22013 THIRD-PARTY LOGISTICS STUDY©2012 C. John Langley, Jr., Ph.D., and Capgemini. All Rights Reserved. No part of this document may be reproduced, displayed,modified or distributed by any process or means without prior written permission from Capgemini. Rightshore ® is a trademarkbelonging to Capgemini.
Table of Contents3Table of ContentsExecutive Summary 4Current State of the 3PL Market 7Supply Chain Innovation 15The IT Gap 20Supply Chain Disruption 22Talent Management 28Strategic Assessment 30About the Study 34About the Sponsors 37Supporting OrganizationsBriefcaseA N A L Y T I C SCEDOLCELSCCenter for Emerging Logistics and Supply ChainsI W L AInternational WarehouseLogistics AssociationFreightWatchINTERNATIONALTransport Intelligence
4 2013 THIRD-PARTY LOGISTICS STUDYExecutive SummaryCurrent State of the 3PL MarketThe success of the third-party logisticsindustry is evident in the generally highmarks given to 3PLs by respondentsto a survey as part of the 2013 17 thAnnual Third Party Logistics Study,which identifies trends and exploreshow both 3PLs and shippers are usingthese relationships to improve andenhance their businesses and supplychains. A substantial 2,342 industryexecutives provided usable responsesto the survey, including users and nonusersof 3PL services as well as 3PLproviders.Despite challenging businessconditions, aggregate global revenuesfor the 3PL sector continue to rise,and far more shippers (65%) areincreasing their use of 3PL servicesthan returning to insourcing (22%)some 3PL services. Nearly three infive (58%) shippers are reducing orconsolidating the number of 3PLsthey use. Shippers report spending anaverage 12% of revenues on logistics,and an average 39% of that figure isspent on outsourced logistics services.Outsourcing accounts for 54% ofshippers’ transportation spend and39% of warehouse operations spend.As found in past Annual 3PL Studysurveys, transactional, operational,and repetitive activities such astransportation, warehousing, andfreight forwarding tend to be the mostfrequently outsourced.Both shippers (86%) and 3PL providers(94%) largely view their relationshipsas successful, with shippers postingsome impressive results fromoutsourcing: just over half (56%) saytheir use of 3PLs has led to year-overyearincremental benefits. They alsoreport significant savings from logisticscost reductions (15%), inventory costreductions (8%) and logistics fixedasset reductions (26%). Shippersare more satisfied than 3PLs (71% to63%) with the openness, transparencyand good communication in theirrelationships, and 67% of shipperrespondents judge their 3PLs assufficiently agile and flexible.Shippers’ openness to more strategic3PL-shipper arrangements, includinggainsharing and collaboration withother companies, appears to bedeclining somewhat. The IT Gapappears to have stabilized over thelast few years, with 94% agreeingthat IT is a necessary element of 3PLcapability but just 53% indicating theyare currently satisfied with 3PL ITcapabilities. Contributors and potentialsolutions to this disparity are exploredin the IT Gap section.Supply Chain InnovationInnovation is a critical driver of growth,differentiation, and profitability, butas the logistics industry maturesand markets become more global,innovation in this industry is becomingmore challenging. The solution lies inevolving toward fundamental changesin 3PL-shipper relationships.Until recently, 3PLs could demonstrateinnovation by introducing processimprovements, adding technology,improving execution, or offering newservices. But shippers no longersee these as truly innovative, insteadseeking disruptive innovation: a newproduct or service idea that whenimplemented significantly disruptsa market and/or value chain bysimplifying, automating, generatingvalue, or reducing costs.Many 3PL-shipper relationships arenot set up to support innovation.They are tactical rather than strategic,offer insufficient visibility and arelimited by metrics, contract terms,and risk mitigation strategies. Most3PL respondents (89%) believe theyare ready to innovate, but just 53% ofshippers agree. 3PLs and shipperseach see themselves as the largestsources of innovation within theirrelationships.Shippers and 3PLs largely agree onthe top requirements for innovation,including trusting relationships,talent/right people, and operationalexcellence. The unifying theme of theresults is that it takes truly collaborativeand strategic relationships amongall partners to develop the types ofdisruptive innovations needed tosolve the vexing challenges facingtoday’s supply chains. Currentindustry consensus is that 3PLsand shippers can facilitate supplychain innovation by leveragingorganizational and technology-focusedcapabilities. Organizational driversinclude fostering collaboration throughstructure, relationship governance,and embedding innovation into theorganization. Technology driversinclude advanced IT and mobilesolutions, big data and analytics, andsocial media.Shippers assert that they are willingto pay 3PLs for investments requiredto drive innovation. Despite its limiteduse, gainsharing is the most favoredmethod to fund this investment.The IT GapThe long-standing gap between theimportance shippers assign to 3PLs’ ITcapabilities and their satisfaction with3PLs’ current IT capabilities – whichwe call the IT Gap – has stabilized atroughly a 40-point delta. The reasonmay be an ongoing disconnectbetween how the two groups view3PL IT investments: 3PLs are morelikely to describe their IT investmentsas aggressive compared to shippers,while shippers are much less likely tocall 3PL investments aggressive (12%vs. 23% for 3PLs), and 35% say they’reconservative. Shippers’ relationshipswith 3PLs’ IT organizations arealso less than ideal: 46% call theserelationships project-focused, 29%tactical, and 14% are contentious.Shippers want 3PLs to offercomprehensive and easily integratedsolutions. And the good news is thatjust over half of 3PLs anticipate makinglarge investments in modernizingapplications. But 3PLs cannot makethe right IT choices until they have aclear picture of their customers’ supplychains, how they function, and thechallenges they face. A collaborativeapproach between partners, featuringa relationship governance structure
Executive Summary5that includes IT, will further improveshipper satisfaction with 3PLs’ ITcapabilities, drive increased innovation,and improve 3PL-shipper relationships.Supply Chain DisruptionExtended supply chains, reducedinventories, and shortened productlifecycles are just some of the factorsmaking disruption of supply chainoperations more likely and more costlythan ever. Economic losses fromsupply chain disruptions increased465% between 2009 and 2011.Shippers report adverse weather asthe biggest source of supply chaindisruption, followed by extreme volatilityin commodity, labor, or energy prices/supply.Many 3PL and shipper respondentssay their organizations are placinga greater focus on supply chain riskand mitigation, with partnerships,business continuity planning, supplychain visibility tools, and employeetraining/talent management as their topstrategies. All are valuable contributorsto a comprehensive risk mitigationstrategy. Equally notable are theapproaches not highly ranked, suchas supplier scorecarding and supplychain mapping, essential first steps toidentifying and monitoring risk.The top reason many shippers and3PLs fall short on their supply chaindisruption risk mitigation efforts isa lack of understanding of availablemitigation tools. Other commonreasons include lack of capital anda belief that current risk mitigationcapability is not a problem. Othermissteps include: actively monitoringonly direct suppliers and not subsuppliers,and failing to follow throughon plans crafted hastily after adisruption.Companies that have successfullyimplemented effective supply chainmitigation plans often apply newthinking to traditional mitigationstrategies, such as diversifying ratherthan consolidating suppliers. Cleareyedassessment of the currentstate of the network is the first stepto understanding the risk, followedby a well-considered plan of attackto both alleviate the biggest sourcesof vulnerability and respond whendisruptions do occur. A soundmitigation strategy can both avoidcosts and help create a competitiveadvantage.Talent ManagementSeveral industry surveys have foundthat CEOs consider talent their mostimportant challenge behind businessgrowth. The right talent is essentialto driving innovation and managingpotential supply chain disruptors. Inlast year’s 2012 16 th Annual 3PL Study,shippers and 3PLs agreed that havingthe right people and leadership in placewould be the number one driver of theircompanies’ success over the next fiveyears.Top tools used by 3PLs and shippersto mitigate supply chain disruptionsinclude employee training, talentmanagement, and internal and externalcertifications, and many plan to investaccordingly.Talent is also essential to supportthe growing demand for logisticsinnovation. One area where 3PLs areresponding to this need is in IT; inrecent months many leading 3PLs havebeen recruiting experienced CIOs andbest-in-class IT talent in response tocustomer demands. Shippers are alsotaking action; in some organizationsthe IT function and supply chainorganization are being merged basedon the strong dependency of logisticson the availability of timely, accurate,and relevant data.Strategic AssessmentThe study team continually monitorscurrent topics in the overall supplychain industry as well as findingsthat emerge from the research. Thefollowing is a brief look at some timelysubjects being considered for furtherexploration in next year’s Annual 3PLStudy.X-shoring: We introduce the term“X-shoring” to address shippers’ movestoward rebalancing supply chainsto be more flexible and adaptable,suggesting that shifting globaleconomic conditions may frequentlychange preferred sourcing locations.The issues shippers confront in makingX-shoring decisions to cope with afluctuating global economy mirror thosefaced across the enterprise. Makingthese choices requires better data andimproved decision-making strategies,such as employing total landed costversus cost of goods sold, assessingrisk/quality/service-related costs, andlearning to spot “caution flags.” Suchinsights will enhance shippers’ abilityto employ world-class supply chainmanagement to drive profitability.Global Trade Management: Mostcompanies believe global trademanagement is essential as they relymore heavily on global trade for growthin a weak economy. However, issuessuch as shifting trade lanes and newfree trade agreements are makingglobal trade more complex. Challengesinclude maintaining visibility of allpurchase part information, coordinatingfree trade agreement information withsuppliers, and ensuring qualification fordifferent trade programs. Shippers thatinvest time and resources into globaltrade management best practiceswill be positioned to transform theirglobal operations into a competitiveadvantage over their competitors.Big Data: Growing data volumes(sometimes called Big Data) generatedfrom increased monitoring of moreaspects of supply chain operationswith greater frequency and granularityhas emerged as a disruptive innovationopportunity for shippers and 3PLs.Converting this data into business valueis the heart of the challenge and adriver for expanding 3PL relationships.To capitalize on this opportunity, 3PLsmust be competent data managers,provide specialized IT tools, facilitateanalysis, and adopt a knowledgecentricapproach to their relationshipswith shippers.Companies thathave successfullyimplementedeffective supply chainmitigation plans oftenapply new thinking totraditional mitigationstrategies.
