Current State of the 3PL Market Shippers Reflect Continued Confidence with Use of 3PL Serv

Results and Findings of the 16th Annual Study
2012 THIRD-PARTY LOGISTICS STUDY
The State of Logistics Outsourcing
Contents
©2012 C. John Langley, Jr., Ph.D., and Capgemini. All Rights Reserved.
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4 Executive Summary
7 Current State of the 3PL Market
15 Emerging Markets
23 Electronics
33 Talent Management
41 Strategic Assessment
44 About the Study
48 About the Sponsors
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2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Supporting
Organizations
Balance is the state of equilibrium — a continuous and sometimes evasive quest for supply
chain executives — and the theme of this report. Whether they’re exploring emerging markets,
navigating the challenges of the electronics supply chain or in ?nding the right talent, attaining
equal and satisfactory distribution of resources is an ongoing challenge.
www.3plstudy.com
Current State of the Market
Survey responses from 1,561 industry execu-
tives and managers representing users and
non-users of 3PL services, as well as respons-
es from 697 3PL executives and managers,
con?rm that 3PLs continue to provide strategic
and operational value, provide new and inno-
vative ways to improve logistics effectiveness
and are key contributors to shippers’ overall
business success. Total logistics expenditures
represent an average of 12% of shippers’ sales
revenues, and of this, an average 42% is devot-
ed to outsourcing. Metrics relating to logistics
cost reduction, inventory cost reduction, and
logistics ?xed asset reduction remain con-
sistent with the two previous years’ studies.
A majority of shipper respondents, 64%, are
increasing their use of 3PL services, while
24% are returning to insourcing some 3PL
services and 58% report they are reducing
or consolidating the number of 3PLs they
use. Logistics activities most frequently out-
sourced continue to include those that are
more transactional, operational and repeti-
tive, while those that are more strategic,
customer-facing and IT-intensive tend to be
less frequently outsourced. A similar phe-
nomenon is present in expectations of 3PLs’
IT capabilities; execution-oriented activities
and processes such as transportation and
warehouse/DC management-related IT capa-
bilities are more in demand than those that
are more strategic and analytical.
3PLs continue to rank their relationships
with shippers a bit higher than shippers
do, but the vast majority (88% of shippers
and 94% of 3PLs) view their relationships
as successful. Openness, transparency,
and good communication as well as agility
and ?exibility contribute to this success.
Interestingly, ?gures from this year’s study
suggest decreases in the use of gainshar-
ing and collaboration.
This report presents ?ndings
of the 2012 16th Annual Third-
Party Logistics Study, based
on research conducted in
mid-2011. In addition to docu-
menting the ongoing evolution
of the third-party logistics
market, this year’s report also
takes a close-up look at three
special topics:
– The logistics of operating in
emerging markets
– The unique challenges facing
the electronics supply chain
– For the ?rst time in the
study’s history, the report
considers the implications of
talent in the supply chain and
in shipper-3PL relationships
Effective with this report, we
are branding each Annual 3PL
Study in terms of its ?rst full
year of circulation following
the report’s annual October
release. Therefore, this report
constitutes the 2012 3PL Study.
Emerging Markets
A substantial 80% of shippers and 77% of
3PLs in the survey conduct business with or
within an emerging country — nations with
economies that are experiencing rapid growth
through industrialization. China, India, Brazil
and Mexico are considered top emerging mar-
ket opportunities by survey respondents.
Operational dif?culties, including logistics
challenges, threaten to erode the potential
bene?ts associated with doing business with
or within emerging markets. For shippers
based in mature markets, dif?cult laws and
regulations, cultural differences, the ability
to deliver against promises or agreed-to ser-
vice levels and complicated tax regimes top
the list of challenges.
Brazil is representative of the risk/reward
challenges that are posed by an emerg-
ing economy. Government investment in
infrastructure, as well as tax reductions
and participation in the Mercosur free trade
agreement, have contributed to the fast
growth that has attracted global manufac-
turers and 3PLs. But companies moving into
Brazil face the very challenges shippers cite.
Indeed, entering any new market requires
due diligence; when it’s an emerging mar-
ket, it’s even more critical. More than half of
shippers based in both mature and emerging
markets agree that a global 3PL coordinating
with a local 3PL is the most successful oper-
ating model for 3PLs operating with or within
an emerging market.
The 3PL capabilities shippers most value
when entering emerging markets are visibility,
expertise on the latest global trade regula-
tions and managing and optimizing shipment
routing based on free trade agreement (FTA)
knowledge. Those participating in workshops
supporting the study also added proactive
consulting services, local insight and exper-
tise and integrated solutions to that list. The
majority of shippers in mature and emerging
markets call 3PLs’ knowledge of FTAs very
important (65% and 73%, respectively).
Executive Summary
4 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Electronics
Electronics products can be highly popular,
but along with enviable demand comes pres-
sure to make products smaller, faster, cooler
and at a lower price point. Hitting these tar-
gets demands a fast and nimble supply chain.
Increasing pressure to lower costs and man-
age material and suppliers more ef?ciently
has triggered a preference among electronics
companies for asset lightness, outsourcing
both production and logistics, especially in
emerging markets. Shippers call price pres-
sure to reduce operating costs their top
logistics challenge (59%), but electronics
manufacturers also wrestle with other issues
incurred by a long, thin supply chain, employ-
ing strategies such as postponement.
The electronics industry is notoriously dis-
integrated, with multiple players involved in
the supply chain and a high rate of mergers
and acquisitions. Further complicating mat-
ters, electronics companies sell into many ver-
tical markets, each with its own unique needs.
Multiple layers, supply constraints, mashed-
together supply chains and the speci?c chal-
lenges of retail channels introduce cost,
safety stock, forecast challenges and addi-
tional time into logistics processes. Another
challenge is to design a common, cost-ef?-
cient infrastructure across supply chains.
Because electronics products are often
high value, they pose challenges including
assuring security, preventing counter-
feit and packaging suf?ciently to handle
long-distance transportation. Short life-
cycles combined with the challenges of
accurately forecasting demand also mean
inventory obsolescence is a signi?cant
problem, leading electronics companies to
seek solutions such as on-line auctions.
