The Annual Third-Party Logistics Study has been published every year since 1996. It provides a yearly pulse on the state of logistics outsourcing, and the relationship between 3PLs and their customers.
This article provides a high-level summary of the 2022 Third-Party Logistics Study results, based on our read. Access the full report here. NOTE: Although the research was conducted in 2021, the authors refer to it as the 2022 study.
89% of 3PL users (shippers) view their 3PL relationships as successful.
The study has consistently shown that 3PL customers are happy with their decision to outsource logistics functions.
57% of 3PL users report reducing or consolidating the number of 3PLs they use.
Shippers want to simplify management of the logistics activities when they can. Of course, the 3PL industry is, itself, consolidating. That can be a good thing or a bad thing.
62% of shippers believe that supply chains have become too lean.
Many were burned when COVID led to raw material delays and empty shelves. Shippers also believe supply chains have become too global and must be rebalanced to utilize more regional and local suppliers. In fact, a full 83% of shippers plan to adjust their sources of supply to achieve this rebalancing. The reasons cited for a shift to nearshoring were 1) greater need for supply chain resiliency, 2) decreased supply chain vulnerabilities and 3) restrictive trade policies.
The top CURRENT investments by 3PLs to improve operations are:
- Data analytics and visibility
- Labor management and scheduling
- Domestic transportation and logistics
- Warehousing and distribution
For shippers, the pecking order for CURRENT investments is:
- Demand forecasting
- Capacity forecasting
- International transportation and logistics
- Supply chain network design
- Data analysis and visibility
It’s ironic that most shipper investments are going toward forecasting at a time when supplier delays and supply chain disruptions have made accurate forecasting quite difficult.
The study confirmed that the Human Resources function has achieved elevated stature within organizations.
Companies are increasingly reliant on HR to build a strong talent pool to support future growth and to attract and retain qualified logistics associates in a difficult labor market.
Rising interest in technology
Shippers’ survey responses pointed to a sharply rising interest in robotics and data analytics and, overall, a desire for 3PLs to leverage technology to drive value.
When it comes to 3PL IT capabilities, there remains a gap between what shippers need from 3PLs and their satisfaction with these capabilities.
94% of shippers say IT capabilities are a key part of what they need from 3PLs, but only 58% are satisfied with what they are getting. This gap used to be much worse. In the 2002 report, only 27% of shippers were satisfied with 3PL IT capabilities. This rating rose to 54% in 2010 and has stayed relatively stable since. Clearly, shippers want and expect 3PL partners to be leaders in investing and deploying supply chain technology.
Comparing last year to this year, shippers expressed a DECREASED need for tactical 3PL IT capabilities (transportation planning, transportation scheduling, warehouse management) and a large INCREASED need for strategic IT support.
- The need for control tower visibility, tracking and asset management went from 37% in the 2021 study to 60% in the 2022 study.
- The need for cloud-based solutions went from 23% in the 2021 study to 49% in the 2022 study.
- The need for advanced analytics and data-mining tools went from 27% in the 2021 study to 38% in the 2022 study.
Shippers clearly see the need to advance their own capabilities in these areas to stay competitive, and they’re looking for 3PL partners to help.
3PLs reported that their top FUTURE investment areas are centered upon technology.
- Robotics, including use for picking and palletizing
- Autonomous forklifts
Cloud-based systems are gaining momentum.
69% of 3PLs and 61% of shippers use a cloud-based TMS. As for cloud-based WMS systems, 3PLs are actually investing much more than shippers – 69% versus 24%, respectively.
The impact of COVID-19
Results of this year’s survey were undoubtedly influenced by COVID-19. A couple of examples are the rising interest in sourcing from regional and local suppliers and an expressed desire to increase inventory, which runs counter to a decades-long focus on leaning out the supply chain.
The main takeaway from the 2022 Third-party Logistics Study is that shippers are increasingly reliant on 3PLs to help them achieve their supply chain goals, and are not afraid to challenge 3PLs to step up and deliver in key areas. That’s a challenge we, at Kane Logistics, welcome.