Every fall, for the past 25 years, Dr. John Langley of Penn State, has published the “Annual Third-Party Logistics Study”.  I have been following this report since its inception, and have always found it to be a comprehensive summary of current relationships between logistics service providers (LSP) and their customers. This year’s study, sponsored by Penn State, Infosys Consulting, Penske Logistics, and the Council of Logistics Management Professionals, was particularly interesting in that it reflects the impact of Covid-19 on the entire supply chain.

According to the survey, for shippers the heaviest impacts were felt in international transportation and logistics (55%), manufacturing (46%), labor management (39%), and supplier networks and product availability (39%).

As might be expected, the impacts on LSPs were somewhat different. Labor management was at the top of the list at 54%, followed by domestic logistics (45%) international transportation and logistics (40%) and the inability of LSP customers to accept orders (32%). Risk management has always been a concern, but recent pandemic related issues have resulted in a new emphasis on operating during times of crisis. Both groups agreed that certain areas needed strengthening post-crisis. For shippers the top five were readiness and continuity planning, data analysis and visibility, risk management, demand forecasting, and scenario management. LSP areas for improvement were readiness and continuity planning, data analysis and visibility, risk management, scenario management, and labor management and scheduling.

While firms continue to outsource a variety of supply chain functions, the top five have remained fairly constant over the past few years. Again, this year, they were domestic transportation (74%), warehousing (3%), international transportation (62%), customs brokerage (49%), and freight forwarding (49%)

As is usually the case, there are firms that do not choose to outsource. The major reasons for not doing so were lack of confidence in LSPs to reduce costs, meet service commitments, no good business case for outsourcing, and lack of control. Other non-outsourcers were concerned about security and IT integration, and some simply felt their expertise exceeded that of the LSPs.

While the majority of shippers felt their LSP relationships have been successful, there was a continuing disconnect between the users and the providers relating to the degree of success. Ninety one percent of the shippers felt they had successful arrangements, but 99% of the LSPs felt that way. Eighty eight percent of the shippers and 99% of the providers felt that LSPs have contributed to service improvements. Only 68% of the users, but 96% of the providers believe that outsourcing has reduced total costs. There is an alignment however, on the important factors in outsourcing. Performance, cost, and service offerings were ranked in that order by both shippers and providers.

Technology continues, and will continue to play a critical role in outsourcing. Shippers use it for supply, demand, sales operation, and capacity planning. A smaller percentage of LSPs are using technology for supply, demand, and sales operations planning; but more are using it for capacity planning. Interestingly, LSPs are ahead of their customers in the adoption of mobile technology enablers such as smart phones, tablets, and other hand-held devices. Both shippers and providers plan to invest in leading technology over the next three years.

In addition, both groups will continue moving away from transactional relationships and concentrate on preferred and strategic partner relationships. Future arrangements will be dependent on data, analytics, technology, and digital solutions.

As has been indicated elsewhere, this study confirms that retailers and their providers are decentralizing their inventories in order to meet consumers’ quick response demands. This in turn, is changing traditional transportation operations as carriers shift to more regional hauls.

This report also contained interesting insights into the evolution of the third-party industry over the past 25 years. The entire report is well worth reading, and is available at www.3plstudy.com