Expertise in Data Analytics Draws Shippers to 3PLs

The 24th Annual Third-Party Logistics Study indicates that shippers turn to 3PLs in large part because they have “built out a robust tech infrastructure that contains the right tools for the job and best practices already realized by being field tested with an array of customers.”

The results show that 93% of shippers report the relationships they have with their 3PLs generally have been successful. And 99% of 3PLs agree that their relationships with shippers generally have been successful.

The authors of the 2020 study, sponsored by Infosys Consulting, Penn State University and Penske Logistics, attribute that success story to the “availability of data and the utilization of appropriate technologies.” The study was released on Sept. 16 and can be downloaded here at no cost.

“Shippers and 3PLs have been using data and information for many years to support decisions that are relevant to their relationships,” the authors state. “However, recent history suggests that the use of analytics — the scientific process of transforming data into insight for making better decisions — is gaining significantly in terms of frequency of use, levels of sophistication and utilization of available computational capabilities. Broader types of capabilities that support this trend include the availability and utilization of cloud-based technologies, growth of software. and approaches to manage and analyze data, and the successful adoption and use of Internet of Things (IoT) capabilities.”

The five most common referred-to types of analytics are given as:

• Descriptive (explain what is happening)
• Diagnostic (understand why)
• Predictive (forecasting)
• Prescriptive (suggest what should be done)
• Using cognitive/artificial intelligence/machine learning to identify patterns of activity

In the study, 95% of shippers and 99% of 3PLs agree that analytics are a necessary element of 3PL expertise. But only 26% of shippers and 27% of 3PLs are satisfied with current analytic capabilities. The issues result from the need to create “clean and useful data and insufficient resources to best utilize analytics (are there data scientists on the team?) This has created a large analytics gap that warrants further study.”

According to the study, a big roadblock is thrown up when the shipper and 3PL are not in total agreement on a strategic plan on the best use of analytics, that is to say, what is the need and how to best serve it. Many shippers currently have legacy systems that are difficult to connect with today’s hardware and software.” In general, the supply chain, like many areas of the business world, may be slow to adopt new approaches.”

The authors also contend that as geopolitical volatility affects global operations, supply chain finance is becoming critical. The survey shows that 26% of shippers employ a supply chain finance professional at the vice president level; 31% report having someone with the director title. For shippers, their top supply chain finance costs are freight payment audit (72%), total landed cost (57%) and letters of credit (37%). For 3PLs, top supply chain finance costs are freight payment audit (71%), letters of credit (39%) and open accounts (36%). The study also reveals that 70% of shippers manage their impact of global political decisions internally; 20% aren’t managing it at all; and 19% use 3PLs to do so.

“Natural, political and operational disruptions are the new normal in today’s global supply chains,” remarked Shanton Wilcox, head of North America Supply Chain, Infosys Consulting. “To mitigate these risks, companies are increasingly leveraging supply chain finance.”

The study also zeros in on the continuing greening of the supply chain. “More and more shippers are embracing sustainability programs, and carriers and 3PLs are focusing on greening efforts to attract shippers,” the authors point out. “In addition, those within the supply chain are becoming more sophisticated in how they demonstrate and document their carbon emissions, miles per gallon, data and efficiency metrics. Public perception and cost savings are driving sustainability within logistics for shippers as well as their third-party logistics providers.”

Top reasons given for introducing more sustainability include regulatory requirements, public perception and cost savings. For shippers these are the leading uses: optimization, such as route and load (76%); tracking and reporting emissions (42%); voluntary programs (38%) like the EPA SmartWay program; and the use of alternative fuels (16%). For 3PLs, the list includes: optimization (78%); voluntary programs (63%); tracking and reporting emissions (39%); and using alternative fuels (19%). The study notes that electric vehicle technology is a hot green topic.

“There are many benefits to a more sustainable supply chain,” commented Joe Carlier, senior vice president of global sales, Penske Logistics. “We have a responsibility to be better environmental stewards. A smarter and more agile supply chain is also cost effective.”

The 44-pg study report also lays out six challenges facing the modern supply chain:

• The growth in e-commerce
• Economic uncertainty in wake of longest bull run in history of stock market
• Truck driver shortage
• Disruptive technologies (automated vehicles, drones, cloud computing)
• “Relationship necessities, namely supply chain alignment strategies”
• Competitive pressures

As part of this year’s survey process, the study recorded 558 respondents. The 2020 study, as well as an archive of previous publications, is available at www.3PLStudy.com.