2016 #3plstudy: the state of logistics outsourcing

2016 Third-PartyLogistics Study

The State of Logistics Outsourcing

Results and Findings of the 20th Annual Study

Multi-Media Feed: #3PLStudy

22016 Third-Party Logistics Study – Results and Findings of the 20th Annual Study

Contents

About the Study

Current State of the 3PL Market

Special Topics

- Aligning 3PL Relationships

- 3PL Competitive Landscape

- Workforce Innovation and Agility

Strategic Assessment


20th Year Anniversary of Annual 3PL Study

1996-2000

2001-2005

2006-2010

2011-present

1996

Study

Founded

North America

Focus

2013

Big Data

Talent

Management

2008

Green

Supply

Chain

1998

Importance

Of IT

2002

Added

Western

Europe

2003

Added

Asia-Pac

2004

Added

Latin America

2005

Added

South Africa

2012

Emerging

Economies

2009

Economic

Crisis

2006

First

Workshops

Chicago

Paris

Shanghai

2014

Omni-

Channel

Mobile

Technologies

2015

3PL

Competitive

Landscape

2006

Special

Topics


2016 20th Annual 3PL study – Major Research Thrusts

Customer Study

E-Mail SurveyMajor Industry Verticals

Special Topics

Focus InterviewsKey Industry Experts

Facilitated Discussions

Capgemini AcceleratedSolutions Environment (ASE)

San Francisco

London

Singapore

Paris

Amsterdam

New York

Berlin

Hong Kong

Shanghai

Chicago

Each year, workshops are held in different locations around the world

Rio De

Janeiro

Sydney

//upload.wikimedia.org/wikipedia/commons/e/ec/World_map_blank_without_borders.svg

//upload.wikimedia.org/wikipedia/commons/e/ec/World_map_blank_without_borders.svg


Recent 3PL Study Themes

www.3plstudy.com

This year’s special topics:





Profiles of Respondents Represented


Contents

About the Study


Special Topics






Logistics Services Reported by 3PL Users


Benefits Experienced Through Use of 3PL Services

93%3PL Relationships

Generally Successful

83%3PL Use Improves

Service to Customers

75%3PL Innovations

Improve Logistics Effectiveness

73%Increasing Our

Use of 3PL Services

70%3PL Use Helps to Lower Logistics

Costs

3PL Value


The “IT Gap” – Where Do We Go from Here?

89%85%

91% 90% 92% 92% 92% 88%94% 93% 94%

98% 96% 93%

27% 33%42% 40% 35% 42% 37% 42%

54% 54% 53% 55%60% 59%

0%

20%

40%

60%

80%

100%

120%

02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

IT Capabilities Necessary Element of 3PL Expertise

Shippers Satisfied with 3PL IT Capabilities

IT

“Gap”


Essential IT Capabilities Suggested by 3PL Users

• Warehouse/DC Management

• Transportation Management (Planning)

• Visibility

• Transportation Management (Scheduling)

• EDI

• Web Portals

• Network Modeling and Optimization

• Bar Coding

• Global Trade Management Tools

• Transportation Sourcing

• Customer Order Management

• Supply Chain Planning

• Customer Relationship Management (CRM)

• Distributed Order Management

• Advanced Analytics and Data Mining Tools

• Cloud-Based Systems

• Yard Management

• RFID

60% or More

40% - 59%

25% - 39%

Less than 25%


Contents

About the Study


Special Topics






3PLs Need to be Aligned With Their Customers and Service Providers


Strategic vs. Tactical 3PL Relationships


Business Partner Collaboration Provides the Greatest Benefit to Shipper and 3PL as Both are Aligned to Each Others’ Goals

Tactical Partner

Service Partner

Business Partner

Benefits

Low Medium

Highly focused on cost

Equates logistics with expenses

Service sometimes viewed as a commodity

Outsourcing to gain efficiency and execution

Focus on getting the right solutions

Cost not considered to be the deciding factor

Shipper looking for expert advice and willing to pay for right solution

3PL strategic partner Both parties invest in

the relationship and share returns

3PL a crucial part of shipper’s business and competitive position

Both parties focus on alignment to business and operational goals

Sharing of information and strategic directions

High

Source: News Articles; Capgemini Consulting Analysis


Suggested Elements for Successful Onboarding of 3PL-Customer Relationships


Key Strategies That Can Optimize the 3PL Relationship

Control

Risk

Mitigation

Business

Reviews

Continuous

Improvement

1

3

2

4


Facilitators of Alignment in 3PL-Customer Relationships

Elements 3PLs Customers

Agreed-upon performance expectations 87% 96%

Formal performance reviews 80 81

“Dashboards” to understand results of 3PL operations 63 73

Providing 3PLs with information relating to shippers' goals and strategies

53 54

Visibility into workflows and process management 48 69

Cultural fit with our 3PLs 43 70

Plans for how shipper and 3PL personnel at the executive, management, and operational levels need to work together.

