3PLs Gain Nearly Half of Logistics Budgets, Foresee Continued Growth

American manufacturers are spending more of their logistics budgets than ever before on the services of third-party logistics providers (3PLs). According to the 13th annual study released by Accenture and Northeastern University, American manufacturers allocated 40% of their 2003 logistics operating budgets to 3PLs, compared with between 19% and 30% in the prior four years. Even more startling, 80% of manufacturers are also utilizing 3PLs to help manage their supply chains overseas. With this kind of growth—perhaps due in part to the increasing globalization of manufacturing—it’s no wonder CEOs of 3PLs are projecting double-digit increases in company revenue during the next year as well as over the next three years. It’s also no wonder that 3PLs can use some help weeding through the growing number of WMS software providers, prompting publication of a “Who’s Who in 3PL WMS Software” directory.

“The growing share of budget consumed by [3PLs] reflects American manufacturers’ continued satisfaction with the benefits delivered by the providers,” noted Brooks Bentz, an associate partner in Accenture’s Supply Chain Management practice, and co-author of the study with Northeastern Professor Robert Lieb. “It also underscores the growing reliance on third-party providers to support the expanding international operations of American manufacturers.” The study is based on surveys of two groups: 60 chief logistics executives of the 500 largest manufacturers in the United States, and nearly 50 chief executive officers of the top third-party logistics providers. This year’s survey was expanded to include CEOs of 3PLs from Europe and Asia-Pacific.

CEOs of North American 3PLs seem to take a positive view of the manufacturing globalization trend. While 43% of the North American CEOs said that off-shoring of manufacturing from North America has affected their company’s North American operations, most characterized the affect positively as providing opportunities for new and expanded services. In fact, only one of the North American CEOs said the movement had a negative impact.

Among the findings:

• On average, 3PL respondents in North America said they expect 12% revenue growth this year and 14% annually over the next three years; those in Europe expect 15% growth this year and 19% annually over the next three years; those in Asia-Pacific expect 19% growth this year and 17% annually over the next three years.

• CEOs in all geographies also projected significant growth in overall industry revenue. On average, respondents in North America expect one-year industry revenue growth to be 9% and three-year annualized growth to be 10%; those in Europe projected one-year industry growth of 10% and three-year annualized growth of 11%, and those in Asia-Pacific projected both one-year and three-year annualized growth of 15%.

• CEOs in North America and Europe identified downward pressure on pricing as the most important industry dynamic in their regions, while CEOs in Asia-Pacific said growth of the Chinese economy is the most important industry dynamic in that region.

• The ability to find and keep qualified people is a greater problem in North America than in other markets, cited by 60% of CEOs in North America versus 54% in Asia-Pacific and 46% in Europe. More information is available at http://www.accenture.com.

Meanwhile, Industrial Data & Information Inc. (IDII), a supply-chain focused research consulting company based in Webbers Falls, OK, contends that selecting and evaluating warehouse management system (WMS) software for a 3PL “should rank 10 out of 10” for challenging tasks. In addition to all warehousing functions that a private warehouse needs, the 3PL also needs inventory ownership, 3PL billing, 3PL customer reporting, 3PL management reporting, and ultimate configuration options on a per customer basis. IDII has published “Who’s Who in 3PL WMS Software,” a 342-page guide that leverages the firm’s expertise in assisting companies to select and implement software solutions. The report covers 28 software solutions that have 3PL billing functionality, support full Radio Frequency (RF) for all warehouse tasks, and have current 3PL installations. It is intended to allow 3PLs to intelligently develop a short list of vendors to which they can send RFPs. IDII claims to have spent over a thousand hours investigating these software solutions. It has also added comments and criticisms about the solutions, based on evaluations conducted for clients.

A full sample software solution profile can be viewed at http://www.softeval.com. For more information on IDII, visit www.idii.com, call (918) 464-2222 or e-mail philobal@idii.com.

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