Unfortunately, electronics shippers give
low marks to 3PLs’ ability to solve their top
logistics challenges. The largest gaps occur
on their highest priorities: for example, 59%
regard price pressure to reduce operating
costs as their top challenge, while just 28%
believe 3PLs can help them with this chal-
lenge. 3PLs need to do a better job of selling
the quality and value of their capabilities to
electronics customers, and shippers need to
be more open to collaborating with 3PLs to
address their top challenges.
Talent Management
Despite the supply chain’s role as a signi?cant
contributor to attaining strategic business
goals, the logistics industry is experiencing
a shortage of capable and well-rounded sup-
ply chain managers prepared to step into key
management positions. This can be overcome
by developing programs for talent manage-
ment — the vigorous, systematic process of
connecting a clear, well-de?ned business
strategy to the recruitment, retention and
development of talent.
Many shippers and 3PLs are troubled by the
current state of talent management within
their organizations, with promotion and rota-
tion practices and identifying and developing
leaders the top concerns.
As supply chains grow more complex and
intrinsic to a company’s ability to attain its
business goals, they require leaders who are
more diverse and multi-faceted. A signi?-
cant number of shippers and 3PLs feel their
current leaders don’t have what it takes
to address future business challenges.
Shippers and 3PLs most highly value opera-
tional execution (51% and 60%) followed
by people management and development
skills (54% and 43%) in their leaders.
Today’s supply chain leaders have been
required to grow well beyond their opera-
tions backgrounds, developing a broad
range of competencies while on the job;
shippers (37%) and 3PLs (39%) are most
con?dent in the learning ability of today’s
leaders. Also important are leaders’ ability
to deduce, execute, conduct talent review
processes and lead visionary change and
organization buy-in. But few organizations
have been indoctrinating these competen-
cies into mid-management training and
development, leading to the talent crisis.
The scarcity of supply chain talent pres-
ents a real challenge for many shippers and
3PLs. To date, the majority of both ship-
pers and 3PLs recruit from inside their own
industries, but a growing trend is to look for
talent in adjacent industries. Company suc-
cess and performance, attractive salary and
bene?ts and personal development oppor-
tunities within the company are considered
the top qualities needed to attract talent.
Strategic Assessment
Constantly changing economic and political
dynamics necessitate continual re-evalua-
tion of supply chain directions. Inspired by
the ?ndings of this year’s study, in this stra-
tegic assessment, the study team examines
several trends spurring yet more change and
innovation in the supply chain world.
The survey found shippers in developing
regions exhibit a greater inclination to both
outsource and insource logistics services
than those in the more developed countries.
While these results may seem to contradict
one another, the underlying ?nding is that
shippers in developing economies are more
likely to make changes to their outsourc-
ing strategies than those in more developed
regions. Considering the increasing complex-
ity of many supply chains, there is a strong
argument that shippers should be looking
carefully at bolstering logistics capabilities
via 3PLs and 4PLs.
A growing number of companies aspire to
manage this complexity via supply chain
control towers, a central repository for all
event data, and several 4PLs offer this ser-
vice. A well-designed supply chain control
tower enables a company to measure and
control the effectiveness of the supply chain
in terms of agility, resilience, reliability and
responsiveness. This trend can be viewed as
a positive method of managing overall supply
chain activities and processes, but 3PL and
shipper must collaborate to prevent duplica-
tion of efforts and undue added costs.
Nearshoring is another sign of constantly
changing global dynamics. Companies have
moved production to emerging markets in
pursuit of lower costs, but that decision
sometimes changed conditions in those
very markets. This challenges companies
to reconsider the overall economics and in
some cases return to nearshoring.
Like other industries, the supply chain indus-
try is in the early stages of working out how
to best leverage social media for tasks such
as collaboration, enhancing forecasting and
locating talent, to enhance day-to-day busi-
ness functions while minimizing the risks.
Though social media was not included as a
topic during this year’s survey, a signi?cant
number of respondents and participants see
the bene?ts of social media in the logistics
world and question not whether social media
will take off, but only when.
5 EXECUTIVE SUMMARY
Balancing internal logistics competencies with external expertise
Results of the 2012 16th Annual Third-Party
Logistics Study once again reaffrmed that
third-party logistics providers continue to
provide strategic and operational value to
many shippers across the globe. Shippers
consider logistics and supply chain man-
agement as key contributors to their over-
all business success, and approximately
three-quarters of survey respondents say
3PLs provide new and innovative ways to
improve logistics effectiveness.
These results are based on survey
responses from 1,561 industry executives
and managers representing users and
non-users of 3PL services (referred to as
shippers or shipper respondents through-
out this report), as well as 697 executives
and managers representing frms that
provide 3PL services (called 3PLs or 3PL
respondents). 3PLs were added to the
survey group in 2009 in order to capture
both sides of the buyer-seller relationship.
The number of usable survey responses
continues to rise each year, with a signif-
cant increase for the 2012 Study.
Please see About the Study on page 44 for
detailed information about survey respons-
es and the four streams of research used to
fully analyze the state of the 3PL market:
a web-based survey, desk research, focus
interviews, and facilitated workshop ses-
sions at Capgemini Accelerated Solutions
Environment
®
(ASE) locations in Chicago,
Illinois, and Utrecht, The Netherlands,
and at the 2011 eyefortransport 3PL
Summit in Atlanta, Georgia.
Current Global Economic
Climate and Use of 3PLs
As acknowledged in our Annual 3PL Studies
over the past two to three years, economic
volatility and uncertainty have impacted
global business markets and in turn, global
markets for 3PL services. Figure 1 includes
data from Armstrong & Associates that
estimates the magnitude of global 3PL rev-
enues for 2010 (US $541.6B), and provides
breakdowns for the four major geographies
that are included in the 2012 3PL Study.
Global 3PL revenues reported for 2010
represent an increase of 6.8% over those
reported in 2009, confrming the general
trend toward improving global business
conditions. Focusing specifcally on the US,
3PL revenues reported by Armstrong &
Associates have increased from US $107.1B
in 2009 to US $127.3B in 2010, and are
expected to increase to US $141.2B in 2011.
Generally, these refect the somewhat-
improving global business environment
and ongoing economic globalization.