37 51

Multi-enterprise collaboration systems, such as between shippers, 3PLs, and service providers

25 43

Strategic plan for “succession” of the relationship 25 36

Calendar visualization to facilitate scheduling meetings and activities

21 30

Pay for performance in addition to pay for services 16 33

Data indicates percentages of clients and 3PLs indicating elements are generally present in their relationships


Reported Frequencies of Interactions Among 3PLs and Customers

0%

10%

20%

30%

40%

50%

60%

70%

20%

52%

15%

8%5%

14%

66%

16%

3% 1%

Customers

3PLs


Relationships Between 3PLs and Asset-Based Service Providers

13PLs are expected to have formal plans to help

manage relationships with service providers77% 91%

2 3PLs select or help to select the service providers 80% 63%

3 Meaningful sharing of information between 3PLs,

service providers, and customers 81% 91%

4 3PLs have visibility into daily performance of

service providers80% 70%

5 Service failure by one of the service providers is a

service failure of 3PL organization81% 79%

6 Improvement needed in relationships between

customers, 3PLs, and service providers83% 80%

Percent Agreement

3PLs Customers


Initiative

Percentages Indicating Helpful

3PLs3PL

Users

Automated way for clients to log in and see requests from 3PLs for approvals of decisions, activities, documents, and other “to-do’s”

80% 84%

Real-time news feed (like Twitter or Facebook) of everything that is happening across all 3PLs used by a client

49% 57%

In communicating with our 3PLs/clients, we find that most of the time email provides the needed types of functionality

59% 70%

Communications Between 3PLs and Users

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCMfyirKWgsgCFRQyiAodr_kAiA&url=http://www.adweek.com/socialtimes/twitter-first-logo/500686&psig=AFQjCNEhdatAyL8l37YdtWKGmHx6HyzFbQ&ust=1442720370173268

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCMfyirKWgsgCFRQyiAodr_kAiA&url=http://www.adweek.com/socialtimes/twitter-first-logo/500686&psig=AFQjCNEhdatAyL8l37YdtWKGmHx6HyzFbQ&ust=1442720370173268

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCJOuhNuWgsgCFdKiiAodNBYNFA&url=https://www.iconfinder.com/icons/167630/email_icon&psig=AFQjCNH-3iPP2yVN8pQLbDIBSAYkyl6BxQ&ust=1442720437251903

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCJOuhNuWgsgCFdKiiAodNBYNFA&url=https://www.iconfinder.com/icons/167630/email_icon&psig=AFQjCNH-3iPP2yVN8pQLbDIBSAYkyl6BxQ&ust=1442720437251903

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCNmDgrCXgsgCFcdQiAoduxYNMg&url=http://www.imagineiti.com/the-cloud/is-the-cloud-secure/&bvm=bv.103073922,d.cGU&psig=AFQjCNFgSKSDlsOjs1KYUE30Xaxt6QhEtA&ust=1442720636633851

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCNmDgrCXgsgCFcdQiAoduxYNMg&url=http://www.imagineiti.com/the-cloud/is-the-cloud-secure/&bvm=bv.103073922,d.cGU&psig=AFQjCNFgSKSDlsOjs1KYUE30Xaxt6QhEtA&ust=1442720636633851


Contents

About the Study


Special Topics






The use of new technologies has helped 3PL players to combat external challenges and improve internal operations


The benefits and breadth of application of cloud technology can deeply impact a 3PL in a multifaceted way

Transportation Management Systems (TMS)

Provides full order visibility Real time connectivity with supply chain partners Tracking shipment and routing progress Role-based access for the various users in the supply chain Multi tenant architecture

Global Trade Management (GTM)

Based on the AderbeenGroup report, 55% of the companies were expected to implement SaaS GTM solution in 2014 (compared to 37% three year ago)

Facilitates transportation planning Trade compliance and customs management

Warehouse Management System (WMS)

Support day to day operation in a warehouse Tracking inventory levels and stock locations Billing and invoicing Controlling inbound and outbound inventory

Supply Chain Planning

Achieve more than 15% higher perfect-order rates End to end supply chain management Multi-channel warehousing management In-store inventory management

There are 5 key benefit to implementing cloud technologies:

Lower Cost of Set-Up

Pay-As-You-Go Pricing and

FeaturesFast Deployment Self Sufficiency

Real Time Global Visibility


This year’s survey respondents utilize their cloud technologies in many capacities