62013 THIRD-PARTY LOGISTICS STUDYAligned Teams Collaborating to New Summits
Current State of the 3PL Market7Current State of the 3PL MarketSatisfaction Remains High, But Expansion Opportunities RemainThe third-party logistics industry hascome a long way in its relatively shorthistory, a maturity curve that has beendocumented in the seventeen years ofthis study. Early on, shippers cautiouslyentrusted 3PLs with a relativelylimited number of core services,such as managing warehousing andtransportation, then steadily asked3PLs to do more. 3PLs honed theircraft in delivery of these services, whilegaining shippers’ trust and buildingtoward more collaborative, integratedrelationships with their customers.That progress is reflected in thegenerally high marks given to 3PLs byrespondents to a survey as part of the2013 17 th Annual Third Party LogisticsStudy, which tracks trends in 3PLshipperrelationships and explores howboth types of organizations are usingthese relationships to improve andenhance their businesses and supplychains. A substantial 2,342 industryexecutives completed usable surveys,including users and non-users of 3PLservices (referred to as shippers orshipper respondents throughout thisreport) as well as firms that provide3PL services (called 3PL respondents).Please see the About the Study sectionfor more information on the researchand survey respondents.Shipper respondents overwhelminglycall their relationships with 3PLssuccessful, crediting them withproviding new and effective waysto improve logistics effectiveness.They say 3PLs are sufficiently agileand flexible to accommodate futurebusiness needs and challenges.Shippers are also happy with theopenness, transparency, andcommunications experienced in theirrelationships with 3PLs.But at the same time, the pace ofprogress toward the advanced end ofthe maturity model for 3PLs-shipperrelationships seems to have slowed.Trust levels, technical challenges,and risks required to create thesehighly evolved relationships, as wellas the continuing impact of the recentrecession, are certainly factors in thisdevelopment. Results also indicate thatAsia-Pacific and Latin America supplychains are in a somewhat earlier stageof maturity than those in North Americaand Europe.How the Global EconomyImpacts Use of 3PLsEconomic volatility and uncertaintycontinue to affect global businessmarkets and in turn, global marketsfor 3PL services. As seen in estimateddata from Armstrong & Associates inFigure 1, global 3PL revenues for 2010of $541.6 billion (US dollars) increasedby 13.7% to $616.1 billion (USD) in2011. This reflects ongoing globalizationand increasing business for theworld’s 3PL providers. Aside from theobvious adverse impacts on global 3PLrevenues in the 2007-2009 timeframe,the 3PL sector has continued to growin recent years.The geographic breakdowns inFigure 1, which align with the fourmajor geographies that are includedin the 2013 3PL Study, highlight thedistinctions among markets. Asia-Pacific (+43.6%) and Latin America(+54.0%) are growing dramatically intheir use of outsourced logistics. NorthAmerican 3PL revenues are increasingFigure 1: Global 3PL Revenues Up for 2010-2011Region2010 Global3PL Revenues(US$Billions)at a much lower rate (+7.2%), reflectingthe maturity of its 3PL market, whileEurope’s economic challenges can beseen in the modest shrinking (-2.8%) of3PL revenues.Creating Value Moving Backinto FocusDespite the ongoing economicvolatility, shippers and 3PLs seem tobe returning to some level of stability intheir business relationships. Shippersare fine-tuning their objectives ofimproving business practices throughuse of outsourced logistics services,while 3PLs are working to streamlinetheir operations so they can deliver highlevels of service to their customers andacceptable financial results for theirstakeholders.According to Dan Albright, VicePresident at Capgemini Consulting,“3PLs and their customers have hadtheir ‘heads-down’ for some time asthey are engaging in individual andcollective efforts to enhance theirbusinesses through the effectiveprovision and use of outsourcedlogistics services.”2011Global 3PLRevenues(US$Billions)PercentChange 2010to 2011North America $ 149.1 $ 159.9 + 7.2%Europe 165.1 160.4 - 2.8%Asia-Pacific 157.6 191.1 + 21.2%Latin America 27.5 39.5 + 43.6%Other Regions 42.3 65.2 + 54.0%Total $ 541.6 $ 616.1 + 13.7%Source: Armstrong & Associates, 2012
8 2013 THIRD-PARTY LOGISTICS STUDYTwo other high priorities for shippersand 3PLs are driving supply chaininnovation as well as mitigating oreliminating supply chain disruption.Organizations that do either or bothof these successfully create criticaldifferentiation in the marketplace thatcan drive competitive advantage.The study team explores both ofthese in-depth as part of this year’sspecial topics coverage. The reportalso briefly considers the critical roletalent management plays in attainingsupply chain innovation and disruptioncapabilities, as well as the drivers andobstacles behind the ongoing gapbetween shippers’ expectations and3PLs’ capabilities when it comes to IT.What Respondents Spend onLogistics and 3PL ServicesShipper respondents devote anaverage 12% of their total salesrevenues to logistics, and an average39% of that goes to outsourcinglogistics (Figure 2). While the 12%remains constant from previousstudies, the 39% devoted tooutsourcing is down only slightlyfrom the 42% reported in last year’sstudy. Total logistics expendituresinclude transportation, distribution,warehousing, and value-addedservices. Considering Armstrong &Associates’ estimated and projectedincreases to global 3PL revenues citedin Figure 1, these percentages supportthe finding that global markets for 3PLservices are expanding.Figure 2: Outsourcing Spending Patterns Persist80%70%60%50%40%30%20%10%0%15%12%10% 12% 12%Total Logistics Expendituresas a Percent ofSales Revenues39%33%55%31%39%Percent of Total LogisticsExpenditures Directedto OutsourcingFigure 2 also shows dramaticdifferences across geographies inthe percentages of transportationand warehousing spend managedby third parties. Shipper respondentsreport that on average, outsourcingaccounts for 54% of transportationspend, but these range from a lowof 42% in North America and 45% inAsia-Pacific to 60% in Latin Americaand 71% in Europe. Asia-Pacific’s 45%is down dramatically from the 60%shippers reported last year, which maybe explained by a modest decrease inAsia-Pacific shippers that are reportingincreased use of outsourcing logisticsservices this year.The percentage of shippersoutsourcing warehouse operations isdown slightly across all geographiesexcept Europe, where it grew from42% to 48% this year. This increasedoutsourcing of warehouse operationsmay be explained somewhat by thesignificant economic issues that haverecently been impacting Europeanbusiness activity.Outsourcing OutpacesInsourcingSimilar to other industries, shippers(customers) sometimes revisit theirdecisions to use 3PLs, even over shortperiods of time. Overall, however,results of this study suggest that farmore companies increase their logisticsoutsourcing in any given year than54%42%71%45%60%Percent of TransportationSpend Managed byThird Parties36%31%48%32%30%Percent of WarehouseOperations Spend Managedby Third Partiesthose that bring most logistics servicesback in-house – which helps to explainsome of the overall increase in global3PL revenues discussed earlier. Themeasurement of these outsourcing/insourcing trends tend to remain fairlystable year over year:- Outsourcing: 65% of shipperrespondents report increases in theiruse of outsourced logistics servicesthis year, compared with 64% and65% in the last two years. NorthAmerican growth lags the otherregions by a modest amount. Threequartersof 3PL respondents see anincrease in outsourcing among theirshippers.- Insourcing: Generally, insourcingremains less prevalent, with 22% ofglobal shippers indicating they arereturning to insourcing many of theirlogistics activities. One region thatevidences significant change fromprevious results is Europe, whichdropped from 18% last year to 12%this year. 3PL reports of shippers ingeneral returning to insourcing manyof their logistics activities remainsconsistent at 37%.- Reducing or Consolidating3PLs: The ongoing trend towardstrategic sourcing that is occurring atmany shipper firms shows up in thenumber who report they are reducingor consolidating the number of 3PLsthey use, an average 58% globally.This is consistent with previousyears’ findings and remains prettyconstant across geographies as well.Interestingly, 3PLs are more likelythan shippers (72%) to report that ingeneral they see shippers reducing orconsolidating the number of 3PLs theyuse.So while rates of change tooutsourcing/insourcing appear toremain stable in recent years, thegeneral trend among global shippersis to increase their use of outsourcedlogistics services.All Regions North America Europe Asia-Pacific Latin AmericaSource: 2013 Third-Party Logistics Study
Current State of the 3PL Market9Measurable Satisfaction andSuccess3PLs are primarily meeting shippers’expectations. An average of 86%of shipper respondents view their3PL relationships as generallysuccessful, compared with 94% of3PL respondents. Shippers’ ratingsare consistent across North America(90%), Europe (90%), and Asia-Pacific(85%). But success ratings for LatinAmerica slipped from 87% last year to76% this year. Some of this drop maybe attributed to the dramatic increasereported earlier in the use of 3PLs byshippers in Latin America. Nearly all(94%) 3PLs respondents view theirrelationships with shippers as havingbeen successful.As seen in Figure 3, shippers reportimpressive results through use of 3PLservices, numbers that have remainedrelatively consistent over time. Wherewe do see some variation year overyear is in order fill rate and orderaccuracy. While shippers do attributeimprovement in these factors to the useof 3PLs, the percentages themselvesare somewhat lower than we havereported in the past few years. Thismay be related in some way to theprevailing global economic uncertainty,a topic that warrants closer examinationin future Annual 3PL Studies.Figure 3: 3PLs DeliveringMeasurable Benefits to ShippersResultsAllRegionsLogistics Cost Reduction (%) 15%Inventory Cost Reduction (%) 8%Logistics Fixed AssetReduction (%)Order FillRateOrderAccuracy26%Changed From 58%Changed To 65%Changed From 67%Changed To 72%Source: 2013 Third-Party Logistics StudyAs with past years, just over half ofshipper respondents (56%, down from60% last year) report their use of 3PLshas led to year-over-year incrementalbenefits, while 87% of 3PL providerssay their customers’ decisions to use3PL services has led to year-over-yearbenefits. The biggest declines are inAsia-Pacific (60% to 51%) and LatinAmerica (63% to 48%) – also indicatorsthat those regions are at a differentpoint in the maturity of 3PL usage thanNorth America and Europe.The Challenge of Enhancing3PL-Shipper RelationshipsSince this study began including 3PLswith their own version of the surveyfour years ago, a pattern has emergedjust like the one above: 3PLs’ ratings ofvarious aspects of their own capabilitiesand relationships tend to be higherthan those given to them by shippers.Their ratings of shippers, however, arenot always quite so high. That certainlyapplies for these 3PL characteristics:- Openness, transparency andgood communication: Similarto last year the 2013 3PL Studysurvey showed 71% of shipperrespondents are satisfied with3PLs’ openness, transparency,and communication. But just 63%of 3PLs respondents are satisfiedwith these characteristics in theircustomers, creating an opportunityfor improvement.- Agility and flexibility toaccommodate current and futurebusiness needs and challenges:Nearly all (97%) 3PLs feel that theircustomers expect these qualities intheir 3PLs. But just 67% of shipperrespondents judge their 3PLs assufficiently agile and flexible – anotheropportunity for enhancement.A popular topic in 3PL-shipperrelationships is the ability forparticipants in the logistics outsourcingarena to reach the highest levels onthe maturity curve when it comes to3PL-shipper relationships. In the throesof the recession, there were somesigns that shippers were becomingmore open to newer ideas that wouldimprove efficiency and effectivenessin innovative ways, but issues aroundtrust, risk, and even technical obstaclesslowed adoption.Perhaps for those reasons, as wellas some improvement in economicconditions, our research reveals recentdeclines in the openness of someshippers to more innovative 3PLshipperarrangements:• “Gainsharing” between 3PLsand shippers is down. Two yearsago, more than half of shippers(56%) reported having engaged ingainsharing arrangements with 3PLs.Last year it fell to 47% and this yearit’s 37%. The lower percentagesseem to be driven by year-over-yearreductions in Asia-Pacific (46% to35%) and in Latin America (a verystriking 54% to 34%). Shippers inthese regions appear to be morecomfortable with fee-for-servicearrangements, rather than incentivebasedarrangements. More thanhalf of 3PLs respondents (54%) saythey have engaged in gainsharingagreements with customers,consistent with past reports.• Interest in collaboratingwith other companies, evencompetitors, to achieve logisticscost and service improvementsis also down. This strategy has notbeen wildly popular during the yearswe included it in the survey, withjust 41% of shipper respondents thisyear reporting use of collaborationto achieve logistics cost and serviceimprovements compared to 44% inlast year’s study. Our interpretation isOur research revealsrecent declines in theopenness of someshippers to moreinnovative 3PLshipperarrangements.
