**London**: Third-party logistics providers are adapting to evolving demands driven by geopolitical factors and technology. Shippers are either insourcing logistics functions or deepening partnerships with 3PLs, seeking agility and efficiency amid ongoing challenges. Experts highlight the need for modernised systems to respond to changing market conditions.
Third-party logistics providers (3PLs) are navigating significant changes within the industry, shaped by a confluence of shifting demands, geopolitical factors, and evolving technology, according to DC Velocity – Logistics News, Analysis & Multimedia. The need for improved and cost-effective logistics solutions has led shippers to call for more agile and intuitive systems, prompting a reevaluation of the traditional roles within supply chains.
In recent years, shippers have exhibited a growing appetite for flexibility, with many opting to take certain logistics functions back in-house instead of relying solely on 3PLs. This shift allows them to manage transportation, warehouse operations, and shipment tracking using their own newly acquired technologies. In some scenarios, businesses are building internal teams to execute these functions, while in others, they utilise experienced personnel from 3PLs to manage operations effectively.
Conversely, some shippers are committing to longer contracts with their 3PL partners, emphasising collaboration and shared success. This partnership approach utilises the extensive expertise of 3PLs, integrating them deeply into the shipper’s operations, which in turn addresses ongoing challenges and demands for increased agility and efficiency.
Bart De Muynck, a veteran industry analyst with Bart De Muynck LLC, noted that agility has become a necessity for 3PLs to respond swiftly to changing customer needs. Speaking on the subject, he remarked, “It’s about being able to respond quickly to customers and to what have become very rapidly changing needs of their business.” De Muynck’s insights highlight a consistent demand among shippers for resilience, particularly in crafting customer-centric logistics solutions that incorporate advanced analytics and automated processes.
The industry faces multiple hurdles in achieving this level of agility, with many 3PLs still using older technology systems that hinder their adaptability. De Muynck pointed out the risks associated with these outdated systems, particularly regarding cybersecurity vulnerabilities. He warned, “If you outsourced your [logistics] operations and data to a 3PL that is still on an older [and vulnerable] system and it gets hacked, you are pretty much screwed.”
The pandemic notably impacted shippers’ operations, with capacity, market volatility, and sustainability issues being among the foremost challenges. Despite prevailing complications, Michael Castagnetto, president of North American surface transportation for C.H. Robinson, expressed that the fundamental role of 3PLs has not altered significantly. He remarked, “What has emerged… is an accelerated pace of change in global supply chains.” This sentiment illustrates the increasing frequency and intensity of disruptions within supply chains requiring shippers to rely on 3PLs more than ever.
As shippers seek efficiencies, different service models such as drop-trailer services have gained traction. This is where a driver leaves a trailer at a shipper’s facility, enabling loading and unloading at the recipient’s convenience. Castagnetto indicated that drop-trailer services have become a significant business for C.H. Robinson, bringing in $900 million annually and being particularly beneficial in sectors like retail, automotive, and healthcare.
The concept of insourcing versus outsourcing logistics functions has seen a resurgence as well, as highlighted by David Gonzalez, a vice president analyst at Gartner. Many shippers are reevaluating their levels of reliance on outsourcing partners. He stated, “There is a great breadth of operating models today,” noting that companies are taking steps to internalise logistics activities they believe can offer a competitive edge.
Recent studies have indicated that a notable majority of logistics leaders plan to internalise specific operations, with the aim of increasing control over supply chain processes. This trend aligns with shippers who are not only adopting their own technologies but also leveraging 3PL expertise to manage these systems, closing the gap between operational efficiency and cost-saving strategies.
The balancing act between cost and service is becoming increasingly pronounced. Steve Sensing, president of supply chain and dedicated transportation solutions for Ryder, emphasised that current market conditions allow shippers to mix and match 3PLs based on specific capabilities. He explained that in a saturated freight market, “the shipper is trading cost for service.” This points to a broader trend of strategic adaptation among shippers as they seek to optimise freight management in response to demand characteristics.
Despite technological advancements in the logistics domain, shippers have conveyed dissatisfaction with the tech capabilities of their 3PLs, citing outdated transportation management systems (TMS). Satish Jindel, from SJ Consulting Group Inc., remarked that many companies are slow to change due to a lack of urgency driven by carrier satisfaction with current practices. He underscored that opportunities for cost savings might lie in re-evaluating fundamental logistics planning and execution.
Jindel further emphasised that improvement in logistics operations could stem from a more analytical approach towards shipping practices, proposing increased scrutiny of shipping cycles, ordering patterns, and overall operational efficiency. His insights suggest that a collective shift towards more strategic and mindful logistics management could unlock further savings within the supply chain landscape.
The evolution of 3PLs reflects a broader narrative of adaptation in response to changing market demands, operating models, and the ongoing quest for efficiency within the logistics sector.
Source: Noah Wire Services
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