The Competitive Starting
Line Has Been Re-Set
The chief reason for conducting the
2012 3PL Study is to update our knowl-
edge of 3PL-shipper relationships, and
to learn how both types of organiza-
tions are using these relationships to
improve and enhance their businesses
and supply chains. Many shippers are
currently in search of new and innovative
global supply chain strategies, suggest-
ing new opportunities for 3PLs to make
signifcant contributions to supply chain
Current State of the 3PL Market
Shippers Re?ect Continued Con?dence with Use of 3PL Services
Figure 1: Global 3PL Revenues for 2010
Region
2010 Global 3PL Revenues
(US$ billions)
North America 149.1
Europe 165.1
Asia-Paci?c 157.6
Latin America 27.5
Other Regions 42.3
Total 541.6
Source: Armstrong & Associates, 2011
7 CURRENT STATE OF THE 3PL MARKET
are also similar to last year. A new series of
questions in the 2012 3PL Study asked ship-
pers to report the percentages of trans-
portation and warehousing spend that are
managed by third parties. As indicated in
Figure 2, the overall average for transpor-
tation was 56%, but the regional averages
ranged from 41% in North America, to
more than 60% for shippers in Europe,
Asia-Pacifc and Latin America. The aver-
age warehouse operations spend managed
by third parties was 39%, with only modest
variation by individual region.
Reported Changes in
Use of 3PL Services
In recent years’ studies, we began to ask
shippers whether they were increasing
their use of outsourced logistics services,
or returning to insourcing many of them.
The responses represent an interesti ng
record of the shifting use of 3PL services:
– Increasing use of 3PL services: Nearly
two-thirds (64%) of shipper respon-
dents report an increase in their use of
outsourced logistics services, and 76%
of 3PL respondents agree this is what
they are seeing from their customers.
Regionally, 58% of North America ship-
pers reported increased use, as well as
57% of European, 78% of Asia-Pacifc
and 73% of Latin American shippers.
– Returning to insourcing: Consistent
with the churn that occurs each year
with some companies increasing out-
sourcing and others bringing logistics
activities back in-house, an average
of 24% of shipper respondents are
returning to insourcing some of their
logistics activities, and 37% of 3PL
respondents observe that some of their
effciency and effectiveness. Many ship-
pers and 3PLs agree that today’s business
challenges represent some version of a
“new normal,” driving the need for both
types of organizations to identify and
implement new strategies for success. In
effect, the starting line has been re-set,
injecting a new, highly invigorated and
highly competitive spirit into the logistics
business environment.
“Today’s 3PL marketplace is experiencing
signifcant change. Established 3PLs are re-
calibrating their business models to provide
greater value to their shipper-customers,”
noted one prominent 3PL industry observ-
er. “At the same time, they are looking over
their shoulders at emerging sources of com-
petition and the new and innovative offer-
ings they are bringing to market.”
Spending on Logistics
and 3PL Services
As seen in Figure 2, shipper respondents
to the 2012 3PL Study report that total
logistics expenditures represent an aver-
age of 12% of their companies’ sales rev-
enues. Total logistics expenditures include
transportation, distribution, warehousing
and value-added services. Regional dif-
ferences range from 11% in each of three
regions to Latin America’s 14% of com-
pany sales revenues.
Shippers devote an average 42% of this
total to outsourcing, the same as reported
in last year’s study. That suggests that in
comparison with the previous year, average
changes in expenditures for outsourced
logistics have been proportional to chang-
es in total logistics expenditures. The
average percentages of logistics spending
shippers devote to outsourcing by region
customers are returning to insourcing
logistics activities.
– Reducing or consolidating the num-
ber of 3PLs used: Slightly over one-
half (58%) of shipper respondents are
consolidating the number of 3PLs they
use, and 72% of 3PLs feel that customers
in general are reducing or consolidat-
ing the number of 3PLs they use. This
general trend toward consolidation is
consistent with contemporary trends in
procurement and strategic sourcing.
Interestingly, the percentage of shippers
increasing/decreasing their use of 3PL ser-
vices is very close to the fgures we report-
ed in last year’s study. So, again this year,
there is strong evidence that the predomi-
nant direction among shippers is to move
toward increased use of outsourced logis-
tics services.
3PL-Shipper Relationships
Continue to Progress and Improve
Similar to last year’s study, 88% of shippers
view their 3PL relationships as generally suc-
cessful, compared with 94% of 3PL respon-
dents. Shippers’ ratings are consistent across
regions: North America 89%; Europe 88%;
Asia-Pacifc 89%; and Latin America 87%.
Somewhat fewer shippers, 71%, indicate
that 3PLs provide them with new and
innovative ways to improve logistics effec-
tiveness; 91% of 3PL providers feel that
this statement accurately characterizes
the services they provide. The gap con-
tinues between the ratings that shipper
respondents assign to various aspects of
the 3PL-shipper relationship and the more
positive evaluations provided by the 3PL
respondents themselves.
Figure 2: Outsourcing Spending Remains Consistent
Selected Information All Regions
North
America
Europe Asia-Paci?c Latin America
Total Logistics Expenditures as a
Percentage of Sales Revenues
12% 11% 11% 11% 14%
Percent of Total Logistics Expenditures
Directed to Outsourcing
42 38 46 47 35
Percent of Transportation Spend Managed
by Third Parties
56 41 66 61 66
Percent of Warehouse Operations
Spend Managed by Third Parties
39 36 42 42 40
Source: 2012 16th Annual Third-Party Logistics Study
8 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Success Factors: According to the survey
fndings, the following are key ingredients
to successful 3PL-shipper relationships:
– Openness, transparency and good
communication: While 69% of shipper
respondents are satisfed with the open-
ness, transparency, and communication
received from 3PLs, only 62% of 3PLs
are satisfed with these characteristics in
their relationships with customers. So,
apparently there is a need for both par-
ties to consider the value that could be
gained by being more willing to share
appropriate information with their busi-
ness partners.
– Agility and fexibility to accommodate
current and future business needs and
challenges: Nearly all (98%) 3PLs feel
that their customers expect them to be
suffciently agile and fexible to accom-
modate their (shippers’) current and
future business needs and challenges.
But just 68% of shippers judge their
3PLs as suffciently agile and fexible,
down from 72% last year. This aspect
of 3PL-customer relationships clearly
needs improvement, and deserves care-
ful watching.