60%

40% 38% 38%33% 32%

28% 27% 25%

13%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

% r

esp

on

den

ts le

vera

gin

g th

e te

chn

olo

gie

s

60% of respondents named visibility across operational processes as the key driver for use of cloud technologies in logistics


0%

10%

20%

30%

40%

50%

60%

70%

Shippers are turning to 3PLs to help continue balancing cost and service given future complexities

Total survey respondents = 5,000 3PL users

Challenges faced by shippers, 2014Key Shipper and 3PL interactions due to

capacity consolidation

12%

12%

13%

17%

17%

18%

20%

20%

22%

31%

32%

63%

Vendor Management

Technology Strategy and…

Expanding/sourcing from…

Expanding/Selling to New…

Regulations, Security,…

Reducing Labor Costs

Managing Inventory

Retaining and Training Labor

Supply Chai Visibility

Improved Customer Service

Business Process…

Cutting Transportation Cost


As the landscape is changing, new companies have pushed the envelope by offering fulfillment services

Two-Day delivery was launched

Grocery delivery at convenient time

Examples:

Introduction of same-day delivery services by Shutl

— The company helped to match same-day orders with high-speed couriers

Examples:

Shop for items from local store and get delivery same day or overnight by Google

Sunday delivery was started by Amazon

Adoption of free and same day delivery by various e-commerce companies

— Amazon launched same day delivery in the US and the UK

— China Smart Logistic Network (CSN) was launched by Alibaba to offer same day delivery across all cities in China

Examples:

2005-2007 2008-2011 time period2012-2014

Reduced fulfillment days and customized delivery

time

Introduced one day Fulfillment

Complete adoption of one day fulfillment and introduction of overnight, same day and Sunday

delivery

Over the past decade, the delivery time has shrunk from a couple of days to same day

Evo

luti

on

of

De

live

ry


How are most companies meeting these growing expectations...?

Investing in newcapabilities yourself

Leveraging newcapabilities from othercompanies in different

industries

Choosing not to invest Leveraging newcapabilities from

competitors

58%

40%

20%

15%


Large, global 3PLs still seem to be dominating the landscape

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Large, global providers (e.g., Panalpina, UPS)

Regional, full service providers (e.g., Toll)

Specialized providers (e.g., freight forwarders, air)

Evolving service providers (e.g., UberRush, Amazon, Google Express)


Some new capabilities in last mile fulfillment are needed to maintain service while controlling costs

Last Mile Requirements

DescriptionConstraints to

Implementation

Source: Talking Logistics, Capgemini Consulting Analysis,

High Medium Low

Adoption

Electronic Confirmation and Proof of

Delivery

The confirmation of delivery of goods has evolved from mobile signatures

The system confirms appointments while en route; validates presence (they came and you were not home); electronic proof of delivery; and follow-up on customer satisfaction

The wide industry still uses paperwork for closing the financial transaction

Mobile and Telematics

Logistics players use GPS and AVL for precise locating and directing of vehicles

Technologies also provide driver instructions, monitor delivery status, and link to execution for real-time routing changes

Many fleets are yet to fully implement these services

Regulation will aid the adoption of telematics

Dynamic Incentivized Scheduling

Logistics providers need to devise economic models and dynamic schedules which are attractive choices to the customer and profitability to shipper

Logistic providers provide a variety of pickup or drop points and also time slots for delivery

Limited availability Lack of visibility and

predictive analysis over delivery operations

Continuous Route

Optimization

Logistics companies need to optimize the large number of stops within a route

The traditional ERP or TMS system are unable to deal with constraints such as real-time congestion, vehicle type, driving time regulations and delivery time windows

Need complex decision making and powerful optimizers to cope with the last mile process


Contents

About the Study


Special Topics






An unprecedented labor shortage

• Worldwide transportation functions across various industry face a major labor shortage in blue collar jobs

• Worldwide warehousing and logistics functions face a shortage mainly in middle management jobs

• Major countries facing a truck driver shortage

• High insurance rates for the youth

• Licensing laws increasing waiting periods

Australia

• Other Industries more attractive than trucking

• Regulation scrutinizing driver operations

• Abolition of compulsory military service

• Three year training period

• Fall in Large good vehicle licensing

• Regulation scrutinizing driver operations

• Lower wages

• Aging population

• Lack of proper training

US Germany

UK Japan Canada


Skilled labor shortage will increase in the coming 5 years; truck driver and warehousing staff shortage is expected to surge the most

