Global Study Reveals Shippers are Placing Growing Importance on Third Party Logistics Providers as a Key Source of Supply Chain Innovation and Risk Mitigation

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17th Annual Third-Party Logistics Study from Capgemini Consulting, Penn State University, Korn/Ferry International and Panalpina examines the global market for 3PL services

Paris, October 1, 2012 – Capgemini Consulting, the global strategy and transformation consulting brand of the Capgemini Group, in cooperation with Penn State University, executive recruiting firm, Korn/Ferry International, and global logistics provider, Panalpina, today announced the findings of a worldwide report examining the global market for outsourced logistics. The 2013 17th Annual Third-Party Logistics (3PL) Study reveals that despite challenging business conditions, global revenues for the 3PL sector continue to rise as 3PLs continue to improve their business presence and create value for their customers, with 65 per cent of shipper respondents reporting an increase in their use of 3PL services. Faced with increasing competition and a difficult economic environment, the report finds that shippers are increasingly turning to logistics providers as a key driver of both supply chain innovation and risk mitigation. The 3PL-shipper relationship continues to evolve and shippers seek to drive real value and competitive differentiation through their choice of 3PL provider. However, the report reveals that 3PLs still have significant progress to make in being able to fully address the growing demands of the shippers they serve.

Based on responses from over 2,300 shippers and logistics service providers in North America, Europe, Asia-Pacific, Latin America and other regions, the study reveals that shippers are making increasingly complex demands of their 3PL providers as they seek bold new solutions that will create new routes to growth and market differentiation. Until recently, 3PLs could demonstrate innovation by introducing incremental process improvements, adding technology or improving execution. However, shippers increasingly believe that these process improvements are not sufficient to drive their supply chains and that more disruptive innovation is required to make a true difference within the marketplace or value chain, for example facilitating same-day delivery or introducing RFID tagging. Yet many shippers lack confidence in their 3PLs’ ability to operate at the strategic level necessary for disruptive innovation. The majority of the study’s 3PL respondents (89 per cent) believe they are ready to innovate, but just 53 per cent of shippers agree.

Many of today’s 3PL-shipper relationships are not set up in a way that fosters innovation. Shippers commonly engage with 3PLs on a very tactical level only, so their 3PL partners lack any real visibility or insight into their organisation and its challenges, said Dan Albright, Vice President and North American Supply Chain Leader at Capgemini Consulting. “It takes truly collaborative, strategic relationships among all partners involved to develop the kinds of disruptive innovations it will take to solve the challenges facing today’s supply chains. This will require a considerable change from the way that many 3PL-shipper relationships are structured today.”

Similarly, the report reveals that with today’s complex supply chains more vulnerable than ever before to negative impact from disruptive events, shippers are also becoming increasingly demanding of their 3PLs’ risk mitigation capabilities. A number of factors, including extended supply chains, reduced inventories and shortened product lifecycles are making supply chain disruption both more likely and more costly than ever before. Economic losses from supply chain disruptions increased 465 per cent from 2009 to 2011, while at the same time, the number of companies experiencing supply chain disruption grew by 15 per cent*. The report highlights adverse weather and the threat of a pandemic as the biggest source of supply chain disruption, cited by 69 per cent of shipper respondents, and volatility in commodity, labour or energy costs as the second, cited by 59 per cent of shipper respondents.

“Drawing on lessons learned from the previous global supply chain disruptions, the majority of 3PLs and shippers we speak with indicate that employee training and talent management, as well as internal and external certifications, are areas where they plan to invest most heavily over the next 2 years to combat supply chain disruption. Such planning must be lived and practiced and not simply a manual on a shelf,” said Zack Deming, Consultant, Global Logistics & Transportation Services Practice, Korn/Ferry International.

As a result, almost half of 3PLs (44 per cent) say they are placing a greater focus on supply chain risk and mitigation than five years ago. Closer partnerships (69 per cent), improved business continuity planning (61 per cent), advanced supply chain visibility tools (65 per cent) and better employee training (64 per cent) are the top strategies 3PLs are currently using to mitigate supply chain risk.  Yet, despite the increased risk of supply chain disruption, many companies are currently underfunding supply chain disruption mitigation planning and without more advanced strategies in place such as supply chain mapping and enterprise risk management, the strategies currently in use will not be as effective at minimising the risk of supply chain disruption. Those shippers that have successfully implemented an effective strategy here highlight a detailed assessment of the state of the network together with a thorough plan to alleviate the biggest sources of vulnerability and outline the response for when disruptions do occur as the best way to create a solid supply chain risk mitigation strategy.

