Fostering a Strong 3PL Partnership is Key for Competitive Advantage

Editor’s Note: David Gonzalez, is VP Analyst, Gartner Supply Chain

Partnerships between shippers and third-party logistics (3PL) are complicated relationships that require diplomacy, tact and a healthy dose of pragmatism. Often shippers are aggressive in their complaints, accusing 3PLs of indifference, overcharging and deteriorating customer service. Some 3PLs are equally as vocal, at times laying blame on the shortcomings of their customers.

Increasingly, shippers are accusing the 3PL community of profiteering. This is quite a shift from the goodwill expressed by shippers toward their 3PLs just a short time ago as the world grappled with the COVID-19 pandemic. It is interesting to see how some shippers are quick to condemn 3PLs when prices are increasing, yet claim market forces are at play when prices are in free fall.

Addressing the Shipper and 3PL Divide
It is not entirely surprising to see shippers voicing concerns, though unfortunate that they are looking for someone to blame. As a community, logistics leaders are grappling with seismic shifts in their industry. Over the past 12 months, ocean container rates on some global trades have increased by more than 300% compared to pre-COVID levels. In that same period, service levels, for many reasons, have rapidly deteriorated and are struggling to recover.

Carriers across all modes of transport have forced change in the way they manage capacity and pricing, no longer accepting bad behavior from the shipper community. Carriers are demanding better forecasts, greater transparency in capacity plans, and more loyalty and sustained support for a fair price. They control the assets and access to them.

This shift in power has sent significant shockwaves through the industry. For some, the change has been too much, too soon and a more collaborative balance is required. However, these changes are necessary, and over the long term they will make for a more robust, resilient and sustainable industry.

And while technology has led to many improvements in logistics and will continue to play an important role in helping the industry evolve, technology on its own will not save the day. Interpersonal skills that have long defined logistics as a people driven business continue to be an essential element and should not be overlooked or discarded.

Successful 3PL Partnerships Deliver Business Results
According to a recent Gartner survey on logistics outsourcing trends, more than 65% of approximately 250 logistics leaders claimed that they intended to increase outsourcing over the next two years. Additionally, nearly 70% of respondents stated that their 3PL service providers had a positive or extremely positive effect on their competitiveness. If that is the case, why are some shippers so reluctant to embrace and value their 3PL relationships and truly establish a long-lasting and meaningful partnership?

If the increased outsourcing trends are to be believed, shippers must focus more of their time and effort in managing relationships rather than being hands on in executing tasks. In fact, relationship management is a skill that in many respects is woefully lacking in logistics. Working productively and collaboratively with a 3PL partner often requires more listening and less talking. Shippers must be prepared to manage their expectations and empower their 3PL partners to deliver the service for which they have been engaged. Too often we see critical shippers standing back and preparing for failure rather than leaning in and contributing to success.

Ongoing disruption and volatility in the market are dynamics that logistics leaders cannot ignore. To achieve optimal business performance, shippers and 3PLs must work together to mutually protect their vested interests. The 3PL community has a lot to offer and the shipper community has a lot to gain from a strong partnership.

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