10 2013 THIRD-PARTY LOGISTICS STUDYnot that shippers regard collaborationas unimportant, but rather thatmany 3PLs and shippers addressedcollaboration first by seeking toestablish an industry standard,rather than initially involving only asmall number of partners to provethe concept, and subsequentlyexpanding the resulting platform toothers.As indicated in the next section, manyshippers prefer 3PL relationships thatare tactical and/or operational ratherthan strategic, making approachessuch as gainsharing and collaborationless of a fit with their current methodsfor managing 3PL relationships.3PLs’ Advanced CapabilitiesLess TappedWhether it’s disinterest or the difficultlyin overcoming trust and risk obstaclesthat is stalling progress of 3PL-shipperrelationships along the maturity curve,the evidence of such stagnation showsup each year in the list of 3PL serviceofferings and those services shippersused. This year, the two are combinedinto Figure 4 to reveal the extent of thecontrast.Typically, 3PLs develop a substantialnumber of services to respondeffectively to customers’ logisticsneeds. Yet each year, we findtransactional, operational, and repetitiveactivities tend to be the most frequentlyoutsourced. These include internationaland domestic transportation (76%and 71% across all regions studied),warehousing (63%), freight forwarding(53%), and customs brokerage (52%).The less-frequently used 3PL servicestend to be somewhat more strategic,customer-facing, and IT-intensive, suchas order management and fulfillment(16%), IT services (13%), supply chainconsultancy services (10%), fleetmanagement (8%), customer service(10%), and LLP/4PL services (8%).Another little-used 3PL offering issustainability/green supply chainrelatedservices (6%). Green supplychain has seen varying levels of interestsince we studied the topic closely forthe 2008 3PL Study. This year, 52% ofshippers say fuel efficiency and carbonemissions have become an importantpart of their 3PL procurement decisionFigure 4: 3PLs Offer More Logistics Services than Most Shippers UseShipper Percentages3PL PercentagesOutsourced Logistics ServiceAllRegionsNorthAmericaEurope Asia-Pacific Latin AmericaInternational Transportation 76% 64% 86% 79% 82% 71%Domestic Transportation 71 67 81 76 61 88Warehousing 63 61 72 59 51 83Freight Forwarding 53 54 60 46 47 64Customs Brokerage 52 52 57 44 57 54Reverse Logistics (defective, repair, return) 26 27 31 23 19 60Cross-Docking 25 29 31 18 19 64Product Labeling, Packaging, Assembly,Kitting25 25 31 21 20 65Transportation Planning and Management 22 24 27 19 15 70Inventory Management 19 16 15 21 17 64Freight Bill Auditing and Payment 18 32 13 11 5 34Order Management and Fulfillment 16 20 18 16 9 65Information Technology (IT) Services 13 16 16 14 9 50Service Parts Logistics 12 11 14 12 12 39Customer Service 10 8 7 17 14 67Supply Chain Consultancy Services Providedby 3PLs10 14 7 9 9 56Fleet Management 8 8 8 8 9 26LLP (Lead Logistics Provider) / 4PL Services 8 8 17 4 4 39Sustainability/Green Supply Chain-RelatedServices6 3 7 6 6 31Source: 2013 Third-Party Logistics Study
Current State of the 3PL Market11processes. But just 26% of shipperrespondents rely on 3PLs to providevisibility to fuel efficiency and carbonemissions information. The biggestchanges occurred in Asia-Pacific,where the percentages dropped andare now more aligned with the figuresfor all regions. In Latin America 60% ofshippers now see this data as important,but fewer (15%) are relying on 3PLs toprovide this type of information.3PLs’ IT Underdelivering, butAlso UnderusedShippers’ propensity to view 3PLstactically rather than strategically isalso reflected in their views of 3PLs’IT capabilities. As seen in Figure 5,the IT capabilities shippers feel 3PLsmust have relate moreso to executionorientedactivities and processessuch as transportation, warehouse/DC management, electronic datainterchange, visibility, etc., whilecapabilities that support more strategicand analytical services are lower-ranked.For 11 years this study has trackeda measurable difference betweenshipper’s opinions on whether theyfeel information technologies are anecessary element of 3PL expertise,and whether they are satisfied with their3PL providers’ IT capabilities. We havereferred to this as the “IT Gap.”Figure 6 reveals that over the long term,this gap has narrowed significantly.However, over the last three yearsthe gap appears to have stabilized tosome degree. Interestingly, 70% of 3PLrespondents feel their customers aresatisfied with the IT services providedby 3PLs. Please see the IT Gap section,which explores some of the driversbehind shippers’ expectations of 3PLcapabilities as well as factors that inhibitclear communication between shippersand 3PLs.Figure 5: Shippers Still Prioritize Execution-Oriented 3PL IT CapabilitiesInformation TechnologiesPercentagesReported ByShippers3PLProvidersTransportation Management (Execution) 72% 84%Electronic Data Interchange (Orders, AdvancedShipment Notices, Invoicing)68 79Transportation Management (Planning) 67 80Warehouse/Distribution Center Management 64 78Visibility (Order, Shipment, Inventory, etc.) 60 75Web Portals for Booking, Order Tracking, InventoryManagement, and Billing59 72Bar Coding 50 60Transportation Sourcing 45 58Global Trade Management Tools (Customs Processingand Import/Export Document Mgt.)43 42Customer Order Management 41 64Collaboration Tools (SharePoint, Lotus Notes, VideoConferencing, etc.)32 41Supply Chain Planning 30 59Network Modeling and Optimization 30 44Supply Chain Event Management 26 49Advanced Analytics and Data Mining Tools 26 39RFID 24 36Yard Management 17 28Source: 2013 Third-Party Logistics StudyFigure 6: The “IT Gap” Stabilizing100%80%60%40%20%0%89%27%85%33%91% 90% 92% 92% 92%42% 40%35%42% 37%88%42%94% 93% 94%54%54% 53%02 03 04 05 06 07 08 09 10 11 12IT Capabilities Necessary Element of 3PL ExpertiseShippers Satisfied with 3PL IT CapabilitiesYear“IT Gap”Source: 2013 Third-Party Logistics Study
122013 THIRD-PARTY LOGISTICS STUDYThe Alternative View: Thoughtsfrom Non-Users of 3PL ServicesThe Annual 3PL Study has long invitedshippers who classify themselves asnon-users of 3PL services to providesome insight into their (current)decision not to outsource. Figure 7features a seven-year look-back at thepercentages of non-users indicatingwhy they are not currently using orconsidering the use of 3PL services.Top-ranked reasons continue tobe a feeling that logistics is a corecompetency of the organization, abelief that cost reductions would notbe realized through outsourcing, andshippers viewing logistics as “tooimportant to consider outsourcing.”It is interesting to note that the reasonsfor non-users electing not to use3PLs have diminished over time.For example, from 2006 to 2008 thepercentages of shippers selecting“logistics is a core competency at ourfirm” as a reason not to outsource were38%, 37% and 45%, respectively. Thiscontrasts markedly with data for 2010(19%), 2011 (19%), and 2012 (15%).This suggests two things: First, overtime there are fewer reasons why firmschoose not to outsource. Second, inthe past, non-users had more reasonto question 3PLs’ capabilities andcompetencies. Now, they seem to beconceding that 3PLs have improved –but they still feel they can do it better.The reasons for nonuserselecting notto use 3PLs havediminished over time.Figure 7: Reasons for Not Using 3PLs Change Over TimeReasonMost Frequently Occurring(Yearly Rankings and Percent Shippers Indicating Reason)2013 2012 2010 2009 2008 2007 2006Logistics Is a Core Competency At Our Firm1(15%)1(19%)1(19%)2(27%)1(45%)1(37%)1(38%)Cost Reductions Would Not be Experienced2(15%)3(17%)2(15%)1(32%)2(33%)2(36%)2(31%)Logistics Too Important to Consider Outsourcing3(12%)2(18%)4(13%)3(25%)4(30%)3(28%)6(17%)Service-Level Commitments Would Not Be Realized4(9%)6(12%)5(11%)5(23%)5(22%)3(28%)5(20%)Corporate Philosophy Excludes the Use of Outsourced LogisticsProviders5(8%)8(8%)7(9%)7(16%)7(13%)7(17%)7(16%)We Have More Logistics Expertise Than Most 3PL Providers5(8%)7(9%)6(10%)6(17%)6(19%)6(21%)4(20%)Control Over the Outsourced Function(s) Would Diminish7(7%)5(13%)3(14%)3(25%)3(31%)5(23%)3(29%)Too Difficult to Integrate Our IT Systems with the 3PL’s Systems7(7%)4(14%)8(8%)10(8%)- - -Issues Relating to Security of Shipments9(6%)10(5%)11(5%)12(7%)8(14%)9(14%)9(5%)Inability of 3PL Providers to Form Meaningful and Trusting Relationships9(6%)12(3%)12(3%)11(7%)9(11%)10(12%)10(7%)Global Capabilities of 3PLs Need Improvement11(5%)11(4%)9(6%)9(10%)9(11%)8(16%)8(9%)We Previously Outsourced Logistics, and Chose Not to Continue12(3%)9(6%)10(5%)8(14%)- - -Source: 2013 Third-Party Logistics Study
Current state of the 3PL Market13Key TakeawaysKey findings about the Current State ofthe Market for the 2013 17 th Annual 3PLStudy include:• Despite the continuing volatilityof global business environments,3PLs are continuing to improve theirbusiness presence and create valuefor their customers. Aggregateglobal revenues for the 3PLsector continue to rise, particularlyin Asia-Pacific and Latin America.A majority of shipper respondents(65%) are increasing their use of 3PLservices, while 22% are returning toinsourcing some 3PL services and58% are reducing or consolidatingthe number of 3PLs they use.• Total logistics expendituresremain consistent at 12% of salesrevenues for shipper respondents,and they spend on average 39% oftheir total logistics expenditures onoutsourcing. Outsourcing accountsfor 54% of shippers’ transportationspend and 39% of warehouseoperations spend.• Similar to last year’s results, mostshipper respondents (86%) and most3PL providers (94%) view theirrelationships as successful.Shippers report measurable logisticscost, inventory cost and logisticsfixed asset reductions, and just overhalf (56%) say their use of 3PLs hasled to year-over-year benefits.• Shippers are more satisfiedthan 3PLs (71% to 63%) with theopenness, transparency, and goodcommunication in their relationships,and 67% of shipper respondentsjudge their 3PLs as sufficiently agileand flexible.• Our measures indicate that theopenness of some shippers to moreinnovative 3PL-shipper arrangementsappears to be declining somewhat;“gainsharing” between 3PLsand shippers is down andinterest in collaborating with othercompanies, even competitors, toachieve logistics cost and serviceimprovements has also declinedslightly since last year.• Consistent with the past,transactional, operational, andrepetitive activities tend to be themost frequently outsourced, inrelatively consistent numbers, while3PLs’ more strategic capabilities areunderused, including IT capabilities.• Over the long term, the gap hasnarrowed between the value shippersplace on 3PL IT capabilities (94%this year) and how they feel 3PLs aremeeting their expectations (53%),but this IT Gap appears to havestabilized somewhat over the lastfew years.• The variety of reasons drivingthe decisions of shippers notcurrently outsourcing logisticsare diminishing; main reasonscontinue to include a belief thatlogistics is a core competency of theorganization and that cost reductionswould not be realized throughoutsourcing.
14 2013 THIRD-PARTY LOGISTICS STUDYBringing Bright Solutions to Supply Chains
Supply Chain Innovation15Supply Chain InnovationShippers Seek Bold, Disruptive SolutionsInnovation is widely viewed as essentialto the long-term success of anorganization. 3PLs and shippers can’tsimply continue to make incrementalimprovements to what they do now;constant innovation is required todiscover new paths to growth anddifferentiation. But innovation isbecoming more challenging as thelogistics industry matures and marketsbecome more global. Fundamentalchanges are required in 3PL-shipperrelationships to create a foundation forthe innovation shippers need to solvetheir supply chain challenges.The Changing Rules ofInnovationInnovation is defined as the creationof better or more effective products,processes, services, technologies, orideas that are accepted by markets,governments, and society (shippersand 3PLs). New ideas are invented, butit takes innovation to put those newideas to use in the real world.“Many 3PLs are too reactive,” saidQuentin Tse, Formerly VP NetworkStrategic Sourcing, Ericsson NorthAmerica, at the Jersey City AcceleratedSolutions Environment. “They needto become more proactive. 3PLsand customers need embeddedpartnerships where 3PLs are morestrategically involved with theircustomers.”Until recently, 3PLs could demonstrateinnovation by introducing processimprovements, adding technology,improving execution, or offering newservices such as order management,customer service, or transportationplanning. But as seen in Figure 4 inthe Current State of the 3PL Market,many such additional services werenot always created in response to truecustomer demand.The underlying message: Shippersincreasingly believe that these processimprovements are not sufficient todrive their supply chains. Innovationneeds to be more significant, and 3PLsand shippers need to work on gamechanginginnovations to compete intoday’s environment.“All of my 3PLs can innovate. This ispart of the selection of partners,” saysJohan Jemdahl, Vice President, SupplyChain Operations EMEA, at CiscoSystems. “But it’s about disruptiveinnovation and how providers can helpus change the game to improve oursupply chain.”Innovation is the term used in mostsupply chain discussions – and in thequestions put to respondents as partof the survey and used throughout thisreport. But what these shippers arereally seeking is disruptive innovation. Adisruptive innovation is a new productor service idea that when implementedsignificantly disrupts a market and/or value chain by either simplifying,automating, generating value, orreducing costs. It helps create a newmarket and value network by disruptingan existing market and value networkand displacing an earlier productor service. Examples of disruptiveinnovations include cell phones versuswireline phones, and RFID tagging.What Is ChangingShippers are being pressured bymultiple factors that must be addressedin their supply chains. Competition andpricing pressures are driving them toseek lower labor and manufacturingcosts around the world while alsominimizing the effect of taxes andtariffs. As they are extending to newmarkets for both sourcing and sales,shippers are also constantly revisitingold sourcing decisions and in somecases pulling production closer totarget markets. All of this meanssupply chains are growing increasinglycomplicated and more susceptible todisruption.As a result, shippers are seekingincreasingly relevant supply chaininnovations that reduce costs as wellas add value, supporting needs suchas new product marketing, developingmarket entry, logistics/IT integration,or sustainability initiatives. Several ASEand workshop participants noted thatinnovation is case-specific. “Innovationfor me might not be innovationfor others,” said Graham Wilkie,E-Commerce Supply Chain Directorat Carrefour, at the study workshopconducted in Paris, France.But many of today’s 3PL-shipperrelationships are not set up ina way that fosters innovation.Shippers commonly engage 3PLson only a tactical level, so their 3PLpartners lack real visibility into theirorganization and its challenges.Metrics in place internally andbetween 3PLs and shippers limitor work counterproductively toinnovation. Contract duration and riskmitigation strategies also can limit theopportunities for innovation. “Creatinglong-term governance in a three- tofive-year (contract) cycle does not lenditself to investments in innovation,” saidCarrefour’s Wilkie.
