Pick of the Bunch

What do exotic produce and third-party logistics services have in common? Their buyers are picky. This year, companies that use 3PLs are examining the menu of offerings much more carefully. In a recent study, researchers from Cap Gemini Ernst & Young, Ryder System, Inc., and the Georgia Institute of Technology found that only 54% of firms using 3PL services considered their outsourcing successful — compared to a vigorous 80% in years past. According to the survey, which drew responses from 93 companies of varying sizes, logistics managers have evolved into sophisticated buyers who expect flawless service, strategic management skills, and top-of-the-line technology from 3PLs.

Outside providers, for their part, fulfill these expectations in some areas but fall far short in others. Most respondents are satisfied with the routine, day-to-day operations of 3PLs, but find them deficient in meeting service-level and cost commitments, offering e-commerce and global logistics services, and providing integrated supply chain management. A 3PL’s ability to handle a wide range of tasks is crucial; 73% of respondents cite this as a highly desirable characteristic. Sixty-seven percent would like solutions to logistics and supply chain problems, and 62% want service providers who can integrate various activities.

Technology is the weakest link in the 3PL supply chain. About 70% of 3PL users say that IT-based services such as warehouse management, shipment tracking and tracing, and freight forwarding are readily available from outside providers. However, future third-party logistics requirements are many: 44.4% of respondents say they need supplier management systems, 37% want access to electronic markets in transportation and logistics, 33.3% would like supply chain planning capabilities, and 27.8% expect customer order management services.

For more information, contact Gary R. Allen at Cap Gemini Ernst & Young, 500 Woodward Avenue, Suite 1620, Detroit, MI 48226; phone: (313) 628-8025; e-mail: Gary.Allen@us.cgeyc.com.

Auld Lang Syne

Services Outsourced in 2000 (%) Outsourced in 2001 (%)
Warehousing 63.3% 73.7%
Outbound transportation 60.7 68.4
Freight bill auditing/payment 59.8 61.4
Inbound transportation 44.6 56.1
Freight consolidation/distribution 32.1 40.4
Cross-docking 5.0 38.6
Product marking/labeling/packaging 19.6 33.3
Selected manufacturing activities 39.3 29.8
Product returns and repair 17.9 22.8
Inventory management 10.7 21.0
Traffic management/fleet operations 21.4 19.3
Information technology 8.9 17.5
Product assembly/installation 8.9 17.5
Order fulfillment 10.7 15.8
Order entry/order processing 2.7 5.3
Customer service 4.5 5.3
Source: Cap Gemini Ernst & Young, 2001

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