75%

60%

58%

55%

44%

70%

62%

52%

43%

32%

Skilled Labor

Supply ChainPlanners

Entry-LevelLogistics

Managers

Truck drivers

WarehousingStaff

Talent Shortage in the Logistics Industry (% of companies)

2014 Next 5 years

Warehousing staff responsibilities have evolved from basic moving of goods to planning, developing, organizing, directing, managing and evaluating operations

These responsibilities are expected to be handled by warehousing managers

Many countries over the past years have reported truck driver shortage

Truck driver shortage is expected to intensify in the coming years as majority of the baby boomers will retire and regulations are becoming more stringent

The lagging behind logistics curriculum has contributed to shortage of entry level managers in the logistics industry

Logistics companies are trying to increase awareness and tying up with education institutions to bring them on par with the industry needs

The increasing emphasis on efficiency across the supply chain operation has increased the demand for supply chain managers

Companies are employing supply chain management tools to gain better visibility over operations

Changing dynamics of the logistics industry has increased the demand for skilled labor

This trend is likely to continue in the coming years

Total= 1,757 global industry players

Source: Trends and Strategies in Logistics, LPI 2014 – World bank at Kuehne Logistics University; News Articles; Capgemini Consulting Analysis

Most of the logistics companies are facing a shortage of talent, as the dynamics of the logistics industry change


Are you prepared?

52%• Shippers feel they can rely on their

3PL’s preparation for the labor shortage’s impact on their business

79%• 3PLs feel their shippers are unprepared

for the labor shortage’s impact on their supply chain

The industry will likely depend on 3PLs to prepare for the labor shortage


Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; Gartner Supply Chain Executive Conference 2014 ; News Articles; Capgemini Consulting Analysis

58.6%25.5%

16.0%

Talent Finding, 2014

Hard to FindTalentNo Change

Become Easier toFind Talent

54.4%29.5%

16.2%

Expected Logistics Hiring, 2014

Increased

Remained theSameDecreased

The industry is struggling to find the right talent to fill positions, and hiring is expected to intensify in the coming years

Labor shortage was of the leading challenges facing the industry at the at the APICS, Gartner Supply Chain Executives and CSCMP annual conferences

Executives participating in the conference expressed that filling roles over the coming years will becoming tougher

Going forward, the demand for supply chain jobs is likely to increase, however the supply of labor is expected to shrink

– Supply chain jobs are expected to grow by 25% over the next decade

– Almost 25% of the current workforce in supply chain management is expected to retire by 2015

Total: 5,178 employees of Supply chain and logistics industry from 80 countries

Current Talent Scenario in Supply Chain Industry (1/2)


Supply chain operation have become complex over the years, requiring employees at all levels with better analytic capabilities

Current Talent Scenario in Supply Chain Industry (2/2)

48.3%

42.2%

9.5%

Workforce distribution based on designation, 2014

Non ManagementEmployees

Middle Management

Senior Management(e.g. CEO, CFO)

Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; Gartner Supply Chain Executive Conference 2014; News Articles; Capgemini Consulting Analysis

40.2%

42.8%

4.8%

12.2%

Workforce qualification, 2014

Undergraduate

Postgraduate

No tertiaryqualificationOther tertiaryqualification

Total: 5,178 employees of Supply chain and logistics industry from 80 countries

Less than 20% of the current workforce in the industry have the new required skill set

The number of supply chain university courses have increased over the past years, however the academic curriculum still lags behind the current needs of the industry

Executive, management and non-management skills have drastically changed over the last 20 years:

dealing with a crisis

understanding various technology

increased complexity and transparency of supply chain


Logistics employees prefer in-house trainings by professional mentors and instructors

3.3%

3.3%

6.8%

10.6%

31.2%

45.0%

9.1%

9.2%

15.8%

13.3%

19.4%

33.4%

None of these

Books or other referencematerial

On-line courses

Tuition reimbursement foroff-site courses or seminars

Professional Mentoring

On-site workshop sessionsled by an instructor

Training Preference, 2014

Training received

Employee expectations

Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; News Articles; Capgemini Consulting Analysis

Total = 5,178 employees of Supply chain and logistics industry from 80 countries

Almost 25% of the logistics companies provide on-line courses and books or other reference material trainings while only 10% of the employees prefer these modes of trainings

On-site workshop session, professional monitoring and online courses are mainly provided for improving workers skill levels

Employees prefer professional mentoring and on-site workshop sessions by instructors to other training

Employees laid the most emphasis on three training and development areas namely

– Technical/Professional development

– Management development

– Leadership development

Areas with large gap between expectation and

actual trainings

41.4%

27.5%

25.3%

5.8%

Orientation and Training received, 2014

Satisfied

Netural

Dissatisfied

Not applicable


The labor shortage will alter 3PL workforce challenges

Today’s workforce challenges for 3PLs and shippers

Developing leaders

Retaining high performers

Enhancing employee motivation and engagement

Attracting the best talent

Reducing workforce costs

12345

Workforce challenges of tomorrow due to labor

shortages

Lack of continuity and thus quality of service or product

Growing turnover

Decreased productivity and output

Not finding the right people fast enough

Inability to promote and accelerate careers of high potentials

12345


3PL & Shipper Response

Innovative and dynamic employee development and hiring strategies will play a critical role in most organizations’ response to the anticipated labor shortage.