16 2013 THIRD-PARTY LOGISTICS STUDYSome shippers also seem to lackconfidence in 3PLs’ ability to operateat the strategic level necessary fordisruptive innovation. The majority of3PL respondents (89%) to the Annual3PL Study survey believe they are readyto innovate. But just 53% of shippersagree and another 33% are not sure.“There is a constant pressure onconsistent delivery versus time out toinnovate,” said one workshop attendee.Figure 8: Shippers, 3PLs See Themselves as Top Innovation OriginatorsWhere Shippers SayInnovations Come From7%12%17%36%28%Where 3PLs SayInnovations Come From4%11%20%30%35%As seen in Figure 8, shippers and3PLs think of themselves as the largestsource of innovation, and the other asthe second largest source.The ability for 3PLs to drive innovationis not just important to satisfy shippers’evolving needs. It is also necessary for3PLs to remain profitable. At the ASEin Jersey City, NJ, Jim Carey, SeniorVice President Sales & Marketingat Clancy Companies, noted, “Lackof innovation increases the chanceof commoditization. It fosterscommoditization, stagnancy and in theend, obsolescence.”Enriching RelationshipsFortunately, shippers and 3PLs agreeon the factors it takes to developinfrastructure that supports innovation.Shipper respondents (93%) and3PL respondents (89%) are nearlyunanimous in their belief that 3PLsshould have a defined structure forinnovation.Even better, as seen in Figure 9,they also agree on the top drivers forinnovation, although the order is slightlydifferent. Shippers regard a trustingrelationship as the most importantdriver, while 3PLs rank this secondto talent/right people. Operationalexcellence, a culture of collaborativecontinuous improvement, andtechnology round out the top five.Shippers 3PLs IT Companies Consultants OtherSource: 2013 Third-Party Logistics StudyFigure 9: Shippers, 3PLs Relatively Aligned on Top Drivers for InnovationRelationship and Trust47%67%Operational Excellence44%62%Talent/Right People41%71%Technology33%57%Culture of Collaborative Continuous Improvement33%55%Communication31%47%Measurements/Metrics28%42%Financial Incentives (i.e., Gainsharing)43%27%Executive Commitment26%52%Process Integration25%36%Contractual Framework13%21%Exposure to Overall Business Challenges and Drivers13%44%Regulations (Government, Industry, etc.)12%14%0% 10% 20% 30% 40% 50% 60% 70% 80%3PLsShippersSource: 2013 Third-Party Logistics Study
Supply Chain Innovation 17The Current State of the 3PL Marketsection notes a moderate decline ofinterest in mechanisms that somebelieve would improve efficiency andeffectiveness and drive innovation,such as gainsharing and interest incollaborating with other companies,even competitors. Those results areechoed in these findings: Both shippersand 3PLs gave lukewarm rankingto financial incentives as a driver ofinnovation. Contractual frameworkwas rated even lower, with only 13% ofshippers and 21% of 3PLs calling it atop driver.“The contract is a framework forour collaboration, but not the actualcollaboration,” said Cisco’s Jemdahl.“So much is constantly in motion andhappening. There are so many threadsof info/input, and as I used to say,‘Facts aren’t, facts become,’ whichtells us that whatever brought us herewon’t keep us here. We need talentedpeople to navigate, conceptualize andact on all this. Only humans have thatcapability. People are responsible,not a ‘project’ nor a ‘contract’ nor a‘process’.”Relationships That FosterInnovationThe unifying theme of these results isthat it takes true collaborative, strategicrelationships among all partnersto develop the kind of disruptiveinnovations it will take to solve thechallenges facing today’s supplychains. That represents a considerablechange from the way many 3PL-shipperrelationships are structured today.A June 2010 review of current researchon logistics service provider innovationby Christian Busse and Carl MarcusWallenburg, Innovation Management ofLogistics Service Providers, found thatboth 3PLs and shippers can facilitatesupply chain innovation by leveragingorganizational and technology-focuseddrivers:Organizational Drivers:Fostering Collaboration throughStructure: The capacity for 3PLs toinnovate is driven by frequent, repeatedcollaboration with their customers,because frequent contact builds trust,eases communication, and reducesthe instinct for knowledge protection.“More dimensions of relationship bringmore opportunity to innovate,” noteda participant at one of the Annual 3PLStudy workshops.For 3PLs this means shifting toa decentralized structure with aseasoned, operations-focused 3PLrepresentative on site at the shipper’slocation, where 3PL and shippercan devise tailored solutions freefrom bureaucracy and standardizedapproaches. Conversely, the idealmodel for a shipper is to create anInnovation Center of Excellence, athink tank focused exclusively oninnovation. The success of the Centerof Excellence in interacting with internaland external stakeholders to fosterand implement innovation is critical fordriving disruptive innovation.Relationship Governance: Simplyboosting face time isn’t enough,however. Current 3PL-shipperrelationships are too often “singlepoint” and do not bring the right peoplenor the right relationships into play. Aformalized relationship managementapproach sets the stage for how thepartners will drive the business andpromote collaboration. Options include:• A tiered structure that verticallyaligns the 3PL’s and shipper’s topmanagement, mid-management, andworkforce. Each tier examines therelationship’s tactical, strategic, andtransformational performance.• Horizontal, peer-to-peer mappingthat matches employees fromboth the 3PL and shipper in similartiers and roles. Once mapped,communications protocols establishhow each set of peers can discusstier-appropriate items. As companiesbecome more global, horizontalintegration can support morecomplex structures and interfaces.• Embedding Innovation into theOrganization: Perhaps the biggestchallenge in fostering disruptiveinnovation is developing a culturethat promotes and rewards it. For3PLs this often means shifting from aphysical mindset focused on day-todayoperational delivery to one basedon knowledge, including strategycollaboration and innovation. Atransformation management processis a valuable means to create anenvironment that values innovationand embeds it in the vision.Murphy Ho, Regional LogisticsManager, Asia, of Celestica, noted thisat the Hong Kong workshop: “It’s aboutrelationships, relationships between3PLs and shippers and also therelationships within organizations andbetween departments.”Technology driversAdvanced IT and Mobile Solutions:As noted in the Current State of the3PL Market section, the “IT gap”has been reduced by 21% over thepast half-decade. But even with thatimprovement, the gap has stabilizedin recent years, with just 53% of userssaying their 3PL meets expectations.A major frustration is a lack of visibility.Use of SaaS- and cloud-basedsolutions together with robust, realtime,anywhere access to data enabledby mobile apps and smartphoneshold promise for breaking through thisbarrier.Big Data and Analytics: Also offeringgreat potential are technologies togain control of the huge volumes ofdata generated by today’s multifacetedsupply chains. Emerging big datasolutions, paired with robust analyticsengines, will empower both 3PLs andshippers to find meaningful patternsand trends in data. That visibility isa key ingredient to revealing newopportunities for innovation.“Managing the balance betweenvisibility and data is critical to 3PLsand shippers,” says Leanne Hill, VicePresident, Global Supply Chain, DutyFree Shoppers. “Getting this right canseparate high-performing relationshipsand drive supply chain success, butto be successful in this area requiresclose collaboration between shippersand 3PLs.”
182013 THIRD-PARTY LOGISTICS STUDYSocial Media: A growing numberof companies are learning toleverage social media to enhancecommunication across the supplychain. According to Social CRMin the Supply Chain, a fall 2011report from IDC Research Services,logistics companies using socialmedia identified significantly morebenefits than non-users, especiallyaround communication and trackingindustry trends. A substantial 88% ofrespondents reported time savingsgreater than 10% using social media,and 60% said it improved theirsatisfaction with a supply chain vendoror partner somewhat or to a greatextent. Social media can potentiallyfacilitate the previously addressedhorizontal integration model forrelationship governance.Israel-based global genericpharmaceuticals leader Teva has usedsocial media tools to create a virtualsupply chain community for use byinternal operations professionals andexternal suppliers, according to the IDCreport. The spontaneous discussionfostered by social media led to animprovement in upstream supply leadtime from 15% to 60%, and operationalcycle time improved by 40% in fourmonths.Funding InnovationImplementing the cultural and technicalinfrastructure to create an environmentthat supports development of disruptiveinnovation requires considerableinvestment. As seen in Figure 10,shippers assert that they are willing topay 3PLs for the required investment.Interestingly, despite its relativeunpopularity, shippers cite gainsharingas their chief means to fund thisinvestment (49%), followed by additionalbusiness and pay for performance.3PLs agree that shippers are willingto pay them for innovation, but seeadditional business as the leadingmethod (43%).Figure 10: Shippers and 3PLs Agree on Top Funding Source for InnovationI Am Willing to Pay My 3PL for Innovation39%36%31%19%5%Source: 2013 Third-Party Logistics StudyYes -GainsharingYes -Additional BusinessYes -Bonus for PerformanceShippersSupply Chain Innovation: KeyTakeaways• Fundamental changes are requiredin 3PL-shipper relationships to createthe foundation for truly disruptiveinnovations shippers need to solvetheir supply chain challenges.• Shippers and 3PLs agree on thetop drivers for innovation, althoughin different order. These arerelationship and trust, talent/rightpeople, operational excellence, aculture of collaborative continuousimprovement, and technology.Arriving at disruptive innovationsrequires true collaborative, strategicrelationships among shippers and3PLs.Not sureNo3PLsShippers are Willing to Pay 3PL for Innovation13%19%19%43%49%• Shippers and 3PLs can facilitatesupply chain innovation by leveragingorganizational drivers such asfostering collaboration throughstructure, relationship governance,and embedding innovation into theorganizations as well as technologyfocuseddrivers: advanced IT andmobile solutions, data and analytics,and social media.• Shippers assert that they arewilling to pay 3PLs for the requiredinvestment in innovation.It’s about relationships, relationships between3PLs and shippers and also the relationshipswithin organizations and between departments.
Supply Chain Innovation19
202013 THIRD-PARTY LOGISTICS STUDYThe IT GapShippers feel strongly that IT capabilitiesare at the core of a 3PL’s ability to providevalue, as seen in Figure 6 in the CurrentState of the 3PL Market section. Thisyear’s survey found nearly 25% of 3PLsare responding aggressively to fulfill thisneed, describing themselves as willingto adopt technologies while they arerelatively new and risky — while 52% of3PLs call their IT investments mainstreamand 26% call them conservative.Yet the difference between what shippersfeel is important and their ratings oftheir 3PLs’ current IT capabilities hasstabilized at around a 40-point gap.Shippers are much less likely to call 3PLinvestments aggressive (12% vs. 23% for3PLs), and 35% say they’re conservative.It’s possible that 3PLs are simply notfully informing shippers about their ITcapabilities. However, it is more likely thatshippers are seeing what they have andfinding it lacking.Similar to the overall 3PL-shipperrelationship, shippers are most likely tocall their relationship with their 3PL’s ITgroup project-focused (46%) or tactical(29%), and 14% even describe therelationship as contentious (Figure 11).Just 11% of shippers say it’s strategic,while 3PLs are much more likely (23%)to describe the relationship their ITdepartment has with their customers asstrategic.Shippers want 3PLs to offercomprehensive and easily integratedsolutions. Yet there is an approximately20% difference between shippers’satisfaction with basic IT services and3PLs’ ratings of their own capabilities,such as for IT operations, applications,integration and staffing (Figure 12). Theresulting position shows a significantopportunity for 3PLs to improve theirtechnical relationships with shippers. Andin fact, 55% of shippers say they want todevelop a strategic technical relationshipwith their 3PLs.
The IT Gap21Figure 11: Relationship between Shippers and 3PL’s IT GroupShippers’ Current View14% 11%12%23%46%29%Source: 2013 Third-Party Logistics Study29%StrategicTacticalProject-FocusedContentiousFigure 12: Percentage of Response of Above Average or Better Ratings for3PL Capabilities34%Shippers’ Desired view16% 5%50%3PLs’ Current ViewReliability (e.g., Service Level Compliance)46%67%Staffing - Skills and Talent38%59%Information Transparency (e.g., Visibility, Analytics, etc.)36%63%On-boarding Time & Effort35%52%Technical Infrastructure40%34%Applications34%55%Support (e.g., Help Desk, Call Center)33%49%Methodologies and Governance31%39%Integration (B2B, Application to Application)28%50%IT Operations27%49%IT Consulting Services23%39%0% 10% 20% 30% 40% 50% 60% 70%Source: 2013 Third-Party Logistics Study3PLsShippers31%The good news is that 3PLs arehearing the call. Just over half of 3PLrespondents say they are likely tomake large investments in modernizingapplications, and 65% plan on buyingsolutions to reduce client on-boardingcosts, time, and effort.But these investments must not bemade in a vacuum. 3PLs cannot makethe right investments until they havea clear picture of their customers’supply chains and the challenges theyface. Some 3PLs regularly invite theircustomers to collaborative meetings,where these shippers share the issuesthey are struggling with and the 3PLdevelops a solution that they can thengo market to other companies, suchas developing an execution-based intransitvisibility capability.A major question is what investment intime and resources is required by bothparties to actually develop a strategic ITrelationship, and is there enough valuerealized to justify the investment? Thesequestions challenge the transactionalrelationship that often exists today,focused on KPIs and cost. Morein-depth and timely communicationsharing regarding shippers’ challengesand opportunities is required to align3PLs’ priorities and investments.Ultimately, a collaborative approach toIT planning ensures 3PLs are investingin what shipper’s value, instead ofwhat they think they value. Greatercollaboration ensures a more strategicrelationship.As seen in the innovation section, ITremains a key aspect and opportunityto drive innovation. With the rightrelationship governance structure thatincludes IT, collaboration betweenshippers and 3PLs will further improveshipper satisfaction with 3PL ITofferings, driving increased innovationand improving the overall relationship.