– Interest in “gainsharing” between 3PLs
and shippers: Gainsharing comes up
frequently during our shipper work-
shops, and we are receiving mixed sig-
nals regarding this form of shipper-3PL
collaboration. This year 56% of 3PL
respondents and 42% of shippers (ver-
sus 56% last year), report engaging in
gainsharing arrangements. While many
shippers consider gainsharing to be a
useful incentive for themselves and their
3PL providers to work toward agreed-
upon objectives and in keeping with the
principles of good collaboration, others
seem to feel that the basic agreement
with a 3PL should cover all areas where
Figure 3: Shippers Continue to Experience Measurable Bene?ts From Use of 3PL Services
Results All Regions
Logistics Cost Reduction (%) 13%
Inventory Cost Reduction (%) 9%
Logistics Fixed Asset Reduction (%) 25%
Order Fill Rate
Changed From 70%
Changed To 79%
Order Accuracy
Changed From 80%
Changed To 87%
Source: 2012 16th Annual Third-Party Logistics Study
Figure 4: Shippers Still Prioritize Execution-Oriented 3PL IT Capabilities
Information Technologies
Percentages Reported By
Shippers 3PL Providers
Transportation Management (Execution) 75% 79%
Transportation Management (Planning) 68 76
Warehouse/Distribution Center Management 67 79
Electronic Data Interchange (Orders, Advanced Shipment Notices, Invoicing) 66 78
Visibility (Order, Shipment, Inventory, etc.) 63 75
Web Portals for Booking, Order Tracking, Inventory Management, and Billing 55 68
Bar Coding 47 56
Customer Order Management 42 63
Transportation Sourcing 41 51
Global Trade Management Tool 37 37
Supply Chain Planning 31 54
Network Modeling and Optimization 25 42
Collaboration Tools (SharePoint, Lotus Notes, Video Conferencing, etc.) 25 38
Supply Chain Event Management 24 44
RFID 21 32
Advanced Analytics and Data Mining Tools 19 37
Yard Management 16 26
Source: 2012 16th Annual Third-Party Logistics Study
9 CURRENT STATE OF THE 3PL MARKET
performance is expected, and that it is
not necessary or appropriate to engage
in gainsharing practices. Interest in gain-
sharing may be diminishing somewhat
due to slight improvements in the global
business economy. We plan to follow this
closely in future studies.
– Interest in collaborating with oth-
er companies, even competitors, to
achieve logistics cost and service
improvements: When this question was
asked last year for the frst time, 68% of
shipper respondents and 80% of 3PLs
expressed interest in these strategies.
This year these percentages dropped to
44% and 67%, respectively. So, while last
year we stated it was “reassuring to see
percentages that suggest a true interest
by both parties in working with other
companies, even competitors,” perhaps
the easing of global economic condi-
tions have made this less of a priority.
We will continue to focus on this issue in
future studies.
Measurable Benefts: Shipper respondents
experience measurable benefts from 3PL
services, as seen in Figure 3. Metrics relat-
ing to logistics cost reduction, inventory
cost reduction, and logistics fxed asset
reduction are consistent with what was
reported in the two previous years’ studies.
Shippers also report improvements in
order fll rate and order accuracy resulting
from use of 3PLs, although the absolute
levels of these metrics are a little lower
than those reported in both the 2009 and
2010 3PL Studies. This may be an indicator
of the continuing impact of the global eco-
nomic recession.
Finally, survey results showed that 60% of
the shipper respondents report their use
of 3PLs has led to “year-over-year incre-
mental benefts;” and 88% of 3PL respon-
dents agree. Despite the positive success
ratings perceived by both shippers and
3PLs, there appears to be opportunity to
enhance the benefts experienced by users
of outsourced logistics services.
Information Technology
Figure 4 summarizes the information tech-
nology (IT) capabilities that shippers and
3PLs feel are “must haves” for 3PLs to suc-
cessfully serve customers. Overall, the most
needed capabilities are those that relate
directly to execution-oriented activities
and processes such as transportation, ware-
house/DC management, electronic data
interchange, visibility, etc. Others that have
somewhat lower rankings tend to be more
strategic and analytical.
Highlighted in Figure 5 is a ten-year view
of shippers’ opinions on whether they feel
information technologies are a necessary
element of 3PL expertise, and whether
they are satisfed with their 3PL provid-
ers’ IT capabilities, the difference that has
become known as the “IT Gap.” In recent
years there has been a modest increase in
the percentages of shippers who indicate
satisfaction with the IT capabilities of their
3PLs; in fact, it is worth noting that the sat-
isfaction rate has doubled since this ques-
tion was frst asked in 2002. Despite this
improvement, the opportunity remains to
further narrow the gap between these two
ratings. Similar to last year’s study, 68% of
3PLs feel that their customers are satisfed
with the IT services they provide.
Figure 5: “IT Gap” Shows Improvement, But Further Opportunity Remains
0%
20%
40%
60%
80%
100%
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
? IT Capabilities Necessary Element of 3PL Expertise
? Shippers Satis?ed with 3PL IT Capabilities
IT Gap
89%
27%
85%
33%
91%
42%
90%
40%
92%
35%
92%
42%
92%
37%
88%
42%
94%
54%
93%
54%
Source: 2012 16th Annual Third-Party Logistics Study
10 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
What 3PL Users Outsource
and What 3PL Providers Offer
Figure 6 shows the percentages of shipper
respondents that outsource specifc logis-
tics activities. Provided below are some
general observations about this year’s
results and the contrasts they reveal from
previous years:
– Transactional, operational, and repeti-
tive activities tend to be the most fre-
quently outsourced. These include
international and domestic transporta-
tion (78% and 71% across all regions
studied), warehousing (62%), freight
forwarding (57%) and customs broker-
age (48%). This usage varies across each
of the regions. Another observation
is that for the most part, the percent-
ages indicated in Figure 6 for the “all
regions” results are somewhat lower
than comparable percentages from
the previous year’s study. This may be
explained somewhat by the fact that the
current study yielded a higher percent-
age of shipper respondents in the lowest
revenue category than in the previ-
ous year’s study, as noted in the About
the Study chapter later in this report.
Further analysis of the available data
confrmed that the higher the sales cat-
egory, the higher the average number of
logistics activities outsourced.
– Perhaps due to the globally volatile
business environment, the percentage
of shippers outsourcing internation-
al transportation declined from 84%
in 2009 to 75% in 2010, and now has
increased slightly to 78%. Over the same
time frame, the reported use of customs
brokerage declined from 71% to 58% to
48% and the reported use of freight for-
warding services declined from 65% to
53% and then increased to 57%.