Developing built-in succession or talent pipeline programs (career acceleration and identifying opportunities for high potential workers)

Training programs to develop "homegrown" labor/talent

Cross-training or role transitioning (warehouse roles, warehouse worker to driver, etc.)

Increased mobile or remote workforce

Increased use of HR outsourcing and recruiting providers

Establishing partnerships/sponsorship with programs like driver schools, supply chain conferences, etc.


Most common challenges attracting labor

Long time to hire

Poor quality of labor pool

Hard to fill niche talent positions

1

2

3Absence of technology or technology deployed but not optimized

Underdeveloped or under-performing presence in new talent channels

Inability to offer competitive compensation package 4

5

6


Outsourcing of Labor Management

62%24%

10%

4%

Managing Labor within Warehouse, 2014

Company operated

Mix of company and 3PL

Company owned with plans to outsource to 3PL

3PL

Reduce direct (i.e. salary, benefits, etc.) and

Continuous improvements in productivity and quality

Reduced human and equipment assets

Reduce indirect (i.e. recruiting, training, etc.) labor costs

Fear of losing control

Feel the company can do it for less cost

Fear of possible lack of knowledge about their work environments

Reasons for Outsourcing Reasons against Outsourcing

Companies outsourcing warehousing labor management to 3PL have realized improved productivity, and reduced direct and indirect cost

Labor cost accounts for 50% to 70% of the total expenses of warehousing function

Outsourcing of labor management to third party logistics helps in maintaining labor cost and also improves productivity and quality of work

Companies outsourcing their labor management expect 3PL to provide continuous improvement program and demand-driven workforce flexibility

Total = 252 top logistics and supply chain managers

Source: Labor Management Strategies in the Warehouse, Logistics Management, August 2014; News Articles; Capgemini Consulting Analysis


Initiatives for Talent Management

Partnering to Develop Curriculum Graduate Training Programs School and University Guest Lectures

Automation of OperationsReal Time Monitoring to Improve

ProductivityLabor forecasting, planning and

scheduling

Logistics companies are trying to bring logistics curriculum up to par with current operational needs

Paid Internships, sponsoring projects and consulting assignments or research are some of the practices adopted

Graduate training programs offer employees the opportunity to cross train across various departments

Companies connect with other industry graduate trainees and the broader future workforce

Interweave theory with practice through collaboration with institutions

Employees from leading logistics companies give guest lectures to attract and contact potential employees at a early stage

Accurate forecasting of labor requirement and scheduling based on demand

Logistics companies are able to cater to more business with less capacity

Some logistics companies are trying to improve their current productivity to deal with labor shortage

Companies are adopting real time monitoring to increase labor productivity

Automation has been introduced across various material handling and warehousing operations

However, a vast majority of the industry still run a human driven process for most logistics operations

Source: Labor Management Strategies in the Warehouse, Logistics Management, August 2014; News Articles; Capgemini Consulting Analysis

High

Example

Adoption

Example

AdoptionHigh

Example

Adoption

Example

Adoption

Example

Adoption

Low Medium

Example

AdoptionHigh

High


Initiatives

Example Adopters

Driverless Trucking Foreign Employees Increase Female Participation

Trucking associations such as Victorian Transport Association and Linfox are encourage women to enter the industry

US and Japan is also planning to adopt the same approach to deal with labor shortage in their countries

Australian Trucking Association appealed to the government to make available 457 visas for foreign truck drivers

Japanese government is considering opening the labor market to foreign employees

Lead truck operated by a human driver followed in close formation by a small fleet of driverless vehicles “tethered” by a series of sensors

Japanese caravan program and EU the SARTRE program are testing driverless trucks

Current campaigns to overcome labor shortage


Contents

About the Study


Special Topics






Strategic assessment topics for 2016

The Greening of the Supply

Chain

Securing the Supply

Chain

The Widening

of the Panama

Canal

Building an Employer, Industry Brand to Attract

Workers


Questions?

Thank You!

For further information:

Pick up a copy of the study at one of the Media Boxes

Check out our website at www.3plstudy.com