22 2013 THIRD-PARTY LOGISTICS STUDYResponding to and Preparing Against Disruptions
Supply Chain Disruption23Supply Chain DisruptionRisk is Increasing, Executive Support and Funding are LaggingMillions of dollars’ worth of airplanefuselage assemblies move throughmanufacturing lines at a SpiritAerosystems plant in Topeka, Kansas.When the plant’s managers receiveda pinpoint warning on April 14, 2012,from AccuWeather that an F3 tornadowas on track to hit the facility’s mainbuilding in 24 minutes, they jumpedto action, taking people out of harm’sway and securing critical parts. Thebuilding sustained damage, but Spiritexperienced no injuries or inventorylosses.Unfortunately such success storiesare not always common – and arebecoming even less so. Economiclosses from supply chain disruptionsincreased 465% from 2009 to 2011,reaching a staggering $350 billion,according to the Business ContinuityInstitute. In that time the number ofcompanies experiencing a supply chaindisruption grew 15%.Figure 13: Natural Disasters Top Common Causes of DisruptionNatural Disaster/Extreme Weather/PandemicExtreme Volatility in Commodity, Labor or Energy Prices/SupplySignificant Change in Export/Import Regulations/RequirementsInformation/Communication DisruptionUnforeseen Regulatory/Legal ChangeSupplier/Partner ContingencyTerrorism/Piracy/Organized Crime/CorruptionSource: 2013 Third-Party Logistics StudyInfrastructure IssuesPolitical/Social Contingencymost effective risk mitigation tactics.So when disruptions inevitably occur,they’re caught short.5%14%52%46%33%38%29%34%48%47%58%53%59%0% 10% 20% 30% 40% 50% 60% 70%3PLs32%35%48%Shippers58%69%inputs. Shippers say extreme volatilityin commodity, labor, or energy prices/supply is their second largest source ofsupply chain disruption.It appears that disruptions areoccurring more frequently and makinga bigger impact, affecting morecompanies and customers globally.Globalization means supply chains aremore extended, increasing vulnerability.At the same time, companies arereacting to the economic crisis bydrawing down inventories, meaningless safety stock when a disruptionoccurs. Centralized distribution hasfocused more production and inventoryin fewer places, and in some segments,product lifecycles are growing shorter;both magnify the impact. Companiesreport taking the biggest hit inproductivity, but other significant painpoints include higher work costs, lowerrevenues, and a damaged reputationwith customers.Tighter budgets also mean lessmoney devoted to developing andimplementing mitigation strategiesand solutions. That means fewerorganizations are implementing theMultiple Sources of RiskTornadoes and tsunamis may be themost dramatic of disasters, but theyare far from the only sources of supplychain disruption; breakdowns in IT,energy, or communications are alsoat fault, as well as failures in businessoperations, and political and economicfactors. Infrastructure deficienciescaused massive power outages in Indiain late July 2012, for example.Shippers responding to the Annual 3PLStudy survey report adverse weatheris the biggest source of supply chaindisruptions (Figure 13). Just threeevents — the Japanese and NewZealand earthquakes and flooding inThailand – accounted for $58 billion(USD) in insurance losses globally,according to the Business ContinuityInstitute.Sudden resource shortages or inflationand currency fluctuations contributeto rising supply chain costs or missingTransportation infrastructure disruptionswere another notable cause: 3PLrespondents rated this as their numberone source of supply chain disruption.Business operations, both internaland external, can be another frequentcause: A key person in an organizationmoves to another company, takingall process know-how with them, forexample, or a component doesn’t meetquality needs, halting production.Unplanned outages in IT orcommunications systems – includinghacking – affected more than half the3PLs responding to the Annual 3PLStudy survey and 40% of companiesstudied by the Business ContinuityInstitute. Research published by CATechnologies in November 2011, TheAvoidable Cost of Downtime, foundtwo of the three corporate departmentsmost impacted by an IT outage wereoperations and procurement, bothsupply chain-related.
24 2013 THIRD-PARTY LOGISTICS STUDYPolitical and economic factors are alsocauses of disruption. For example, in2011 civil unrest from the “Arab Spring”impacted firms that rely on suppliers inMiddle East or North African nations,particularly those that need the rareminerals and fossil fuels found in theseregions.Supply Chain ComplexityIncreases RiskSupply chains are more vulnerable thanever before to negative impact fromdisruptive events. Logistics networkshave expanded to new locations forboth sourcing and sales; this oftenleads to increased outsourcing andmore partners. A longer geographicreach also increases the odds that atleast one location along the supplychain will experience a disruptive event.In its report, Supply Chain Resilience2011, The Business Continuity Institutefound 61% of supply chain disruptionscame from a direct supplier and 39%from a supplier’s supplier. However,75% of companies only monitortheir Tier One suppliers. This meansmost companies do not have directcommunication with the source of twoof every five disruptions.At the 2013 Annual 3PL Studyworkshops, many participants notedthat they typically address an unwieldynumber of suppliers and sub-suppliersby assigning responsibility for riskmitigation of supplier’s suppliers to theirTier One suppliers in contracts. But inpractice, Tier One supplier compliancewith this requirement is rarely verifiedand audited, and is tested even lessfrequently. Companies lack a tacticalapproach to identifying the biggestrisks across their supply networks, aswell as processes for actively mitigatingand monitoring these risks.In interviews with earthquake-impactedcompanies in early 2012, the BusinessContinuity Institute found that 29%recovered within a week, 24% requiredup to a month and 41% took one tosix months to get back to normaloperations, according to Global SupplyChain Resilience: Lessons Learnedfrom the 2011 Earthquakes.Opportunity to Improve RiskMitigationBoth shippers and 3PLs are sensingthe increased risk of disruption. Nearlyhalf of 3PLs and shipper respondentsagree that their organizations areputting a greater focus on supply chainrisk and mitigation than five years ago,and another 29% of shippers and 27%of 3PLs call the focus significantlygreater.As seen in Figure 14, partnerships,business continuity planning, supplychain visibility tools, and employeetraining/talent management are thetop strategies companies currentlyuse to mitigate their supply chain risk,although shippers and 3PLs rank thesein a slightly different order. They arealso the top strategies shippers and3PLs are planning to invest in over thenext two years.All are valuable contributors to a soundrisk mitigation strategy. Equally notableare the approaches that are not highlyranked, such as supplier scorecardingand supply chain mapping.Vendor Risk AssessmentGrowing More ComprehensiveCredit worthiness is no longer a sufficientindicator of the risk associated with doingbusiness with a particular vendor. Todaybest practices in vendor risk managementdictate assessing every trading partneragainst multiple financial and nonfinancialrisk categories. Researchconducted by vendor risk detectionservice provider Briefcase Analytics foundthat companies’ top goals for vendor riskdetection are insuring against risk (48%),avoiding surprises (46%), predictingvendor failure (42%), and gaining leveragein negotiations with vendors (37%).Looking beyond credit risk helpscompanies understand how a companyhas achieved its current financial positionas well as its relative risk in multipledimensions. In addition to financial health,a comprehensive vendor assessmentexamines risk areas including businessintegrity; privacy and intellectual property;health, safety, and environment; labor andhuman rights; and sustainability.Business continuity planning rankshighly and is a somewhat common riskmanagement solution. However, theseplans are often one-time projects formany companies. Groups are formedand plans made in the aftermath ofa disruption, but no one is assignedadequate responsibility for maintainingprocesses and monitoring compliance.Over time the commitment fades, andthe company is caught off guard whenthe next disruption ensues.A more advanced solution is thedevelopment of a risk managementorganization. This group does nothave to be large or overly complex, butshould have the skills and experienceto define cross-functional solutions.This approach often produces moreeffective and efficient solutions, notrelying solely on procurement orpartners to identify and execute.Over time the group also spreads theknowledge of risk management so thatin the future more employees considerrisk in their everyday decisions.The most-used tools for vendor riskassessment, according to the BriefcaseAnalytics survey:• Contract clauses (83%)• Physical inspections (69%)• Vendor intelligence data (62%)• Vendor self-reporting (60%)• Vendor codes of conduct (49%)Sources of data on companies of allsizes, both public and private, haveexpanded considerably over the pastseven years. That’s allowing companiesto work toward assessing 100 percentof their trading partners, rather than justpublic companies. Researchers haveidentified more than 600 publicly availabledatabases reporting vendor risk data formore than 50 countries.Risk assessment firms such as BriefcaseAnalytics use advanced technologies anddata-mining techniques on a global basisto help companies mitigate their supplychain risk and inform negotiation withsuppliers.
Supply Chain Disruption 25Fueling the ProblemDespite growing awareness of therisks of supply chain disruption, manycompanies have not followed throughwith significant investment in solutions.Figure 15 reveals that 3PLs andshippers largely agree on the mostcommon reasons for underfunding theirsupply chain disruption mitigation orresponse:• Lack of understanding of availablemitigation tools. It is apparent thatwhile companies acknowledge thefrequency and impact of disruptions,many have done little to investigatethe potential tools that are availableto manage this risk. In most casescompanies depend on partners orbusiness continuity plans for thistask.• Capital unavailable. More than halfof shippers (55%) and 3PLs (57%)plan to invest less than $1 millionon their supply chain disruption/mitigation response capability,despite the increasing organizationalfocus they report on risk mitigation.This relates strongly to the fourthrankedreason for underfunding:lack of executive commitment. It canbe tough to sell the leadership ondiverting budget to something thatmight happen when there are somany competing priorities that mustor will happen.• The feeling that current riskmitigation capability is not aproblem. Often, this belief is aresult of the rather short lifespan ofinstitutional memory. Those whoexperienced the company’s mostrecent supply chain disruptionfirst-hand move on, and those whofollow do not have the same scars ormemories.Several automakers with experiencein managing through the disruptionscaused by the September 11 th attacksand the volcanic ash cloud werequickly reminded of the value of riskmitigation planning following theMarch 2011 earthquake and tsunamiin Japan. The disaster closed down afactory operated by Merck ChemicalsInternational of Germany that serves asthe only source of Xirallic ® pigments,Figure 14: Shippers and 3PLs Aligned on Current and Future MitigationStrategiesPartnershipsBusiness Continuity PlanningSupply Chain Visibility ToolsEmployee Training / Talent ManagementSupplier ScorecardingAdvanced Enterprise Risk Management OrganizationSupply Chain MappingDecision Support ToolsInsuranceDisruption News FeedsSupply Chain Visibility ToolsPartnershipsEmployee Training / Talent ManagementBusiness Continuity PlanningSupplier ScorecardingDecision Support ToolsSupply Chain MappingAdvanced Enterprise Risk Management OrganizationInsuranceDisruption News FeedsSource: 2013 Third-Party Logistics Studyfor three months. As a result, atleast six manufacturers lost a keymarkup opportunity with customersseeking the glittery, more intenseand shiny finish the pigments enable,according to a May 2011 report fromthe Congressional Research Service.Manufacturers with more resilientsupply chains were able to quicklyobtain replacement colors from othersources, while others took longer.Combined with other parts shortages,the incident impacted second-quarterUS production plans by as many as400,000 units.Current Mitigation Strategies14%15%0% 10% 20% 30% 40% 50% 60% 70%3PLFuture Mitigation Strategies8%7%17%15%3PL33%32%32%33%30%33%29%44%41%43%Shipper0% 10% 20% 30% 40% 50% 60% 70%Shipper50%53%69%68%62%61%65%64%67%61%62%56%70%53%52%47%35%38%41%37%27%37%36%36%
26 2013 THIRD-PARTY LOGISTICS STUDYFrom Intent to ActionThe Business Continuity InstituteGlobal Supply Chain Resilience reportrevealed that 70% of companies weremaking changes to their supply chainstrategies in the wake of disruptiveincidents, with another 12% makingsignificant changes. Developing aresilient supply chain, one that containsrisk while enabling business growth,starts with probing questions, such as:• Transparency: Do the membersof the supply chain network shareenough information to deliver value?• Talent: Does the supply chainnetwork have the talent necessaryto innovate and compete in the longrun?• Scalability: Does the supplychain have the ability to increaseproduction based on demand?• Finance: Do suppliers have anyfinancial constraints that inhibit theirability to fulfill business obligations?• Geography: Are suppliers located inunsafe places? Do firms or suppliersover-rely on one specific region orchannel?“We are increasingly seeing riskconsciouscustomers engaging us tomap and evaluate their supply chainnetworks,” says Peter Karel, GlobalHead of Supply Chain Solutions,Panalpina. “It is not only aboutmonitoring the risk, but also about theresilience and effectiveness of theirsupply chains. Ensuring a continuousand effective operation of their supplychain is a critical aspect from the boardroom to shop floor.”Business Continuity Planning:Business continuity plans – notcreated once and put up on a shelf,but actively monitored, measuredand modified – are on the rise. TheBusiness Continuity Institute’s GlobalSupply Chain Resilience: LessonsLearned from the 2011 Earthquakesreport found an increase in the numberof US companies with such plans overthe last five years, from 72% to 84%.The lessons learned through interviewswith companies impacted by theearthquakes include:• Suppliers need to have testedcontinuity plans• Analysis must extend to Tier 2 and 3suppliers, when appropriate• A human behavior-based businesscontinuity approach is essential, inaddition to a technical oneRisk Management Organizations:The secret to making a businesscontinuity plan a living documentis to assign clear responsibility forit. Risk management organizationswork best as specifically trainedprofessionals that work as extensionsof the functional teams, rather than asbureaucratic outsiders. They own theplan and work collaboratively with theteam and partners to ensure ongoingprocesses and decisions are in line withits tenets, educating team membersand developing a cross-functional riskmanagement culture.Supply Chain Visibility Tools:Members of the supply chain networkmust share enough information toensure complete visibility into statusand events.Just hours after Japan’s 2011earthquake and tsunami, constructionequipment maker Caterpillar was ableto determine which containers andinventory had remained in an affectedport and which had made it onto aship and out of harm’s way, and adjust• Reliance: Is the firm relying toomuch on certain suppliers throughoutthe supply chain?• Regulation: Do laws and regulationsimpact how firms and suppliersoperate in certain areas?A complete mitigation and continuitystrategy often includes the following:Supply Chain Mapping: Supply chainmapping is an essential first step tomeasuring and monitoring risk; if youdon’t know you have a Tier 3 supplierin Thailand, you don’t know that aflood there will impact your business.Mapping identifies the most criticaloperations and the points of greatestvulnerability.Partnerships: Companies bestequipped to react rapidly to supplychain disruptions are those that takea collaborative approach to managingtheir supply chains. Third-party logisticscompanies can be invaluable partnersin helping shippers assess their supplychain risks and formulate plans to makethem more agile and resilient.Figure 15: Shippers and 3PLs Have Many Reasons for UnderfundingMitigationLack of Understanding of Available Tools forSupply Chain Disruption Response/MitigationLack of Available CapitalsSupply Chain Disruption Mitigation/ResponseCapability has not been a ProblemLack of Executive SupportInability to Build Business Case for InvestmentsLack of Partnership Support (e.g., Suppliers,Buyers, 3PLs)Source: 2013 Third-Party Logistics StudyOther5%7%0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%3PLFuture Mitigation Strategies30%26%Shipper36%37%39%35%42%42%43%41%46%49%
