sc digest
Nov. 3, 2023
Supply Chain Digest Flagship Newsletter


Featured Sponsor




This Week in SCDigest

bullet State of the 3PL Union 2023 bullet SCDigest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet New Stock Index

New Chain Cartoon Caption Contest!

bullet Trivia      bullet Feedback
bullet New Expert Column bullet On Demand Videocasts
first thought


Supply Chain Graphic
of the Week


Lots of Action in the Returns Market


Supply Chain by the Numbers


Panama Canel Running Dry
US Manufacturing Down Yet again
Litttle Known Carrier Makes Offer to Buy Yellow Freight Assets
Amazon more Services than Product


Show Us Your Supply Chain Wit!

Expert Insight

Supply Chain Technology Is Changing The Way SMBs Compete

Real-Time Visibility Into Inventory Levels, Order Status, and Shipment Tracking Enables SMBs to Monitor and Manage Their Supply Chains More Effectively


Sam Polakoff
Founder and CEO


Read Now

Cloudy Outlook but With a Glimmer of Optimism

Expectations of Lower Import Demand for the Rest of the Year and Retailer Cautiousness Will not Bode Well for the Last Mile


Jay Kent
Managing Director
SLB Performance


Read Now

 This Week's SCDigest OnTarget Newsletter

Cartoon, Top SCDigest Stories of the Week


JDA (now Blue Yonder) acquired what groundbreaking sofware firm in early 2010?

Answer Found at the
Bottom of the Page


State of the 3PL Union 2023

Each year in late June, we get the State of Logistics Report from CSCMP, which I summarize under the banner of "The State of the Logistics Union."

Each year in early fall we get the annual "3PL Study," released at the CSCMP conference. And so it was again this year with the 2023/24 study, now in its amazing 27th year, all under the leadership of my friend Dr. John Langley of Penn State.

So this week you get my summary of the 3PL report (we read more so you can read less), which I might as well title the "State of the 3PL Union," as it really is a fine compendium of many data points from the logistics service provider sector.




The report observes that “Successful shipper/3PL relationship trends include using longer contracts, consolidating business into fewer 3PLs and creating relationships that benefit both parties.”

Send Us Your Feedback here

The continuous Langley's leadership has lately been pared with somewhat changing sponsor mix. This year's report was again sponsored by consulting and technology firm NTT Data, Penn State and Penske Logistics. Without the sponsors the report wouldn't happen, so they are worthy of some public recognition.

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 session room and it was well attended as is it is every CSCMP. The interest in logistics outsourcing obviously remains high, and nothing pulls the current dynamics together like this study.

The report is based in part on survey responses from shippers and 3PLs worldwide. It may be in there somewhere, but I cannot this year find a total. Last year, there were 345 respondents, and I will assume the number was in that general range again this year.

As I can attest from our work here at SCDigest, getting people to complete surveys is increasingly difficult.

The reported is a little confusing. The report text and an accompanying graphic indicate 48% of total respondents were 3PLs. But then the text says 44% were shippers using 3PLs and 8% were shippers not using outsourcing. But the chart reverses that, indicate 44% (actually 45%) were non-3PL users and 8%. shippers using 3PLs.

I believe that the text is correct, with the breakdown is 48% 3PLs, 44% shippers using 3PLs, and 8% shippers not using 3PS.

As has been the case for many years, the report again this year focuses on a set of survey data and related discussion across a set of issues that are very similar each year, but this section core data section does seem to be cut back over the past few years to a smaller set of survey responses.

Along with that core data are a set of focus topics for that get lot of pages in the report, usually supported by some additional survey data.

That includes a fairly long section on "partnerships" between 3PLs and shippers, which I will summarize a bit later.

Other focus topics this year include the talent crisis, automaton, and more "contemporary issues."
I will visit these specialty topics next week.

As usual, the data continues to show that shippers and third-party providers experience positive benefits from their relationships.

Most shippers that use 3PL services (95%) report their relationships as generally successful, up from 83% last year. As in the past, 3PLs responded even more favorably than shippers, with 99% (the same percentage as last year) reporting successful relationships.

I am tempted to call BS on the 95% number for shippers, which just seems too high, but then again if the question is phrased a "relationships are generally successful" maybe that number is right.

