Outsourcing logistics management responsibilities to third parties (3PLs) has been an established practice for many years. It hasn’t always been clear, though, why firms outsource, or what real benefits accrue. Is the outsourcing decision a reasoned attempt to add value to the supply chain, or is it perhaps motivated by an aversion to capital investment, a cry for help in managing an out-of-control process, or just a herd instinct? A recent survey of professionals in (mostly) Fortune 500 companies sought to explore the motives, and the techniques firms use to manage their outsource partners.
Although 71 per cent or respondents used 3PLs for some logistics functions, the ‘full service’ option remains rare. 65 per cent outsource transport, 41 per cent warehousing, and 31 per cent the related information systems, but the other services – fleet management, inventory management, reverse logistics, customer support, order processing, customisation – that many 3PLs claim to offer remain minority tastes. That suggests that a major motivation is a reluctance to own assets, rather than operational improvements.
How do 3PLs perform? Two thirds of firms rate their partners’ performance as ‘good’ to ‘outstanding’, but the number of dissatisfied customers has risen against previous surveys. Expectations are clearly rising, and the 3PL market is differentiating quite sharply. Overwhelmingly, the causes for dissatisfaction, or outright failure, are ‘inefficient management’, and ‘hidden costs’, followed by problems in evaluating 3PL performance.
This survey will be discussed at the ‘Outsourcing Logistics’ conference in Amsterdam at the end of May – www.eyefortransport.com/outlogeurope/.