Global 3PLs: Focus on 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. Supply chain management 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, maintains 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, supply chain managers must identify 3PL innovations and leverage them to boost their performance and resilience,” observes Farrah Salim, Senior Principal Analyst, Gartner.

“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,” she adds. “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.

According to Salim, “sustainability” is also a major trend in the 3PL space as several of the top players 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 certified by BREEAM (Building Research Establishment Environmental Assessment Method), an international standard.

This doesn’t necessarily mean that barriers for entry a coming down the third-party arena, however.

“I would say the pandemic has created opportunities more for existing 3PLs (rather than new players) to enhance their competitive advantage in the market,” says Salim. “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.”

Gartner is also seeing a lot of M&A activity happening in the 3PL space as they identify opportunities to create synergies through acquisitions to enhance their end-to-end service offerings.

Meanwhile, analysts say demand on almost every mode of transportation is quite strong at the moment and obtaining capacity remains an ongoing challenge. This, in turn, requires 3PLs to remain agile and to innovate.

“A common misconception defines 3PLs as organizations that do not lay great emphasis on innovation,” says Salim. “A big reason behind this notion is selective availability of shipper solutions.”

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.

As a consequence, 3PL providers are becoming more selective of shipper clients, choosing to invest their best talent and knowledge in those shippers who value their service and relationship, and are willing to pay a fair price for their abilities. –

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