs somehow decreased to 50% this year versus 55% the year before, while the percentage of shippers' warehousing spend managed by 3PLs decreased to 34% from 39%.

It is hard to know if those declines are real or just the types of statistical aberrations that can occur in survey results in any given year. Worth watching over time.

The report summarizes data from Armstrong & Associates on global 3PL revenues, which of course are driven directly by shipper spend with 3PLs. From 2010-17 - notably starting after the Great Recession - global 3PL revenues have grown a decent 3.5% annually (dragged down oddly by negative growth rates in Europe) and I will note that is very close to global GDP growth over the period, so 3PL market share would seem to be flat over the period.

But in North America, that annual 3PL growth rate has been a more robust 4.6%, well above GDP growth of around 2%, indicating 3PLs are gaining in the share of logistics spend. See the graphic from the report below:


Source: 2019 3PL Study

See Full Image

Other survey data highlights include:

• 63% of shippers indicate they are increasing their use of outsourced logistics services this year, up a bit from 61% last year. Conversely, 28% of shippers indicate again this year that they are returning to insourcing many of their logistics activities, same as in 2017.

These percentages seem to in general stay remarkably flat year after year.

• 61% of 3PL users report reducing or consolidating the number of 3PLs they use, up markedly from 53% reported last year. This trend is probably both a reflection of an interest in reducing the 3PLs a company has to manage, and the great consolidation that has occurred in the 3PL sector itself, which becomes a self-fulfilling prophecy of shipper 3PL consolidation.

• 91% of shippers report their relationships with 3PLs generally have been successful, flat with last year and obviously a very high number.

• 73% of 3PL users say that 3PLs provide new and innovative ways to improve logistics effectiveness (same as last year), versus a higher 91% of 3PL which believe they are providing that value. Draw your own conclusions.

• Here's an interesting one: 41% of shippers believe that companies like themselves are collaborating with other companies, even competitors, to achieve logistics cost and service improvements. More than double that percentage (86%) of 3PLs believe that is the case. Why the discrepancy, I wonder?

SCDigest is always interested in the dreaded "IT Gap," which the report has been following for many years. That gap refers to the percentage difference between how shippers place 3PL IT capabilities in terms importance (always very high, usually in the low 90s in terms of percentage), versus their view of actual 3PL IT capabilities, always much lower a score.

For years the IT Gap had been shrinking, but for reasons that are unclear, it spiked back up in last year's data, where it stayed again this year, as shown in the graphic below. 93% of shippers believe 3PL IT capabilities are a very important factor in success, while only 55% are satisfied with those capabilities.

The report says that "Overall, the IT gap appears to have stabilized somewhat in recent years. This observation deserves further attention, as it has been apparent for some time that 3PLs have increased their IT capabilities while shippers have become more proficient buyers of IT-related services."



Source: 2019 3PL Study

See Full Image

My view: some 3PLs still try to get by with aging, often home-grown technology that is simply far out of date. There is some complexity here, because if in the middle of a contract with a given shipper or multiple shippers, introducing new technology raises some issues. Even the shipper may not want to upset the apple cart.

But I also believe that many 3PLs that have deployed modern technologies often do not fully use those capabilities or present them in a way most convincing to shippers.

I am out of space. The full report available for free download with registration here.

A look at the focus issues next week discussed this important research report.

Any reaction to this data from the 3PL report? Let us know your thoughts at the Feedback button below.



On Demand Videocast:

Digital Transformation's Value to the Supply Chain

The Future of Order Management

This videocast breaks down what digital transformation is and how automated order management solutions equate to supply chain benefits.

Featuring Dan Gilmore, Editor along with Esker's Dan Reeve.

Now Available On Demand

On Demand Videocast:

Digitizing the Order Management Process

Orders Still come in Many Different Forms and Systems - Here's How to Get them Under Digital Control

This videocast discusses breaks down all the ways in which orders can arrive, the downstream challenges associated with each, and the benefits of digitization.

Featuring Dan Gilmore, Editor along with Esker's Sarah Joiner.

Now Available On Demand

On Demand Videocast:

Reducing Costs through Automated Inventory Replenishment & Analytics

How Motor City Industrial Taps into Data Visualization to Help Customers Identify Waste, Reduce Inventory

This videocast discusses how to connect people, processes and technology across commerce and supply chain operations to achieve unified commerce.

Featuring Dan Gilmore, Editor along with Joseph Stephens, CEO, Motor City Industrial, Jay Fielder, Supply Chain Technology Manager, Motor City Industrial and Mike Wills, Chief Revenue Officer, Apex Supply Chain Technologies.

Now Available On Demand


We received a number of emails on our various coverage of the CSCMP Edge conference. A selection is below. More next week.

Feedback on CSCMP Edge 2018:


Since the company upgraded its security, SC Digest was getting trapped in "junk" mail folder.

I recently released them from the folder. SC Digest, and your columns, are anything but junk. Indeed, SC Digest is one of the few bulk emails that I enjoy reading.

Though not able to attend the CSCMP conference, your column, as always, was informative and refreshing. You deserve much credit and courage for suggesting realistic and practical ways the conference can be improved. I have been to other conferences where it seems the vendors have hijacked the format either through monopolizing the agendas, duration of sessions or spouting product attributes as 'thought leadership.'

I understand there needs to be balance in these conferences and recognizing the companies willing to share their stories is the a good message to the conference organizers.

Thank you.

Jerry Saltzman
Director, Global Supply Chain Processes




On Monday's Panel with Amazon, IBM, and Nike, I had a few more observations to add to yours.

First, in your video you pointed out that Amazon (Bozeman) had a great saying that you should "strive for a boring factory." And, at the end of session, his first take-away for the audience was to study "lean manufacturing" techniques. Even with advances in technology, the "lean" movement teaches us a lot of about operations. It is interesting that GE announced its first outside CEO and he comes with a very strong lean manufacturing background.

Second, Nike (Brewer) had a quote that supply chain and operations folks should treasure: "It is just an art project until you get it onto someone's feet." Just a great quote to stress the importance of the supply chain. But, I think the quote is deeper. It reminds us that the whole business is connected. The "art project" has to be good for the operations to even exist.

Third, both Nike (Brewer) and IBM (Wright) pointed out that with the pace of change, if you aren't leading it is easier to fall further behind.

Michael Watson
Opex Analytics






First, thank you for you coverage of CSCMP. It was outstanding as usual.


I was unable to make this years' event. Your videos and trip reports made me almost feel like I was there.


I completely agree with you that the conference format is stale and needs a refresh. Your suggestions are good ones. Maybe there are other suggestions out there.


But events like species must evolve and react to the environment, and that is not happening.


Still a good conference, but needs "new blood," for lack of a better word.


Name withheld by request

Consumer package goods industry



Q: What technology term is generally thought to have been invented in 1999 by Kevin Ashton, then of Procter & Gamble, later MIT?

A: Internet of Things.

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