Supply Chain Disruption 27production schedules to keep plantsrunning. Competitors were not sowell-prepared and had to shut downproduction, according to Supply ChainManagement.Supplier Scorecarding is avaluable tool for ensuring compliancewith mitigation requirementsand collaborating on continuousimprovement efforts.Insurance: Insurance and option/future pricing are increasingly beingused to mitigate and recoup losses.For example, companies in the foodindustry are more often purchasingrecall insurance as regulation increases.Another common strategy is requiringsuppliers to be sufficiently insured.Companies that have successfullyimplemented effective supply chainmitigation solutions often apply newQuantifying Supply ChainDisruption RiskSources of supply chain disruptionare well-established. As companieslook to investigate and understandpotential solutions to supply chaindisruption, service providers suchas FreightWatch International offersupport to companies’ risk mitigationplans, helping them develop realmitigation strategies to quantify therisk. These service providers modela company’s supply chain, assessingrisk and quantifying the rate at whichshipment delays can be expected. AFreightWatch assessment includes sixtypes of supply chain disruption risk:Crime: Criminal activity is a majorconcern for some industries in certainregions of the world. This measureanalyzes the rate at which crime canaffect the flow of goods based oncommodity type and routing.Terrorism: This assessment predictsthe likelihood of a disruption based onhistorical events and known terroristgroups in a country or region.Infrastructure: This assesses thestate of the infrastructure used to moveshipments, and likelihood for disruption.thinking to traditional mitigationstrategies. For example, instead ofconsolidating suppliers, they may shiftto a more diverse set of suppliers thatoffer varied levels of risk. They maypursue a deep knowledge of suppliers,instead of the basic knowledge theyhave now. And they may replace a justin-timestrategy for all inventory withone that selectively stockpiles the mostcritical items and components.Among the lessons from recent naturaldisasters is that a victim mentalityis not an appropriate response tosupply chain disruption. A focusedassessment of the current stateof the network is the first step tounderstanding the risk, followed bya well-considered plan of attack toboth mitigate the biggest sourcesof vulnerability and respond whendisruptions occur.Government Regulation: Thismeasure provides insight into thepotential for delays due to governmentregulations, such as unpredictablecustoms procedures.Labor Unrest: This assessmentprovides insight into the historicalevents in a specific region, such asport strikes or protests that cause roadclosures, and provides a rate at which ashipper can expect delays.Natural Disasters/Weather: Thisanalysis provides insight into the annualweather patterns of a given region anda rate at which a shipper can expectweather to disrupt the supply chain.The Monitoring ProcessThe process starts by documentingthe transportation lanes to understandhow shipments are moving from originto destination. This includes identifyingroutes and modes of transportation,and from there all the possibleroads, ports, airports, railroads, andtransshipment locations a company’scargo will pass through. Once thisinformation is gathered, FreightWatchapplies the six lenses of supply chaindisruption, providing clarity into thelikelihood of disruption.The experiences of companies thathave successfully managed throughdisruptions with proactive, disciplinedplanning prove that a sound mitigationstrategy can both avoid costs andcreate a competitive advantage,making supply chains more resilientwithout exorbitant costs.Supply Chain Disruption: KeyTakeaways• The number of companiesexperiencing a supply chaindisruption has increased 15% since2009, due largely to extended supplychains and just-in-time inventory.Disruptions often result in reducedproductivity, higher work costs,lower revenues, and a damagedreputation. In 2011 supply chainlosses hit a staggering $350 billion.Disruptions include natural disastersand breakdowns in IT, energy, orcommunications, as well as failures inbusiness operations and political andeconomic factors.• Despite the increased risk,companies are underfunding supplychain disruption mitigation planning.Developing a resilient supply chainthat balances risk with growthopportunity starts with a rigorousassessment. Partnerships, businesscontinuity planning, supply chainvisibility tools, and employee training/talent management are the topstrategies companies currently useto mitigate their supply chain risk.But these are not as effective withoutthe lesser-used strategies, such assupply chain mapping and advancedenterprise risk management.• Developing a resilient supply chain,one that limits risk while enablingbusiness growth, requires an honestassessment of the current networkfollowed by a well-considered planof attack to both mitigate the biggestsources of vulnerability and respondwhen disruptions do occur.
28 2013 THIRD-PARTY LOGISTICS STUDYTalent ManagementManaging Innovation & Disruption: It takes Talentevery day, in my view,” said StephenFraser, former CEO of Horizon Linesand current Board Member, PODS.“Having the right CIO and IT teamin place and intimately integrating ITand corporate strategy is essential tomeeting demand, retaining customers,and defending/growing market sharethrough differentiation of product andservice delivery. This is no longer amatter of IT ‘enabling’ or ‘enhancing’strategy. IT has become elemental tostrategy.”This commitment is evident in theresearch for the 2013 Annual 3PLStudy. A significant 65% of 3PLs and50% of shippers indicate that employeetraining/talent management/internaland external certifications constitutesome of the top tools they currently useto mitigate and manage supply chaindisruptions. (See Figure 14) A crisis isno time to be dusting off a static actionplan and assigning responsibilities.How to Win the Talent RaceCompanies that make a commitmentto talent management ensure theright talent is in place and preparedto execute on those action plans themoment they are required; 70% of 3PLsand 54% of shippers plan to investheavily in employee training/talentmanagement/internal and externalcertifications over the next two years toaddress supply chain disruption (Figure14).Talent has become a key strategicagenda item in many boardrooms, andCEOs in several industry surveys ranktalent as the most important challengebehind business growth. Amongthe many reasons are the increasingattention on driving innovation andmanaging potential supply chaindisruptors. The right talent is essentialto both.Last year’s 2012 16 th Annual 3PLStudy explored the supply chain talentshortage being experienced by bothshippers and 3PLs. Both groupsagreed that having the right peopleand leadership in place would be thenumber one driver of their companies’success over the next five years. That’swhy talent management – the vigorous,systematic process of connecting aclear, well-defined business strategyto the recruitment, retention anddevelopment of talent – is increasinglyviewed as a strategic agenda item forshippers and 3PLs alike.“Customer demand for integrated andintuitive systems, tuned to their specificindustry and niches, grows louderThese companies know that strongleadership and talent is essential toproperly drive innovation and respondto potential disruptions. However, asillustrated in Figure 16, recruiting theright people is only the beginning.To sustain a high level of businessperformance, organizations must beable to continuously adapt and changeto deal with today’s volatile, complex,and ambiguous market dynamics.When organizations are able to linktheir people strategy to their businessstrategy, they gain the ultimatecompetitive advantage.
Talent Management29“The most critical issue intransportation and logistics is still greatintellectual capital,” said Jack Gross,CEO, Haney Truck Line. “However, itis not just finding potential associates,but applying the talent and abilityof each person to a need within theorganization – not just filling in anorganization chart. Without this senseof worth, really good people will beshort-term employees.”Innovation + Technology =Technical TalentTalent is also essential to supportthe growing demand for logisticsinnovation. Shippers are demandingthat 3PLs increase their valueproposition and invest in innovation.As seen in the Supply Chain Innovationsection, 93% of shipper respondentsagreed that 3PLs should have a definedstructure for innovation. To deliverinnovation, companies require talent.This study has long documented thehigh expectations shippers have of3PLs’ technology. As noted in Figure 6,shippers are nearly unanimous (94%) intheir belief that information technologiesare a necessary element of 3PLexpertise. Yet just 53% are satisfiedwith 3PL IT capabilities – the differenceis known as the IT Gap. Many 3PLs,formed through a series of acquisitionsor grown from family businesses,have refrained from making heavyinvestments in technology for a varietyof technical, cultural, and financialreasons.However, demand for innovation isstarting to change their stance. Inrecent months many leading 3PLs havebeen recruiting experienced CIOs andbest-in-class IT talent in response tocustomer demand. They’re searching inadjacent services businesses as well asin the IT industry itself.Change is underway within shippersas well. In some organizations the ITfunction is being merged with supplychain organizations in recognition of thestrong dependency of logistics on data.Such developments bode well fornarrowing the IT Gap. Increasedattention to developing IT talent on bothsides of the 3PL-shipper relationshippromises to help remove obstacles andincrease the commitment to effectiveuse of IT. Strong talent in IT drivescapabilities both in innovation andmanaging disruption.Figure 16: Effective Talent Management Links People Strategy to Business StrategyBoardEffectivenessCEO &Top TeamEffectivenessIntegratedTalentManagementRecruitmentLeadershipDevelopmentOrganizationTransformationSource: Korn/Ferry International
30 2013 THIRD-PARTY LOGISTICS STUDYPlanning for Future Directions
Strategic Assessment31Strategic AssessmentHere is a brief look at some topicstriggered by the research andcurrent industry trends that are beingconsidered for a closer look in nextyear’s Annual 3PL Study.X-Shoring for Flexibility andAdaptabilityThe world of global commerce isdynamic and volatile and these areamong the factors that are causingmany businesses to reassess theirsourcing, manufacturing, marketing,and logistics strategies. For example,in early 2011 GE moved productionof its energy-efficient water heatersfrom Chinese contractors to its ownfactory in Louisville, Ky., to acceleratecycle time and speed new productlaunches, according to InboundLogistics magazine. According to MFG.com, the number of North Americanproduct manufacturers that actuallyre-shored production was 22% in Q42011, and the number researchingbringing production into or closer toNorth America in Q1 2012 increased by7% to 33%.Such initiatives are intended torebalance the structure and functioningof supply chains to be more flexibleand adaptable — qualities recognizedas essential to compete effectivelyin today’s business environments.While “offshoring” involves conductingbusiness activities sometimes at greatdistances from intended customers intradeoff for other benefits, other termssuch as “near-shoring,” “re-shoring,”and “back-shoring” have emerged torepresent activities that typically occurcloser to consumption. Thus, thisreport introduces the term “X-shoring,”which is intended to describe thegeneral shifting/changing nature oflocational strategies. Use of the “X”suggests that sometimes it will beappropriate to select locations thatbring activities closer to consumptionand at other times put them at greaterdistances from consumption.Current and recent Annual 3PLStudies have looked in depth atseveral topics related to X-shoring,including globalization, emergingmarkets, total landed cost, supplychain innovation, and disruption.Although each of these has broadimplications for both business andsupply chains, our main focus has beenon the perspectives of both users andproviders of 3PL services. As thesetypes of organizations prepare forcontinually changing global businessenvironments, we have observed thatthe issues and challenges they faceare also those faced by businessesas a whole and their trading partners.Given the high stakes that are involved,we feel many questions deserve betteranswers than are currently available,including the following:• Overall, what are the pros andcons of shifting manufacturing,planning, strategic sourcing,logistics management and otheractivities closer to consumption/dailyoperations?• There are reasonably complete listsof costs and benefits that need tobe quantified in a comprehensive,total landed cost (TLC) analysis. Sowhy are many of today’s X-shoringdecisions made on the limited scopeof cost of goods sold (COGS) only,or on a limited number of additionalrelevant costs and benefits?• What impact does a potentiallocation mean in terms of languagesupport, skill set availability,alignment of working hours, andample talent pool to support growthand scale?• One of the premises of makingdecisions in today’s changingbusiness environment is someversion of “change being the onlyconstant.” To the extent that thisis true, then how do we commit toX-shoring decisions that will havean intermediate- to longer-term“shelf-life?”• How do we deal with some of theless-tangible factors that can andshould impact significant X-shoringdecisions? Examples include: risk/quality/service-related costs, impacton innovation, impact on customergoodwill that may be affectedby locational realities, time-zoneadvantages, and the realities ofenvironmental sustainability includingmeasures such as carbon footprint.• Previous Annual 3PL Studieshave documented that 3PLs areviewed as valuable players in themanagement of change as it appliesto businesses and supply chains.So what can be done to encourageshippers and 3PLs to engage in morecollaborative leadership to addresschanging priorities such as moving toX-shoring?• The move to X-shoring can generatesignificant benefits for supply chainsand overall businesses, but what arethe principal “caution flags” to lookfor so that one does not replace oneset of problems with another?• While it is likely that globalization willcontinue as a source of new revenueand cost reduction, to what extentwill X-shoring continue to play a rolein global supply chain operations?Insight into these issues will providesome useful ideas into how wecan enhance understanding of theprinciples of supply chain managementand help to grow our businesses moreprofitably through the power of worldclasssupply chain management.How do you engage yourpartners in benefiting fromnew X-shoring strategies?How do 3PLs and shippersengage each other indeveloping infrastructures tomaximize these changes instrategies?