– The less-frequently reported activities
indicated in Figure 6 tend to be some-
what more strategic, customer-facing,
and IT-intensive. Examples include: IT
services; supply chain consultancy servic-
es; order management and fulfllment;
feet management; customer service;
and LLP/4PL services.
Figure 6: Shippers Continue to Outsource a Wide Variety of Logistics Services
Outsourced Logistics Service
User Percentages
All Regions
North
America
Europe
Asia-
Paci?c
Latin
America
International Transportation 78% 66% 91% 77% 84%
Domestic Transportation 71 65 77 74 69
Warehousing 62 65 61 65 63
Freight Forwarding 57 52 54 64 65
Customs Brokerage 48 49 43 56 45
Reverse Logistics (Defective, Repair, Return) 27 25 28 33 22
Cross-Docking 26 29 28 25 22
Product Labeling, Packaging, Assembly, Kitting 24 19 28 24 26
Transportation Planning and Management 23 24 27 21 16
Inventory Management 21 20 16 27 25
Freight Bill Auditing and Payment 17 35 12 11 8
Information Technology (IT) Services 15 15 14 13 16
Order Management and Ful?llment 14 19 10 15 14
Service Parts Logistics 14 10 14 19 10
Customer Service 11 9 7 14 16
Supply Chain Consultancy Services Provided by 3PLs 11 15 7 13 9
Fleet Management 10 8 9 14 9
LLP (Lead Logistics Provider)/4PL Services 9 7 10 13 4
Sustainability/Green Supply Chain-Related Services 4 3 3 6 4
Source: 2012 16th Annual Third-Party Logistics Study
11 CURRENT STATE OF THE 3PL MARKET
Figure 7 is a summary of the types of logis-
tics services provided by 3PLs participating
in the 2012 survey and reveals that many
3PLs provide a wide range of services.
Based on fndings from last year, it is very
common for 3PLs to offer many, or even
most, of the range of services included in
the question: the typical model is for 3PLs
to offer a substantial number of services to
respond effectively to their customers and
their logistics needs.
Earlier, the 2008 3PL Study included a
special topic focus on shippers’ expecta-
tions and usage of 3PLs as a part of their
green supply chain initiatives. Follow-up
questions on this topic in the 2012 3PL
Study reveal that 29% of shippers rely on
3PLs to provide visibility to fuel effciency
and carbon emissions information. Fully
53% of shippers say fuel effciency and
carbon emissions have become an impor-
tant part of their 3PL procurement
decision processes.
The Voices of Current
Non-Users of 3PL Services
The Annual 3PL Study survey also reaches
a substantial number of organizations
who do not currently use 3PLs. One objec-
tive of this study is to provide insight into
shippers’ decisions not to outsource. As
indicated in Figure 8, the most common
reasons are core competency, the impor-
tance of logistics, realization of cost reduc-
tions, integrating IT systems with 3PL
systems and control over outsourced activi-
ties. While there is a certain logic behind
using these concerns to support a decision
not to outsource, our discussions with
shippers indicate that sometimes these
very issues are used by other companies to
justify their decision to outsource certain
logistics services.
Figure 7: 3PLs Provide a Wide Range of Outsourced Logistics Services
Outsourced Logistics Service
Provider Percentages
All Regions
Domestic Transportation 83%
Warehousing 81
International Transportation 70
Inventory Management 66
Order Management and Ful?llment 65
Customer Service 64
Transportation Planning and Management 63
Cross-Docking 62
Product Labeling, Packaging, Assembly, Kitting 62
Freight Forwarding 58
Customs Brokerage 50
Reverse Logistics (Defective, Repair, Return) 56
Information Technology (IT) Services 51
Supply Chain Consultancy Services Provided by 3PLs 51
LLP (Lead Logistics Provider)/4PL Services 42
Service Parts Logistics 38
Freight Bill Auditing and Payment 34
Sustainability/Green Supply Chain-Related Services 31
Fleet Management 26
Source: 2012 16th Annual Third-Party Logistics Study
Figure 8: Why Non-Users Do Not Use 3PLs
Reason Percent in Agreement
Logistics is a Core Competency at Our Firm 19%
Logistics Too Important to Consider Outsourcing 18
Cost Reductions Would Not be Experienced 17
Too Dif?cult to Integrate Our IT Systems with the 3PL’s Systems 14
Control Over the Outsourced Function(s) Would Diminish 13
Service Level Commitments Would Not Be Realized 12
We Have More Logistics Expertise Than Most 3PL Providers 9
Source: 2012 16th Annual Third-Party Logistics Study
12 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
GO ONLINE
For more information go to
www.3plstudy.com
Current State of the Market: Key Takeaways
Key ?ndings regarding the Current State of the Market for the 2012 16th Annual 3PL Study include:
– 3PLs Make Valued Contributions: Again in 2012, companies
across industries and around the globe regard logistics and
supply chain management as key components of their overall
business success, and many credit their 3PLs with help-
ing to provide new and innovative ways to improve logistics
effectiveness.
– Logistics Spending is Consistent: Across all regions included in
the 2012 survey, shipper respondents report that total logistics
expenditures represent an average of 12% of sales revenues,
and they spend on average 42% of their total logistics expendi-
tures on outsourcing.
– Transportation Spend Dominates: Overall, survey respondents
who use 3PL services report that their outsourcing activities
account for 56% of transportation spend and 39% of warehouse
operations spend.
– 3PL Use is Rising: A majority of shipper respondents, 64%,
report they are increasing their use of 3PL services, while 24%
are returning to insourcing some 3PL services and 58% report
they are reducing or consolidating the number of 3PLs they use.
– The Success Rating Perception Gap Remains: Most shipper
respondents (88%) and most 3PL providers (94%) view their
relationships as successful. In addition, just over two-thirds of
shippers say 3PLs provide them with new and innovative ways to
improve logistics effectiveness – whereas 91% of 3PL providers
feel this is the case.
– Gainsharing and Collaboration Lose Ground: The 2012 3PL
Study provides insight into several factors that relate to the
success of 3PL-shipper relationships: openness, transparency,
and good communication; agility and ?exibility to accommodate
current and future business needs and challenges; interest in
“gainsharing” between 3PLs and shippers; and interest in col-
laborating with other companies, even competitors, to achieve
logistics cost and service improvements. Interestingly, results
from the current study suggest that both gainsharing and col-
laboration may have lost some popularity due to the recent
modest improvements in the global economic picture.