Increased competition and pricing pressures are driving shippers to seek lower labour and manufacturing costs from further afield; centralised distribution has focused more production and inventory in fewer places; product lifecycles are growing shorter in some segments; and, at the same time, companies are reacting to the challenging economic environment by reducing inventories; all of which is leading to ever more complex global supply chains and, in turn, magnifying the negative impact of supply chain disruption,” said Sven Hoemmken, Global Head of Marketing and Sales, Panalpina. “A sound mitigation strategy is vital for reducing costs and creating a competitive advantage. Developing a resilient supply chain that balances risk with new growth opportunities starts with a rigorous assessment of the current supply chain followed by a considered plan to mitigate against the biggest areas of vulnerability.

The report also highlights how much value some shippers are driving from their 3PL providers. Shippers report spending an average 12 per cent of revenues on logistics, with an average 39 per cent of that spent on outsourced logistics services, and both shippers (86 per cent) and 3PLs (94 per cent) largely view their relationships as successful. Just over half (56 per cent) of shippers even say their use of 3PL provider has directly led to year-on-year incremental benefits. They also report significant savings from logistics cost reductions (15 per cent), inventory cost reductions (8 per cent) and logistics fixed asset reductions (26 per cent).

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About the 2013 Third-Party Logistics Study
2,342 logistics executives from both 3PL users and providers in North America (33 per cent), Europe (22 per cent), Asia-Pacific (14 per cent), Latin America (20 per cent) and Other (11%)  participated in the 2013 Third-Party Logistics Study via a web-based survey. The findings were supplemented with a number of in-depth interviews with industry observers and experts, primarily relating to the special topics identified for this year. Facilitated workshop sessions that included key logistics executives also were held in New York, Paris, and Hong Kong.

About Capgemini Consulting:
Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change.

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About Penn State University
Penn State is designated as the sole land grant institution of the Commonwealth of Pennsylvania. The University’s main campus is located in State College, Pennsylvania. Penn State’s Smeal College of Business is one of the largest business schools in the United States and is home to the Supply Chain & Information Systems (SC&IS) academic department and the Center for Supply Chain Research (CSCR). With more than 30 faculty members and over 600 students, SC&IS is one of the largest and most respected academic concentrations of supply chain education and research in the world. SC&IS offers supply chain programs for every educational level, including undergraduate, graduate, and doctorate degrees, in addition to a very popular online, 30-credit professional master’s degree program in supply chain management. The supply chain educational portfolio also includes open enrollment, custom, and certificate programs developed by Smeal’s Penn State Executive Programs and CSCR, which helps to integrate Smeal into the broader business community. Along with executive education, CSCR focuses its efforts in research, benchmarking, and corporate sponsorship. CSCR corporate sponsors direct the Center’s research initiatives by identifying relevant supply chain issues that their organizations are experiencing in today’s business environment. This process also helps to encourage Penn State researchers to advance the state of scholarship in the supply chain management field Penn State’s Smeal College of Business has the No. 1 undergraduate and graduate programs in supply chain management, according to the most current report from Gartner.

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The Panalpina Group
The Panalpina Group is one of the world’s leading providers of supply chain solutions, combining intercontinental Air and Ocean Freight with comprehensive Value-Added Logistics Services and Supply Chain Services. Thanks to its in-depth industry know-how and customized IT systems, Panalpina provides globally integrated end-to-end solutions tailored to its customers’ supply chain management needs. The Panalpina Group operates a global network with some 500 branches in more than 80 countries. In a further 80 countries, it cooperates closely with partner companies. Panalpina employs approximately 15,000 people

About Korn/Ferry International
Korn/Ferry International is a premier global provider of talent management solutions, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa.  The firm delivers services and solutions that help clients cultivate greatness through the attraction, engagement, development and retention of their talent. Visit for more information on Korn/Ferry International, and for thought leadership, intellectual property, and research.