The percent of total logistics expenditures directed to outsourcing surprisingly fell to just 37% this year on average, versus 42% in the last survey. I frankly have a hard time believing the drop if any was really that sharp.

Especially as both shippers (62%) and 3PLs (87%) said shippers are increasing their use of outsourced logistics services, up from 54% and 81% last year, respectively.

So something does not square.

Warehousing jumps to the top position of outsourced activities, at 65% of respondents, moving ahead of domestic transportation management, which came in at 62% versus 69% last year.

But the 65% of survey takers saying they are outsourcing warehousing is a jump from 43% last year.

Clearly, there was not that kind of sea change in outsourcing warehousing in just one year, so something is amiss here. But the idea that 65% of companies, especially with a high percentage of respondents that have already said they are outsourcing logistics in some way, seems reasonable.

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), versus their view of actual 3PL IT capabilities, always with a much lower score.

For years the IT Gap was large but shrinking. However, for reasons that are unclear, it spiked back up in five years ago and stayed there, as is normally illustrated in a chart, last year which showed the data back from 2022.

The issue is briefly addressed in text in the report, but disappointingly without the usual graphic.

The report does note that, not surprisingly, nearly all shippers (97%), said IT capabilities are a necessary element of overall 3PL provider expertise.

But this year, just 49% of shippers indicated they're satisfied with 3PLs' IT capabilities, down from 54% last year and 58% in 2022.

So chart or not, the IT gap lives on, and is still growing.

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 cannot present them in a way most convincing to shippers.

I mention above a special section in this year's report on 3PL-shipper partnering - let's take a look.

The report states that "In addition to exchanging daily operational information, this [partnering/collaboration] could include shippers sharing forward-looking demand forecast information that'd be helpful to 3PLs' planning," adding that "Shippers that have yet to buy into the concept of such relationships will miss opportunities."

This section then takes a reasonably long look at the shipper-3PL contracting dynamic.

As some indication of a greater focus on more strategic relationships, 38% of both shippers and 3PL reported that contracts are getting longer, versus only 5% and 3% of shippers and 3PLs, respectively, that are seeing shorter-term deals, as shown in the graphic below.



Source: 3PL Study 2024


There's a lot more, but will end here by noting this section of the report observes that "Successful shipper/3PL relationship trends include using longer contracts, consolidating business into fewer 3PLs and creating relationships that benefit both parties."

With that I will wrap things up for this week.

Overall, this is a very interesting document as usual. That said, there were several mistakes in the chart data versus the text, and at 60+ pages of actual content (before various appendices) it's just getting very long.

I also believe the report is trending too much towards sort of a 3PL marketing document, and less on the traditional data and analysis.

That said, will be back next week after a review of the special topic sections

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

See as Web page/Printable Version

On Demand Videocast:

Understanding Distributen

Highlights from the New "Little Book of Distributed Order Management"

In this outstanding Videocast, we'll discuss DOM, based on the new Little Book of Distributed Order Management, written by our two Videocast presenters.

Featuring Dan Gilmore, Editor along with Satish Kumar, VP Client Services, Softeon

Now Available On Demand

On Demand Videocast:

The Grain Drain: Large-Scale Grain Port Terminal Optimization

The Constraints and Challenges of Planning and Implementing Port Operations

This videocast will provide a walkthrough of two ways to formulate a MIP, present an example port, and discuss port operations.

Featuring Dan Gilmore, Editor along with Dr. Evan Shellshear, Head of Analytics, Biarri.

Now Available On Demand

On Demand Videocast:

A Blueprint for WMS Implementation Success

If You Want a Successful WMS Project, You will Find the Blueprint in this Excellent Broadcast

This videocast lays out the keys to ensuring your WMS implementation goes smoothly, involves minimal pain, and accelerates time to value.

Featuring Dan Gilmore, Editor along with Todd Kovi of Radix Consulting and Dinesh Dongre of Softeon.

Now Available On Demand


Feedback will return next week.

JDA (now Blue Yonder) acquired what groundbreaking sofware firm in early 2010?

A: i2 Technologies, after trying and failing to so in 2008.