Do It Yourself? No, Thanks!

Are manufacturers doing less now, and enjoying it more? It seems so, judging from the latest annual research conducted by New York-based Accenture (www.accenture.com) and Northeastern University.

More top U.S. manufacturers are using third party logistics providers (3PLs) as part of their extended supply chain than ever before — 83% in 2003 vs. 65% in 2002. This is the highest 3PL usage rate ever reported in these surveys. And 85% of survey respondents — an 18-point increase from 2002 — reported use of 3PL services having a positive or very positive impact on logistics service levels, by far the highest positive response generated in this category since the surveys began. Not only are 3PLs good for service, they also help the bottom line: Seventy-seven percent of users reported that use of 3PL services had a positive or very positive impact on logistics costs, up from 70% in 2002.

These figures come from dual surveys, one of which captured data from 66 executives of the largest American manufacturing companies, and the other from 20 CEOs of top global 3PL services providers. The CEOs were asked to identify the three most significant opportunities available to 3PL providers. The most frequently cited opportunity was expansion of integrated supply chain services, which tied for second place in 2002.

Integrated supply chain services were also the subject of a number of questions in the survey of manufacturers, and one of the more interesting findings this year is that 49% of users said their primary 3PL providers also serve their major vendors. Similarly, 57% said that those providers also serve their major customers. More than two-thirds of the users indicated that the related extension of 3PL services to their supply chain partners by the same provider was important in promoting supply chain integration.

CEOs said their most important problem was inadequate profitability. But 4% of users categorized the industry as very profitable, 80% called it moderately profitable, and 16% termed it break-even. This perception influences the negotiating posture of 3PL users, and clearly shows why 3PL providers contend that continued downward pressure on prices from clients is one of the most important problems the industry faces.

One thing we don’t know: how many of the manufacturers surveyed actually make do-it-yourself kits.

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