– 3PL Use Pays Off: Metrics including logistics cost, inventory
cost, and ?xed asset reductions due to use of 3PLs, as well as
order ?ll rate and order accuracy, validate the cost and service
improvements resulting from successful 3PL relationships.
– Execution-Oriented Activities Still Lead: The logistics activi-
ties most frequently outsourced continue to include those that
are more transactional, operational and repetitive, while those
less frequently outsourced are those that are more strate-
gic, customer-facing and IT-intensive. In the future customers
may be more receptive to strategic services that may be avail-
able from 3PLs. One observation from this year’s study is that
generally, the percentages reported by shippers for outsourc-
ing of individual logistics activities is down slightly from those
reported in recent years. As indicated earlier, this is likely due
to the fact that this year’s shipper survey respondents included
a higher percentage of respondents in the lowest annual sales
category than in the previous year’s study – and companies in
the lower annual sales categories tend to outsource fewer logis-
tics services.
– The IT Gap Remains: Information technology remains a key com-
ponent of 3PL-shipper relationships, and the 2012 3PL Study
results indicate that 54% of shipper respondents are satis?ed
with 3PL IT capabilities compared with 93% who indicate that IT
capabilities are a necessary element of 3PL expertise.
– New 3PL Selection Criteria: Fuel ef?ciency and carbon emis-
sions are becoming a more important part of shippers’ 3PL
procurement decision processes.
– Reasons for Non-Use Persist: Non-users of 3PL services pro-
vide reasons why they choose not to outsource to 3PLs. Among
the most prevalent: logistics is a core competency at our ?rm;
logistics is too important to consider outsourcing; cost reduc-
tions would not be experienced; too dif?cult to integrate our IT
systems with the 3PLs’ systems. Other shippers tell us these are
some of the same factors that are responsible for their deci-
sions to use 3PLs.
13 CURRENT STATE OF THE 3PL MARKET
Balancing growth and opportunity
For many companies, doing business in
emerging markets is no longer a nice-to-
have; it’s a must-have to fuel continued
growth. For example, General Motors
sold more cars in China than it did in
the United States last year, and PepsiCo
captured about half of the Russian juice
market through an acquisition, accord-
ing to a CNNMoney report. As seen in
Figure 9, a substantial 80% of shippers in
the survey conduct business with or with-
in an emerging market, with the major-
ity (52%) doing so from a mature market
and 28% from within emerging markets.
Among 3PL respondents, 77% conduct
business with or within an emerging mar-
ket, 48% from a mature market.
We defne emerging markets as nations
with economies that are experiencing
rapid growth through industrialization.
Mature markets are largely industrial-
ized nations with economies growing at a
slower, steadier rate. As seen in Figure 10
on page 16, shippers and 3PLs in mature
markets concur that their top emerging
market opportunities are in China, India,
Brazil and Mexico, though their rankings
differ a bit.
Market Expansion Challenges
The potential benefts of moving into an
emerging market are often far more clear
than is the correct path to establishing busi-
ness there, particularly when making logis-
tics decisions. Successfully balancing risk
and reward requires a careful assessment of
the unique characteristics of each market.
As seen in Figure 11 on page 17, for ship-
pers based in mature markets diffcult
laws and regulations, cultural differences,
the ability to deliver against promises or
agreed-to service levels and complicated
tax regimes top the list of challenges.
Because of such obstacles, “I could set up
a new operation in a more mature market
in much less time than in an emerging
market,” says Gokhan Cakmak, Global
Logistics Manager for Orifame. “This is
mainly due to the state of laws and regula-
tions as well as the infrastructure and lack
of international 3PL players present in
these markets.”
Global trade compliance also represents
a hurdle for many companies operating
in emerging markets. For example, one
Logistics Director for a US-based apparel
manufacturer described the application
of customs regulations in Asia as a vexing
challenge. “The authorities can become
bureaucratic and are normally not very
transparent, leaving a lot of execution and
interpretation to the feld offcers, and they
can be very erratic in their classifcation.”
“Bureaucracy and local processes make
working in emerging markets more chal-
lenging,” says Cyrill Gaechter, Head of
Marketing and Sales for Panalpina Black
and Caspian Sea. “In more mature markets
it is less complex, however the emerging
markets are catching up continuously.
Proper preparation such as documentation
is of high importance around the world but
even more critical in emerging markets to
achieve reliable end-to-end-service.”
Concerns vary by market and industry. For
example, shippers in electronics express
far more concern than the overall respon-
dents (45% vs. 22%) about global trade
compliance, as well as attracting and
retaining good local staff and lack of secu-
rity for their goods.
Indeed, in contrast with the overall sur-
vey respondents, 3PL Study ASE workshop
participants and focus interview partici-
pants assert that security and counterfeit
intervention are key considerations in
operating global supply chains: How well
do you know the suppliers you’re working
with and the quality of their due diligence?
Governments that are clear and consistent
on their security metrics and initiatives
make it easier to manage risk than those
where security efforts are less evident,
notes one US manufacturer. Some shippers
engage transportation security providers
when they perceive a high level of risk.
In focus interviews, several experts
also cited green concerns as they move
into emerging markets. One Head of
Distribution for a communications equip-
ment manufacturer noted the diffculty in
reducing its CO2 footprint, which requires
limiting air freight and road transporta-
tion, while catering to the sales growth
expected in the next two years. “To mini-
mize these modes we need to plan ahead
to allow for alternative modes like sea
freight and rail,” not always an easy task in
a fast-growing market.
Opportunities for Driving Corporate Growth
Emerging Markets
Figure 9: Most Shippers Are Active In Emerging Markets
Neither
I am Based in an Emerging Market
I am Based in a Mature Market,
But I Conduct Business With
or Within an Emerging Market
? Shippers
? 3PLs
52%
48%
28%
29%
20%
23%
Source: 2012 16th Annual Third-Party Logistics Study
15 EMERGING MARKETS
Case in Point: Brazil
Brazil is representative of the risk/reward
challenges posed by an emerging econo-
my. Brazil will play host to two mega sport-
ing events, the FIFA World Cup in 2014
and the Olympics in 2016, events which
are driving a large-scale infrastructural
improvement program. The Brazilian gov-
ernment plans to invest up to US $880B
in an economic stimulus program by 2014
to propel growth, with a portion of those
funds devoted to upgrading its infrastruc-
ture, primarily roads and railways, but
also ports and waterways. The government
is also offering eligible corporations a 75%
corporate tax reduction on “exploration
profts” until 2013. Brazil’s gross domestic
product average growth rate from 1991
through 2011 was 3.26%, according to
Trading Economics.