32 2013 THIRD-PARTY LOGISTICS STUDYGlobal Trade Management: NoLonger Just a DifferentiatorRecently Global Trade Managementhas received renewed attention ascompanies find themselves competingin a business environment markedby expansion of global operations,increased global competitivenessand increased trade complexity. Longconsidered a strategic differentiatorfor companies with leading supplychain organizations, Global TradeManagement is now viewed by manyas essential to remain competitive.According to the International MonetaryFund (IMF), despite the free fall of2009, the volume of global trade ingoods and services is now 8.2% higherthan its 2008 peak. This increase inglobal trade has been driven by theheightened pressure on companiesto compete for elusive profits, as theglobal economy continues to drag andcompanies are forced to explore newmarkets. Many companies now seekto supplement weak domestic demandwith sales growth in emerging marketswhile at the same time relying on globalsourcing to help minimize supply chaincosts.At the same time as companies havecome to rely more heavily on globaltrade, the complexities of global tradehave increased. Trading lanes continueto shift as the number and scope ofFree Trade Agreements (FTA) increase.The United States, which currentlymaintains 14 FTAs, is in negotiationswith eight other countries to finalizethe much-publicized Trans-PacificPartnership (TPP) FTA. China, whichcurrently maintains eight FTAs, is innegotiations to nearly double thatnumber in the coming years. Althougheach additional FTA presents anopportunity for companies, it also addsto the complexity of their operationsand increases the need for effectiveGlobal Trade Management.with FTAs as an opportunity to unlockbenefits. Tariffs and non-tariff barriers(for example, technical productregulations) are often a matter of publicpolicy and there is little companiescan do to avert this cost. However,understanding and being preparedto address import procedures cancreate a competitive advantage forcompanies. For most companies, thechallenges of trade compliance include,among others, the following:• Understanding which FTAs they areeligible for based upon the origin ofdifferent purchased parts• Maintaining visibility of all purchasepart information (for example, tariffnumber, ship date, number of units,mode of transportation)• Coordinating with suppliers toobtain all required FTA information(certificate of origin, trade programcertificate, etc.) to establishcompliance with a trade program• Collecting duty savings by qualifyingbills of material of saleable goods fordifferent trade programsAs the trend toward increased globaltrade, competitiveness, and complexitycontinues, it is likely that companieswill remain focused on Global TradeManagement. Those that investthe time and resources into leadingpractices such as implementation ofautomated Global Trade Managementsolutions will find they are able totransform their global operations intoa competitive advantage. Companiesthat are unable or unwilling to makethese investments will likely find it moredifficult to compete.How do you handle globaltrade management todayand what would you need todo differently to attain morebenefits in the future?Big Data and the Changing 3PLRoleGrowing data volumes (sometimescalled Big Data) has emerged as acritical opportunity for improvementfor shippers and 3PLs. But is the pathtowards Big Data a mature rolloutof last decade’s technology (webapplications and EDI), or in fact adisruptive innovation opportunity for3PLs? Initial indications indeed showthat Big Data is not a linear extensionof the data paradigms of the 2000s,but what makes Big Data so… big?Consider, for example, the rapid growthof available data along these lines:1. Variety: more objects are beingmeasured2. Frequency: the same object (suchas a shipment) is logged more timesduring its life cycle3. Breadth: a single record containsmore specific information points4. Accessibility: data is morestandardized and more easilyaccessed by trading partners5. Accuracy: more data standardizationdue to “key once, share often,”increasing data qualityThe factors above describe how theperception of the supply chain isgrowing, and as a consequence supplychain leaders are often drowning indata. Converting the data into businessvalue is the heart of the challenge, anda driver for expanded 3PL relationships.Increased data requirements lead tothree clear opportunities for a shift inthe 3PL role:1. The 3PL must be a competent datamanager to be a viable partner.Since large and critical parts of thesupply chain are only accessible tothe 3PL, it is up to that 3PL to ensureHowever, understanding optimal tradelanes and having an optimized FTAportfolio is not sufficient to maximizea company’s global operations – otherchallenges remain. Last year’s Annual3PL Study addressed the importanceof understanding and keeping upConverting the data into business value is theheart of the challenge
Strategic Assessment 33While focusing onmoving goods mayfind incrementalhandling economies,it will likely missthe game-changingtransformationalinsights whichcome from bettermanagement of bigdata.data is captured, integrated, andmade available to external parties.Part of this job is to provide reliabilityindicators on the data. Shippersmaking key decisions need to knowto what extent they can trust resultsfrom 3PL data.2. The 3PL needs to be a facilitator tothe data consumer. Manual handlingof large data sets is awkward andunrealistic, especially in multi-mediaformats when the data is a mix oftext, photos, GPS coordinates, andserial/lot numbers. Likewise, mostshippers do not have a systemwhere they centralize every datapoint prior to analysis. Instead, dataanalysis is distributed among manysmall systems and mashed-up withexecution and planning systems. Inshort, making sense of large andcomplex data requires specializedIT tools, which are becoming partof shippers’ expectations of 3PLs.Beyond just having a system, thedifferentiation among 3PLs also turnson how deeply embedded the dataanalysis can be with the executionsystem. Swivel-chair integrationbetween two systems belonging tothe 3PL is considered outdated. Asthe water level of data rises, shipperswant to know if their 3PL will throwthem a lifeline and help them navigateor drag them under and slow themdown.3. The 3PL must be aligned in staffingand processes to capitalize on therich opportunities hiding in the datathey have available. Shippers haveshort patience for a materials-onlyviewpoint, in which the core functionof the 3PL is to “move stuff.” So longas shippers see their own businessesin a broader context, and to theextent that the 3PL is sitting on datawhich can make a shipper’s businessexcel, there is a growing need for3PLs to leverage data instead ofjust materials. While focusing onmoving goods may find incrementalhandling economies, it will likely missthe game-changing transformationalinsights which come from bettermanagement of big data.Will Big Data presentopportunities or threats to3PLs? How can 3PLs andshippers work together tomanage Big Data?
34 2013 THIRD-PARTY LOGISTICS STUDYAbout the StudyIn the mid-nineties the 3PL industrywas very much in its formative years;Third-party logistics providers wereseeking to transition from vendorsof individual services to logisticspartners offering integrated servicesand building meaningful, collaborativerelationships with their customers. Dr.C. John Langley, now Clinical Professor,Supply Chain and Information Systemsand Director of Development, Centerfor Supply Chain Research at SmealCollege of Business at The PennsylvaniaState University, initiated this study thenas a way to capture and measure thisrapidly evolving new service industry.Today, seventeen years later, thecapabilities of both shippers and 3PLshave improved significantly. The Annual3PL Study has grown as well, becominga widely anticipated, heavily referencedindex on the state of the 3PL industry. Ithas also become a vital tool for use byshippers and 3PLs in mapping their ownlogistics relationships.It now takes a full year to establishtopics of interest, develop the surveytool, conduct the research, analyze theresults, write this report and presentand share the findings. The study hasevolved in a number of ways over itshistory:Expanded Reach: From its earlystart as a survey mailed primarily toshippers in North America, the Annual3PL Study has evolved along with theindustry it covers, including its widegeographic reach, reflected in Figure17. Responses have also expanded toinclude a wide range of industries, asseen in Figure 18.Enhanced Accessibility: Severalyears ago the survey tool becameWeb-based, enabling response ratesto increase dramatically. This year, thesurvey, which circulated in mid-2012,generated 1,510 usable responsesfrom both users and non-users of3PL services, as well as responsesto a separate, related version of thesurvey by 832 respondents from the3PL sector, for a total of 2,342 usableresponses. The study report andadditional materials are also presentedvia a specially available Web site,www.3PLstudy.com.Additional Topics: In addition tomeasuring core trends in the 3PLindustry, the Annual 3PL Study severalyears ago began to conduct indepthexaminations of contemporarysupply chain topics that affected bothusers and providers of 3PL services.This year those include the closelyintertwined topics of supply chaindisruption and supply chain innovation.The study also provides perspectiveson talent management and informationtechnology, beyond the coverage ofthese topics in recent versions of thisstudy.Contributing Sponsors: As the studyhas grown, industry organizationshave joined Dr. Langley to lend theirexpertise. Capgemini has jointlyowned the study with Dr. Langley forover a decade. Sponsors over theyears have included leading firms inthe 3PL, information technology andtalent management sectors. This year,Panalpina and eyefortransport continuetheir sponsorship, and are joined byKorn/Ferry International.Additional Perspectives: Four yearsago, the study team began surveying3PLs about their views, to helpcompare and contrast the perspectivesof both users and providers ofoutsourced logistics services.Multiple Research Streams: Adistinguishing feature of the Annual3PL Study is the study team’s use offour streams of research to validateand illuminate the findings in thisreport. In addition to the annual survey,which is available in English, Spanish,Portuguese, French, and German, theteam conducts in-depth interviewswith logistics experts in one-on-onefocus interviews related to the specialtopics. Desk research on study topicsconducted by the team as well asCapgemini’s Strategic ResearchGroup further enhances subject matterknowledge. And intensive, one-dayfacilitated shipper workshops enablethe team to work side by side withshippers to explore survey results inthe context of overall industry trends todiscover deeper implications. This year,for the first time, the team conductedthree such interactive workshops, oneof which was held at a CapgeminiAccelerated Solutions Environment ®(ASE) at Capgemini’s NYC Harborsidefacility in Jersey City, NJ, USA.(See www.capgemini.com/ase formore detail about ASEs.) Facilitatedworkshops were also conducted inParis, France and in Hong Kong.The study team also worked with usersand providers of 3PL services at theeyefortransport 3PL Summit and ChiefSupply Chain Officer Summit held inChicago, IL, USA, in June 2012.Wide Coverage: The Annual 3PLStudy is presented and discussedin prominent supply chain industryvenues, such as the following:• Presentations at influential industryconferences such as the Councilof Supply Chain ManagementProfessionals (CSCMP),eyefortransport 3PL Summit andChief Supply Chain Officer Summit.• Analyst briefings, typically conductedin the weeks following release of theannual study results in the fall of eachyear.• Magazine and journal articles inpublications such as Supply ChainManagement Review, LogisticsManagement, Inbound Logistics,Logistics Quarterly, and Supply ChainQuarterly.
About the Study 35• Webcasts conducted with mediaand publications such as SupplyChain Management Review, LogisticsManagement, and others.Supporting Organizations: Eachyear a number of supply chainorganizations facilitate the researchprocess by asking members andother contacts to respond to thesurvey, or contribute content for thereport. In addition to completing thesurvey, individual companies help outby enabling executives to participatein focus interviews and facilitatedworkshops. Please see the Creditspage for a listing of these valuedcontributors.Definitions: Survey recipients wereasked to think of a “third-party logistics(3PL) provider” as a company thatprovides one or more logistics servicesfor its clients and customers. A “fourthpartylogistics (4PL) provider” is onethat may manage multiple logisticsproviders or orchestrate broaderaspects of a customer’s supply chain.To ensure confidentiality and objectivity,3PL users were not asked to namewhich specific 3PL providers they use.A Note about the Name: For yearsthe study, unveiled each October,was branded with the year in whichit was published. In 2011 the teammade a change, instead brandingthe study with the year in which theresults will enjoy the most active andlively discussion. Therefore, this report,published in October 2012, is titledthe 2013 Third Party Logistics Study:Results and Findings of the 17 th AnnualStudy.2013 Third-Party LogisticsStudy GoalsResearch and analysis for the CurrentState of the Market section sets outto:• Understand what shippers outsourceand what 3PL providers offer.• Identify trends in shipperexpenditures for 3PL servicesand to recognize key shipper and3PL perspectives on the use andprovision of logistics services.• Update our knowledge of 3PLshipperrelationships, and to learnhow both types of organizations areusing these relationships to improveand enhance their businesses andsupply chains.• Quantify the benefits reported byshippers that are attributed to the useof 3PLs.• Document what types of informationtechnologies and systems areneeded for 3PLs to successfullyserve customers, and to assess theextent to which IT-related goals arebeing achieved.• Examine why customers outsourceor elect not to outsource to 3PLproviders.Goals for the Special Topic sectionsinclude:Supply Chain Innovation:Understanding what drives supplychain innovation and assessing theextent to which 3PLs are drivingmeaningful innovation to assist theirshipper-customers in achieving theirbusiness objectives. Research alsohighlights steps that 3PLs can take tobe considered innovative contributorsto the challenge of achievingcustomers’ business objectives.Supply Chain Disruption:Understanding what can be done by3PLs and their customers to developstrategies and operational capabilitiesto mitigate or eliminate sources ofsupply chain disruption. Consideringthat supply chain disruptions generallycome from four main areas (naturalfactors; physical infrastructure outages;business operations failures; andeconomic and political factors), it isessential that shippers and their 3PLcustomers work together effectively tojointly protect their supply chains.Goals for Additional Material:• The Talent section briefly exploresthe critical role of talent as astrategic agenda item in most, if notall, organizations. Additionally, thestudy looks at the role talent plays inrealizing innovation goals, managingsupply chain disruption, and ensuringCEO succession.• Goals for the InformationTechnology section includedetermining what drives shippers’expectations of 3PLs’ technicalcapabilities and subsequently, where3PLs can focus to improve thisaspect of their overall relationship.• Based on what was learned from thestudy process, the team uses theStrategic Assessment to developa perspective on improving 3PLshipperrelationships.
