The future promises increasing competition and complexity for third-party logistics providers, but the good news is that the potential exists for the savvy ones to differentiate their service offerings.
That’s according to the 2015 3PL Selection and Contracting Report from EFT Supply Chain and Business Intelligence (formerly called eyefortransport).
The firm surveyed more than 400 logistics and supply chain executives who are key decision makers in 3PL contracting in retail and manufacturing, along with 3PLs.
“The 3PL industry is coming to a crossroads where greater and greater service levels are required, margins are squeezed, contracts are short and customers are demanding more than ever,” said Haley Garner, research director for EFT.
“On the one hand, 3PLs are fighting to maintain relevance in an increasingly commoditized service‐area,” he added. “On the other hand, technology is playing, and has the potential of playing an immense role in changing how the industry operates, and how 3PLs can claw back the margins they’ve been losing over the last decade.”
The EFT survey found logistics customers expressing greater dissatisfaction with the services they are receiving, and more than 55% of the surveyed manufacturers and retailers have recently switched or are planning to switch 3PL providers.
“3PLs appear to be on their back foot as service satisfaction drops renewal rates decrease and contract length remains low,” Garner noted.
Taking a global look, the report finds plenty of opportunities in North America: “With shifting manufacturing strategies, and space for innovation regarding the distribution of consumer products, LTL, etc. North America has plenty of room for companies to gain market share.”
Third Party Logistics and their Customers
are not on the same page.
When it comes to how the customer chooses a 3PL, there was a noticeable division in perception by the two sides. Manufacturers and retailers saw reputation and testimonials as the No. 1 thing they look for when choosing a new 3PL. Responding 3PLs, on the other hand, felt the size and scope of their business was primarily why they were chosen.
That division in viewpoint widened regarding the perceived reasons that contracts were not renewed. The top three reasons 3PLs believed customers would not renew contracts were poor service, other 3PLs offering cheaper prices and relationship management issues (such as a breakdown in a personal relationship with management of 3PL).
In contrast, logistics customers cited poor service and price as the top reasons why they changed providers.
“With 53.4% of respondents indicating that relationship management issues as a key reason for the non renewal of contracts, it’s clear that that 3PLs need to reimagine and focus more efforts on to secure longer contracts, increased business and more satisfied customers,” Garner observed.
In its late 2014 survey, EFT found a 4% jump in less than satisfied manufacturers and retailers with 13.4% dissatisfied in 2014 vs. 9.3% in 2012.
Despite 3PLs focus on value-added services and innovation, more customers than before are just satisfied with their services at over 67%.
“While there are many reasons for there to be a dip in satisfaction of 3PL services it is clear that the fight against commoditization is ongoing for 3PLs as customers are not seeing the benefits of differentiation and value-added services we’ve been hearing from 3PLs,” Garner said.
Despite the supply chain focus on cost, service was the primary driver for changing or continuing with 3PLs, EFT found. Garner said, “For 3PLs to retain business, a renewed focus on aligning their services to their customers is going to be necessary.”
An infographic summarizing the report’s findings can be accessed here: http://1.EFT.com/LP=901
This and other hot logistics topics will be explored at EFT’s13th 3PL Summit, June 16‐18 in Chicago. To learn more, visit: www.3plSummit.com