A critical step in Brazil’s growth was
the formation of Mercosur, the South
American free trade agreement. Regional
growth together with the tax incen-
tives available in free trade zones such as
Manaus have attracted global manufac-
turers such as Sony, Whirlpool, Samsung
and Honda, as well as international 3PLs,
according to a story in DC Velocity. Fast
growth in the 3PL market has enabled the
emergence of modern, specially built ware-
houses that meet the needs of multiple
shippers. More than 90% of Brazilian com-
panies outsource transportation, accord-
ing to a survey by BDP International, while
75% outsource other activities, such as cus-
toms expediting and warehousing. Quality
of service has become a key metric for
Brazilian shippers.
Figure 10: Shippers and 3PLs Concur on Top Emerging Markets
Colombia
Egypt
Other
Philippines
Vietnam
Indonesia
South Africa
Turkey
Russia
Mexico
Brazil
India
China
Shippers Based in Mature Markets 3PLs Based in Mature Markets
Other
Egypt
Colombia
Philippines
Russia
Turkey
South Africa
Vietnam
Indonesia
Brazil
Mexico
India
China 77%
63%
56%
55%
47%
44%
41%
39%
37%
34%
30%
29%
28%
80%
61%
60%
56%
41%
41%
41%
40%
39%
37%
27%
26%
22%
Source: 2012 16th Annual Third-Party Logistics Study
16 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
However, for all of its opportunity, Brazil
presents some logistics challenges:
– Byzantine Tax Laws: Brazil’s complex
tax laws can vary signifcantly among
regions, with at least 70 different types
of taxes, many of which require monthly
debits and credits. Enforcement is noto-
riously inconsistent. For example, regula-
tory law requires products manufactured
in Brazil to be returned to their point
of origin for disposition. One electron-
ics manufacturer was excused from
compliance in 2009, then required to fol-
low the regulation in 2010, and was once
again excused in 2011.
In addition, companies “must get a
license for a warehouse to ship to custom-
ers, and then goods can only fow from
that warehouse,” says Wally Shaw, Market
Group Supply Lead, Americas, for Philips
Consumer Lifestyle. “You cannot ship
from an overfow warehouse; you have to
ship the goods back to the main licensed
warehouse, which is very ineffcient.”
– Limited Infrastructure: Brazil is best
considered as different countries inside
one country in terms of its infrastruc-
ture and markets. In the south and
southeast regions, there is a big satura-
tion of providers, which generates more
competition and lower costs. The cen-
tral west, northern (Amazon area) and
northeast regions lack providers and
infrastructure, so costs are much higher.
Many companies work with independent
drivers who own their own trucks as a
cost effcient solution for transporting
Figure 11: Dif?cult Laws Top Mature-Market Shipper Challenges in Emerging Markets
Other
Lack of Free Trade Agreements/
Free Trade Zones
Lack of Security
Lack of IT Capabilities
Corruption
Global Trade Compliance
Attracting and Retaining Good Local Staff
Inadequate Physical Infrastructure
Language Barriers
Complicated Tax Regimes
Ability to Deliver Against Promises/
Agreed Service levels
Cultural Differences
Dif?cult Laws and Regulations
50%
47%
42%
42%
32%
31%
30%
28%
20%
19%
19%
15%
42%
29%
55%
28%
20%
36%
34%
22%
22%
33%
21%
12%
3%
5%
? Shippers Based in Mature Markets
? Shippers Based in Emerging Markets
Source: 2012 16th Annual Third-Party Logistics Study
17 EMERGING MARKETS
low-cost products such as seeds and con-
struction materials, but it’s a challenge
for these independent truck drivers to
secure a steady volume. Brazil’s invest-
ment in ports and airports has been
limited over the past many years; a con-
sequence is that containers can sit in cer-
tain ports for weeks awaiting unloading.
Brazil’s government has resisted private
investment in infrastructure.
– Trade Zone Tradeoffs: Free trade zones
such as Manaus encourage growth in
underdeveloped areas by attracting
large manufacturers, but also serve as an
example of how tax benefts alone do not
translate into logistics effciency. Manaus
has one road in and out, which cannot
take heavy truck traffc, forcing many
shippers to use air/water freight.
– Political and Regulatory Obstacles: Like
many emerging markets, Brazil has its
share of political infuences that impact
supply chain effciency. For example,
Brazil’s customs and duty regulations
have created a protectionist market for
some goods.
– Evolving Logistics Marketplace: Rapid
growth has fueled demand for outsourc-
ing, creating a fragmented marketplace
populated by a range of providers. Many
were started by individual truck drivers
who acquired more trucks and then even-
tually bought a warehouse, though Brazil
is also served by major national and inter-
national players. “Many logistics provid-
ers are individual-function oriented, with
few integrated supply chain, value-added
offerings,” says Mauricio Ferreira, Latin
America Supply Chain Director for Kraft
Foods. A fragmented logistics infrastruc-
ture often drives companies to maintain
higher inventory levels.
“In Brazil we are ten hours away from
the US by air and 11 hours from the
main European cities by air. It takes 17
days navigation by water to Europe and
38 to 45 days to reach China ports with
direct service,” says Gilberto Zanon,
Head of Industry Verticals, Brazil at
Panalpina. “The longer lead times mean
planning to avoid stock-outs or excess
stock is a challenge that companies need
to overcome. Successful companies and
3PLs work together to do this.”
Like other emerging markets, Brazil’s com-
pelling rate of growth and potential for
improvement has convinced many compa-
nies that the obstacles are worth the invest-
ment. As one participant at the eyefortrans-
port workshop noted, emerging markets
have the opportunity to build on what the
developed markets have already done and
then leapfrog over them. One example is
the pervasive use of cell phones for bank-
ing purposes in some emerging markets.
Selecting a 3PL Partner
for Emerging Markets
Entering any new market requires due dili-
gence; when it’s an emerging market, gain-
ing local insight is even more critical, since
conditions are often evolving rapidly. 3PLs
can play a critical role in both the plan-
ning and execution of shippers’ entry and
growth in emerging markets.
