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Shippers and third party logistics providers need better IT systems
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22/09/2009
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The economic downturn has created huge challenges for shippers and third-party logistics providers (3PLs), with 82% of shippers employing cost-cutting tactics and 60% rethinking their supply chains and relationships with 3PLs. That's chief among the findings of a study spanning North America, Europe, Asia Pacific and Latin America, by Capgemini, Oracle, the Georgia Institute of Technology and logistics provider, Panalpina.
Their 14th Annual 3PL report also reveals that 88% of shippers feel that IT-based logistics services are important, but that only 42% of them are satisfied with the capabilities of their IT provider.
Dr John Langley, Professor of Supply Chain Management at the Georgia Institute of Technology, says that, as a result of this IT capability gap, shipper respondents reported a lack of the KPIs, alerts and visibility required for an adaptive supply chain. 3PLs reported similar difficulties in getting the data and commitment they need from shippers.
"Shipper-3PL relationships are being impacted significantly by the prevailing uncertainty and economic volatility in global markets," he says. "It is very important for 3PLs to mitigate or reduce any financial risk or service level impact that this may cause."
Langley also notes significant differences between how 3PLs evaluate their role in the supply chain and how they are viewed by shippers – only 59% of shippers feel their use of 3PLs has a positive effect on customer service, compared to 88% of 3PL respondents.
Meanwhile, shippers devote an average of between 47% (in North America) and 66% (Europe) of their total logistics expenditures to outsourcing, and this is expected to rise in the next five years.
Jim Morton, senior manager within Capgemini Consulting's Supply Chain practice, makes the point that economic volatility has challenged shippers and 3PLs alike to contend with factors, such as unpredictable demand, instability in fuel costs and currency valuation, and excess inventory.
In response, not only are shippers attempting to cut costs, but they are also seeking to improve forecasting and inventory management (77%). Cost reduction and improved reliability in services are the main factors likely to increase shipper respondents' use of 3PLs, he says.
"Companies worldwide are still dealing with the effects of the economic downturn, but shippers should embrace the opportunity to rethink their supply chains and the role that 3PLs can play in helping to attain business goals," comments Morton.
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Author
Brian Tinham
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