2018 Third-Party Logistics Study: 3PL Warehousing Highlights

The 2018 Third-Party Logistics Study was recently published. This year marks the 22nd year of publication. The paper discusses the findings from an annual survey of 3PL/4PL Providers, Shippers (not currently using 3PL/4PL services) and Shippers (currently using 3PL/4PL). The study is conducted by C. John Langley Jr. Ph.D and Infosys Consulting. Sponsors include Penske Logistics, Korn Ferry, Infosys and Penn State Smeal College of Business.

The survey is 60 pages and covers various areas of the 3PL market including automation/digitization trends, new technologies such as blockchain, increased importance of supply chain leadership and the need for efficient and open collaboration between 3PLs and shippers. Supply chain operations continue to be a competitive advantage to shippers and a key differentiator between businesses. Below we’ve tried to highlight some of the findings that relate to 3PL warehousing, specifically.

If you are interested in downloading and reading the complete study you can find it here.

Logistics continues to be an important part of the overall customer offering.

Total logistics expenditures as a percentage of sales revenue has increased, reaching 11% in the current year’s study from 10% in the previous year.

“Supply chain used to be a function. Now it is a value-add, and it is fundamental to your customer’s experience,” said Kim Breland, director of finance, supply chain operations for Sprouts Farmers Market, a supermarket chain based in Phoenix. “It has gone from a box hitting a location to delivering an outcome.”

Suppliers that use 3PLs are averaging 50% of their total logistics expenditures with 3PLs.

Total logistics expenditures include transportation, distribution, warehousing and value-added services. The 50% recorded  was the same for the current and past two years.  The chart below shows the percentage of respondents that outsource the various services. Again this year the most frequently cited technologies are those that are more execution- and transaction-based capabilities.

Increased communication, both within the 3PL organization and with supplier partners is a high priority

Shippers and 3PLs are collecting, transmitting and analyzing increased amounts of information, and data-driven decision making is the key to increase asset utilization, improve efficiency and decrease volatility. Shippers and 3PLs are leveraging advanced technologies to enable faster and more efficient services, provide visibility and improve safety. One of the challenges in automating the flow of information is obtaining data and keeping it flowing, particularly when 3PLs are pulling data from multiple sources.

Digitization can help shippers and 3PLs with their optimization of time, resources and labor. New technology is creating greater visibility across the supply chain, which can reduce duplicated effort and create greater insight into advanced management, resulting in lower out of stocks, faster transportation time and lower congestion in warehouses.

3PLs reported that they plan to make future investment in technology.

Logistics providers are investing in their IT solutions, replacing legacy systems and processes with innovative solutions and leading-edge approaches. This is already evident in the adoption of transformative supply chain software, greater use of mobile technologies in key supply chain processes at both shipper and 3PL organizations, and greater movement toward the use of cloudbased systems to facilitate management of supply chain processes and activities.

Investment in technology is still relatively low with 71% of 3PLs and 65% of shippers reporting that they are investing 0% to 5% of capital expenditures in digitization and automation. That said, 64% of 3PLs reported that they plan to make future investment in the technology.

Competitiveness in the industry is the top reason 3PLs are investing in digitization and automation.  For 25% of 3PLs, uncertainty in the ROI of automation and digitization capabilities is keeping them from investing, compared to 17% of shippers; 21% of 3PLs and 16% of shippers cited competing core IT projects; and 13% of 3PLs and 17% of shippers blamed a lack of funding.

Findings from the current study continue to reinforce how important it is for 3PLs to provide a range of IT-based services to help create value for their shipper-customers.

The Survey Participants were mostly larger companies.