36 2013 THIRD-PARTY LOGISTICS STUDYAbout the RespondentsFigure 17: Shipper Respondents Represented Several Major Geographies3PL Users: Figure 17 reveals thegeographies represented by shipperrespondents. These totals includeboth users and non-users of 3PLservices. The non-user responsesare useful because they providevaluable perspectives on why theydo not currently use 3PLs, as well ason a number of other relevant topics.Shipper respondents are typicallymanagers, directors, VPs and C-suiteexecutives.North America (491) 33%Latin America (304) 20%Europe (331) 22%Other (172) 11%Asia-Pacific (212)14%Figure 18 reflects the eight largestindustries of respondents using 3PLservices, accounting for almost twothirdsof the overall respondents.Figure 19 includes all shipperrespondents’ anticipated total sales for2012. As with last year’s study, 37% ofthe respondents represent companiesin the lowest sales category – a higherpercentage than in previous years. Weattribute this to a greater percentage ofrespondents from emerging economiesin regions such as Asia-Pacific andLatin America.3PL Providers: 3PL executives andmanagers responded to a similar,but separate version of the survey.3PL respondents represent: 1) a widespread of operating geographies; 2)an extensive list of industries served(actually quite similar to the shipperrespondentindustries); and 3) a rangeof titles, from managers to presidents/CEOs. Approximately 40% of the3PL firms expected 2012 companyrevenues in excess of US $1 billion(approximately €750 million), whileabout 50% reported revenues of lessthan US$500 million (approximately€375 million).Source: 2013 Third-Party Logistics StudyFigure 18: Eight Largest Industries of Respondents using 3PL ServicesOtherHealthcareAdditionalRetailChemical17%6%18%Source: 2013 Third-Party Logistics Study6%11%7%7%14%ManufacturingConsumer productsFigure 19: Nearly 50% of 3PL User Respondents Anticipated 2012 Sales inExcess of US $1 Billion (€ 750 Million)100%90%80%70%60%50%40%30%20%10%0%17% 18% 18% 18%30%16%15%37% 33%All Regions34% 33%NorthAmerica27%11% 19%40% 36%EuropeSource: 2013 Third-Party Logistics StudyAsiaPacific13%7%9%13%19%17%51%10%LatinAmericaAutomotive/TransportEquipmentHigh-Tech andElectronicsHealthcareFood and BeverageUS$25 billion or more /€20 billion or moreUS$1 billion – less thanUS$25 billion / €750 million– less than €20 billionUS$500 million – less thanUS$1 billion / €375 million –less than €750 millionLess than US$500 million /€375 million
About the Study 37About the SponsorsCapgemini ConsultingCapgemini Consulting is the GlobalStrategy and Transformation Consultingbrand of the Capgemini Group. CapgeminiConsulting helps organizations transformtheir business, providing pertinent adviceon strategy and supporting the organizationin executing that strategy. Our mission isto transform your digital landscape, withconsistent focus on sustainable results. Weoffer a fresh approach to leading companiesand governments that uses innovativemethods, technology and the talents of over4,000 consultants world-wide.For more information:www.capgemini-consulting.comPenn State UniversityPenn State is designated as the solelandgrant institution of the Commonwealthof Pennsylvania. The University’s maincampus is located in State College,Pennsylvania. Penn State’s Smeal Collegeof Business is one of the largest businessschools in the United States and is hometo the Supply Chain & Information Systems(SC&IS) academic department and theCenter for Supply Chain Research (CSCR).With more than 30 faculty members andover 600 students, SC&IS is one of thelargest and most respected academicconcentrations of supply chain educationand research in the world. SC&IS offerssupply chain programs for every educationallevel, including undergraduate, graduate,and doctorate degrees, in addition to avery popular online, 30-credit professionalmaster’s degree program in supply chainmanagement. The supply chain educationalportfolio also includes open enrollment,custom, and certificate programs developedby Smeal’s Penn State Executive Programsand CSCR, which helps to integrate Smealinto the broader business community. Alongwith executive education, CSCR focusesits efforts in research, benchmarking, andcorporate sponsorship. CSCR corporatesponsors direct the Center’s researchinitiatives by identifying relevant supplychain issues that their organizationsare experiencing in today’s businessenvironment. This process also helps toencourage Penn State researchers toadvance the state of scholarship in thesupply chain management field.Penn State’s Smeal College of Businesshas the No. 1 undergraduate and graduateprograms in supply chain management,according to the most current report fromGartner.The Panalpina GroupThe Panalpina Group is one ofthe world’s leading providers ofsupply chain solutions, combiningintercontinental Air and Ocean Freightwith comprehensive Value-AddedLogistics Services and Supply ChainServices. Thanks to its in-depthindustry know-how and customizedIT systems, Panalpina providesglobally integrated door-to-doorsolutions tailored to its customers’supply chain management needs. ThePanalpina Group operates a globalnetwork with some 500 branches inmore than 80 countries. In a further80 countries, it cooperates closelywith partner companies. Panalpinaemploys approximately 15,500 peopleworldwide.Panalpina has extensive experiencewith customers in many key industries.With dedicated experts in key globalmarkets, Panalpina has the people,products, skills and capabilities to meetthe demanding needs of its globalcustomers. Panalpina delivers reliableSupply Chain Solutions that providevalue to its customers- every time. Nomatter what the size, exact businessand location is – Panalpina is alwaysdriven by qualitative, safety-related andenvironmental principles that best serveits customers’ and thus the company’sown long-term interest.For more information please visitwww.panalpina.com.For more information, please visitwww.smeal.psu.edu/scis andwww.smeal.psu.edu/cscr.
382013 THIRD-PARTY LOGISTICS STUDYAbout Korn/Ferry InternationalKorn/Ferry International is a premierglobal provider of talent managementsolutions, with a presence throughoutthe Americas, Asia Pacific, Europe,the Middle East and Africa. The firmdelivers services and solutions that helpclients cultivate greatness through theattraction, engagement, developmentand retention of their talent.Visit www.kornferry.com for moreinformation on Korn/Ferry International,and www.kornferryinstitute.com forthought leadership, intellectual propertyand research.eyefortransportEstablished in 1998, eyefortransporthas become one of the leadingproviders of business intelligence,independent research, news andexecutive level events for thesupply chain & logistics industries.eyefortransport has two primaryfocuses.1) To provide executive networkingopportunities in the supply chain &logistics industries via the more than15 events we annually organize andhost in North America, Europe and Asiaand online via the tens of thousandsof users of www.eft.com. The eventsare designed to complement andenhance the business connectionsavailable through our online network,and bring together the industry elite.Regularly attended by CEOs andsenior management from the transportand logistics industry and Heads ofSupply Chain of major companies, theevents focus on current developmentsand latest trends, and are enhancedby high-level, exclusive networkingopportunities.2) To deliver industry education throughdozens of industry reports, surveys,newsletters, webinars and senior-levelpresentations at leading events.For the list of current research, newsand conferences we produce pleasevisit www.eft.com.Lead Writer: Lisa TerryDisclaimer:The information contained herein is general in nature and is not intended as, and should not be construed as, professional advice or opinion provided by the sponsors(Capgemini Consulting, Penn State, Panalpina, Korn/Ferry and eyefortransport) to the reader. While every effort has been made to offer current and accurateinformation, errors can occur. This information is provided as is, with no guaranty of completeness, accuracy, or timeliness, and without warranty of any kind,expressed or implied, including any warranty of performance, merchantability, or fitness for a particular purpose. In addition, changes may be made in this informationfrom time to time without notice to the user. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstancesor needs, and may require consideration of additional factors if any action is to be contemplated. The reader should contact a professional prior to taking any actionbased upon this information. The sponsors assume no obligation to inform the reader of any changes in law, business environment, or other factors that could affectthe information contained herein.
About the sponsors39CreditsDan AlbrightCapgemini ConsultingJeff LeeBECTON DICKINSON ASIA LTDMark BakerPfizerRon LentzG@ Capital AdvisorGlenn BarnesPanalpinaThierry LescuyerTechnicolorFrank BehrensGT NexusHolly LeungCelesticaSebastien BeignezCasino Global SourcingPatrick LeungCelesticaSerge BelliardPanalpinaDavid LiuCommscopeJohn BensonCapgeminiRichard LoAvery DennisonStephan BuchliPanalpinaAtif MalikLevi StraussJim CareyClancy CompaniesMarc MandarouxBrightstar Tech DataAnna CerdaHuaweiJohn Manners-BellTransport Intelligence Ltd.Jane ChanL'Oreal Hong Kong LtdJean-François MartinotEssilorDiana ChenKorn FerryAndreas MattleArtistRaymond CheungTriumphMyles McGrathLajobiHenry ChiuAvery DennisonJonah McIntirePanalpina Management Ltd.Eric ChuClariantChris MoyeLajobiNeil CollinsKorn/FerryBrenda NgPanalpinaZack DemingKorn/FerryMaxime OubrayrieEssilorStefan EngelbrechtAmer SportsTilo RaabPanalpinaGregor FiabaneKorn/FerryDavid ReidPanalpinaBrett FletcherCapgemini ConsultingIvo RoexSteinhoff International SourcingBoney FongFresenius Medical Care Asia-OacificChris SaynoreyefortransportMariano GilardonKorn/FerryCorina SchweighauserPanalpina Management Ltd.Patrick GuethPanalpina Management Ltd.Nansen SoOlympus Corporation of Asia Pacific Ltd.Heidi HoffmanKorn/FerryFannie SungOlympus Corporation of Asia Pacific Ltd.Leanne HillDFS Hong KongMike SwartzdeHaven Group, LLCMurphy HoCelesticaPolly TangGuess AsiaSven HoemmkenPanalpina Management Ltd.Philip TeoPhilipsJuergen HoenigNokia Siemens NetworksLisa TerryLisa Terry Editorial SericesRyan HuenBenettonHelen TseGuess AsiaJohan JemdahlTandberg (div. of Cisco)Quentin TseRes PartnersRick JordonPanalpinaShirman TzeAvery DennisonPeter KarelPanalpina Management Ltd.Shanton WilcoxCapgemini ConsultingCasey KellyKorn FerryGraham WilkieCarrefourMichael KongPanalpinaOnal WongGuess AsiaWilliam LaiDickson Concepts (International) LtdNick WyssPanalpina Management Ltd.Simon LamBosch Rexroth ChinaAnnie YipBECTON DICKINSON ASIA LTDStephen LamGiorgio Armani Hong Kong LtdFelix YuePhilipsDr. John LangleyPenn State UniversityCrystal ZhuHGST (Hitachi)Sandy LauPublications International
For additional copies of this publication or for more information about the study, please contact any of the following:C. John Langley Jr., Ph.D.Clinical Professor of Supply Chain ManagementDirector of Development, Center for Supply Chain Research (CSCR)Penn State UniversityUniversity Park, PAT: +1 814 865 email@example.comDan AlbrightSenior Vice President, North America Supply Chain LeaderCapgemini ConsultingAtlanta, GA, USAT: +1 404 806 firstname.lastname@example.orgShanton WilcoxPrincipal, Logistics and Fulfillment LeaderCapgemini ConsultingAtlanta, GA, USAT: +1 404 431 email@example.comBrett FletcherCapgemini ConsultingAtlanta, GA, USAT: +1 404 277 firstname.lastname@example.orgSven HoemmkenExecutive Vice President, Global Head of Marketing and SalesPanalpina Management Ltd.Basel, SwitzerlandT: +41 61 226 email@example.comLucas KuehnerManaging Director, USAPanalpina Inc.T: +1 973 254 firstname.lastname@example.orgPatrick GuethGlobal Head of Industry Vertical Hi - TechPanalpina Management Ltd.Frankfurt, GermanyT: +49 6105 937 email@example.comPeter KarelGlobal Head of Supply Chain SolutionsPanalpina Management Ltd.T: +41 61 226 15 firstname.lastname@example.orgStephan BuchliCorporate Head of MarketingPanalpina Management Ltd.T: +41 61 226 1111Stephan.email@example.comNeil CollinsSenior Client PartnerGlobal Sector Leader, Logistics & Transportation ServicesKORN/FERRY INTERNATIONALAtlanta, GA, USAT: +1 404 783 firstname.lastname@example.orgZack DemingPrincipalKORN/FERRY INTERNATIONALAtlanta, GA, USAT: +1 404 222 email@example.comCasey KellySenior Client PartnerGlobal Industrial Markets, Asia-PacificKORN/FERRY INTERNATIONALT: +65 9169 firstname.lastname@example.orgChris SaynorCEOeyefortransportT: 1800 814 3459 ext 7529 (from USA);T: 1866 996 1235 ext 7529 (from Canada);T: +44 20 7375 7529 (from Rest of the World)email@example.comKatherine O’ReillyExecutive DirectoreyefortransportT: +44 (0)20 7375 7207T: 1800 814 3459 ext firstname.lastname@example.org