A survey of logistics executives revealed that reverse globalization, softer revenue forecasts and sustainability are key issues affecting global supply chains.


Results from the "2008 3PL Provider CEO Perspective" surveys were presented by Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics, at the Council of Supply Chain Management Professionals Annual Global Conference in Denver this week.

Incorporating insights from 20 CEOs in North America, 10 in Europe and nine in the Asia-Pacific region, this year's research showed some of the lowest industry revenue projections ever seen in the history of the surveys. Sponsored by Penske Logistics, the surveys found the "greening" of supply chains and the 3PL industry, as well as continued pricing pressures among the top industry trends, and cited rising fuel prices and a slow-growth economy as key challenges facing the industry. A trend toward reverse globalization was also noted.

"While nearly one-fourth of CEOs said that their organizations failed to meet 2007 revenue projections, almost 90 percent reported profitability last year," said Lieb. "Despite rising prices at the pump and a stagnating economy, these numbers indicate that global 3PL efforts to reduce costs, optimize networks through technological advances, and intensify the focus on customer selectivity are working -- we will definitely see a continued focus in these areas well into 2009."

Gallick noted that the results "shed an interesting light on the continued maturing of the 3PL industry while touching upon the new supply chain influences that were barely visible only a year ago."

Though CEOs continue to be bullish about revenue growth prospects for their companies and the industry as a whole, projections have become increasingly conservative during the past several years, particularly in Europe.

Due to rising costs of labor, the impact of high fuel prices on shipping costs, and continued concern around government regulations in Asia, 16 of the 39 CEOs involved in the surveys indicate some of their customers are changing their sourcing and manufacturing strategies and are moving operations away from Asia and "closer to home." Eleven of the 20 North American executives reported seeing a shift in customers pulling manufacturing back from Asia to North or Central America.

Hand-in-hand with reverse globalization, 3PLs and customers are gravitating toward expanding into nearby emerging markets where the cost of labor, shipping and land is less expensive. North American logistics providers are increasingly turning to Mexico and Latin America.

The 3PL industry has made significant strides in establishing environmental responsibility as part of broader corporate visions, with companies reporting numerous internal changes in response to these concerns. However, to date, the CEOs involved in the surveys believe these "green" capabilities are relatively insignificant in winning new business or retaining existing customers.

As commoditization pressures mount in the 3PL industry, the role of procurement in contract negotiations continues to rise, and fuel costs increase, the companies surveyed cited downward pricing pressures as a continuous, major concern for the industry and noted a growing trend in branding as a way to differentiate.

CEOs completed 39 surveys via an Internet-based questionnaire during the summer of 2008. Companies participating in the annual survey included: Cardinal Logistics, Caterpillar Logistics Services, CEVA, DSC Logistics, DHL Exel Supply Chain, Genco, Kuehne & Nagel Logistics, Landstar, Menlo Logistics, NYK Logistics, Panalpina, Penske Logistics, Pittsburgh Logistics, Ryder, Schenker, Schneider Logistics, Transplace.com, UPS Supply Chain Solutions, UTi, Wincanton and YRC Logistics. In total, these companies are responsible for generating approximately $60 billion in revenue.

In addition to those highlighted above, the survey identified other trends, including industry consolidation, opportunities and challenges in the 3PL industry, and the major changes expected in each of the three geographies examined during the next three years.