Gartner’s Supply Chain Research Team Releases New Study on 3PL Innovation

Multiple trends are affecting the ability of logistics functions and third-party logistics (3PL) providers to effectively deliver on their goals, notes a new research study by Gartner.

In addition, COVID-19 has adversely affected capacity to move, cost of shipping and resources available to shippers. Logistics leaders are relying on 3PLs to help minimize the impact of future disruptions while managing ongoing changes in the logistics world, say researchers.

“Shippers Take Note: 3PLs Are Innovative and Here Is the Proof,” compiled by Gartner’s Supply Chain Research Team, notes that the global 3PL community is working hard to exceed customer expectations but, more importantly, vendors are working smarter and better leveraging their knowledge, assets, people and technology.

“As organizations aim to rebound and prosper, logistics leaders must identify 3PL innovations and leverage them to boost their performance and resilience,” observes Farrah Salim, Sr. Principal Analyst, Gartner.

Ms. Salim’s primary research focus is on Best Practices in Logistics Strategy and Operations. She advises clients on 3PL Contract Best Practices for Distribution Center Master Service Agreements and Service Level Agreements through contract reviews. She also covers Best Practices in Logistics Cost Optimization.

In an exclusive SCMR interview, Salim outlines other major new trends in the 3PL arena.

SCMR: What has been the major impact from the COVID-19 crisis?

Farrah Salim: We’re seeing many 3PLs focusing on digital transformation by investing in end-to-end solutions and end-to-end visibility to meet customer demand. In response to some of the logistical challenges the pandemic has created for shippers, greater visibility and orchestration on the movement of goods (both domestically and internationally) has become a top priority for many 3PL customers.

SCMR: What about long term consequences?

Salim: Sustainability is also a major trend in the 3PL space as several of the top 3PLs have robust sustainability programs in place and are working on initiatives such as achieving carbon neutrality, introducing more electric vehicles into their fleets and getting facilities BREEAM certified, etc.

SCMR: Has the pandemic created opportunities for new players?

Salim: I would say the pandemic has created opportunities more for existing 3PLs (rather than new players) to enhance their competitive advantage in the market. For example, many well established 3PLs that offer freight forwarding services saw an opportunity to provide much-needed air freight capacity for customers (with capacity being negatively impacted with the grounding of many passenger aircraft) and responded by building freighter networks.

SCMR: What about mergers?

Salim: Yes, we’re also seeing a lot of M&A activity happening in the 3PL space as 3PLs identify opportunities to create synergies through acquisitions to enhance their end-to-end service offerings.

SCMR: Will international trade tensions have an impact on this sector in 2021?

Salim: At the moment, I would say no major impact is being factored in for the rest of 2021.

SCMR: Will 3PLs see a shift in greater reliance on different transport modes?

Salim: I wouldn’t say there’s a greater reliance on different transport modes. Demand on almost every mode of transportation is quite strong at the moment and capacity remains an ongoing challenge for most regardless of the mode they are using.

SCMR: Are supply chain managers relying on 3PLs to make their organizations more resilient to disruptions and navigate through trends?
Salim: Most definitely. A common misconception defines 3PLs as organizations that do not lay great emphasis on innovation. A big reason behind this notion is selective availability of innovative solutions to shippers.

Gartner researchers conclude that like logistics organizations, 3PLs also make their own assessments of customers they view as a potential candidate for becoming a strategic or equitable customer. 3PL providers are becoming more selective of customers, choosing to invest their best talent and knowledge in customers that value their service and relationship, and are willing to pay a fair price for their abilities.

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