Supply Chain Concerns: Greenness, Security, Technology

Oct 09, 2008 7:24 AM  By

A recent survey of 1,644 supply chain executives conducted by Capgemini — in cooperation with the Georgia Institute of Technology, Oracle and DHL — shows that while 98% see green initiatives as essential for future business success, most are unwilling to invest additional funds in the greening of their supply chains.

Why are most 3PLs unwilling to go the green route? Well, for one thing, few companies rate green capabilities as a deciding factor when choosing a 3PL partner. Only 46% of respondents to Capgemini’s 13th annual Third Party Logistics Study said the effect of supply chain operations on the environment was considered when going through the selection process.

But many supply chain execs concede that they will eventually have to invest in green initiatives. According to the survey, the inevitable greening of the supply chain will have a widening impact on network design, transport modes used, selection of equipment, business processes, behaviors and balance sheets.

This year’s survey also reveals that security is a top concern for 3PL operators. While the theft of material goods remains a top concern, companies must now focus attention on other causes of supply chain disruption — from the theft of intellectual capital to natural disasters to the closure of ports to product tampering.

Although 76% of respondents said their operations are secure, there is a gap between 3PL users’ expectations and the current security capabilities of their 3PLs.

What’s more, companies are concerned about the rising cost of meeting compliance mandates designed to secure supply chains in the face of terrorist threats.

The study’s findings suggest that close collaboration between a company and its 3PL is the key to addressing these issues. Companies that want their 3PLs to be greener should work with them to carry out specific goals and objectives. The source and impact of emissions must be accurately assessed if 3PLs and their customers are to become accountable.

“The greatest shared challenge is that of forming and growing successful collaborative relationships between users and providers of logistics services,” said Dr. John Langley from the Georgia Institute of Technology in the report. “Without a commitment from both sides, little progress can be made in the greening of the supply chain and supply chain security. More than three quarters of 3PL users rate consolidation, routing, and mode selection as the top services 3PLs can contribute to green strategies. However, just 31% indicate that their 3PLs currently offer these capabilities.”

Technology is also a high priority for 3PL users. While most 3PLs are outsourcing their communications, visibility tools, warehouse/distribution management, and transportation management/execution, an IT expectation/performance gap persists, with only 38% of respondents satisfied with their 3PL providers’ information technology capabilities.

“The continued gap between the capabilities of 3PLs and what is required by their customers is extremely worrying,” said Sundar Swaminathan, senior director, Oracle. “IT capabilities are critical to the integration of logistics services provided by 3PLs and the ability to facilitate green supply chains and supply chain security. 3PLs need to simplify and modernize their applications and infrastructure so they can bring new services to market more quickly, increase agility and operational efficiency and deliver service excellence.”

Logistics executives from North America, Europe, Asia Pacific, Latin America South America and the Middle East participated in the Web-based survey. The findings were supplemented with the results from in-depth interviews with industry observers and experts, primarily relating to integrated service offerings, green supply chain, and supply chain security.