Early in the process, shippers must ask
themselves: What type of 3PL partner do we
want? Is it best to seek out a local player with
intimate knowledge of local practices, or a
global partner with more resources to bear?
As seen in Figure 12, more than half of
shippers based in both mature and emerg-
ing markets agree that a global 3PL coor-
dinating with a local 3PL is the most suc-
cessful operating model for 3PLs operating
with or within an emerging market. “We
look for two different types of providers,”
says Tony Xia, Senior Logistics Manager
with Emerson Electric. One must be “big
enough to have good coverage and good
IT, good assets, and can help growth and
expand.” The other type is “niche players,
where they are pretty good in a small piece
of logistics.”
The ideal, many shippers say, is to fnd a
global player with strong local knowledge.
When they don’t fnd these qualities avail-
able in emerging markets, the combina-
tion of global and local 3PLs is the next
best thing. Michael Keong, Director,
Regional Logistics Asia, Levi Strauss and
Company, noted, “We need to ensure
3PLs have the right resources, content
experts, etcetera, to understand the local
favor. A strong account manager who
understands the local area is important to
us. That person need not know it all, but
must have the right network to solve any
problems that break.”
Shippers participating in the ASE work-
shops illustrated the value of local knowl-
edge: One shared the story of a global
company that established a supply ware-
house in China to US specifcations, only
to fnd the unloading docks to be at the
wrong height for local supply trucks.
Another shipper found its pallet shifters
Figure 12: Shippers See Global 3PLs with Local 3PL Partners as Most Successful
Shippers Based in Emerging Markets
Shippers Based in Mature Markets
(with Operations in Emerging Markets)
? Global 3PL Coordinating with a Locally Based 3PL
? Global 3PL
? Locally Based 3PL
58% 24% 18%
51% 22% 27%
Source: 2012 16th Annual Third-Party Logistics Study
18 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
did not work in the narrow-bodied air-
craft coming out of Panama.
Signs indicate that the combination of
global and local players is working; as seen
in Figure 13 on page 20, shippers and
3PLs are pretty well aligned in what they
believe are the most important services
in emerging markets. Shippers’ primary
needs from 3PLs in emerging markets are
visibility (77% of those based in emerging
markets, 81% of those based in mature
markets), expertise on the latest global
trade regulations (60% and 69%) and
managing and optimizing shipment rout-
ing based on free trade agreement knowl-
edge (59% and 57%).
Visibility: With the added risk and uncer-
tainty of emerging markets, the impor-
tance of visibility to shippers is understand-
able. “Delivering products in Russia is
complex,” says Panalpina’s Gaechter, “and
visibility over where our customers’ prod-
ucts are and a reliable service to ensure
products arrive on time are two critical
aspects of our customers’ needs. This is no
different than, for example, China, where
lead-time from factory to exporting port
can take many days. Visibility and reliabil-
ity play a key role there as well, and excel-
ling in this is more diffcult in emerging
markets than more mature markets.”
It’s highly important for service-centric
computer manufacturers to be able to
provide order-level tracking to customers,
says the Supply Chain Director for a large
computer company, and 3PLs need this
capability to provide visibility to customers.
Even better is a 3PL taking proactive steps
to resolve issues detected through visibility,
which many 3PLs in emerging markets do
not do, he says.
Global Trade Regulations: As noted in
Figure 13, 3PLs active in emerging markets
concur with shippers’ rankings, with the
exception of providing expertise on the
latest global trade regulations. Shippers
ranked this as the second most important
service they would like to get, whereas 3PLs
in mature and emerging markets ranked it
somewhere in the middle.
Compliance: In emerging markets, many
shippers rely on 3PL expertise to navigate
import/export documentation, embargoed
products/countries screening and other
compliance services. “It would be useful
for 3PLs to have better relationships with
customs offcers to ensure they have local
input, etcetera,” said Levi Strauss’ Keong.
“3PLs should engage more in customs
meetings and be the conduit to discuss
customer requirements.”
Other Services Sought From 3PLs
In addition to those capabilities cited in the
survey, ASE workshop and focus interview
participants concur that they would like to
see these additional qualities and capabili-
ties in 3PLs active in emerging markets:
– Proactive Consulting Services: At the
ASE workshop held in Utrecht, shippers
concurred that the timing of 3PLs’ assis-
tance was also key. Very often an initia-
tive to move into an emerging market
begins with the shipper conducting ini-
tial research because their 3PL partners
lack insight into that market. Then the
3PL follows, ramping up its own investi-
gation. Shippers would like to see 3PLs
take a more proactive approach — and
are willing to pay for it.
– Local Insight and Expertise: It’s the
lack of local expertise on the part of
global 3PLs without a strong local pres-
ence, such as the best way to move prod-
uct in that country, that drives ship-
pers to local 3PLs and other experts.
Shippers want creative, informed ideas
to overcome local barriers, for example,
using a barge in Vietnam to circum-
vent road congestion, or overland or
cross-border trucking in India and
Bangladesh – or even how to handle
local events such as labor stoppages.
In one telecom company’s emerging
markets experience, “Logistics service
providers fail to come up with new logis-
tics solutions or improvements,” says its
Head of Distribution. “Any new solution
or idea is brought up ourselves. This is
where LSPs really fail.”
– Integrated Solutions: Shippers that want
to amass the requisite logistics services
and knowledge required for an integrat-
ed approach often fnd they must engage
multiple 3PLs because no single 3PL has
what they need. One ASE participant
related how his company was seeking
integrated warehouse and transporta-
tion services in an emerging market it
was entering, ideally with the warehouses
located close to air hubs. But the 3PL
they wanted to work with was not set up
to accommodate the shipper’s needs.
– Security: Shippers in emerging markets
expect 3PLs to address their security
concerns through measures such as
delivery trucks with GPS systems, engine
shut-down systems, and drivers trained
on security protocols.
– Long-Term Commitment: It’s also
important that 3PLs’ efforts be stra-
tegic, not tactical. “3PLs still lack a
longer term sustainable plan for com-
ing into a country,” says Arun Salvi,
Logistics Manager Asia Pacifc, for Shell
Lubricants. “They are taking more of
a short-term approach to make prof-
its much quicker than they should be.
Global players end up being like the
local players, but with a foreign name,
because they have not invested properly
in infrastructure, people and processes.”
All of these points can make for a diffcult
environment and require 3PLs and ship-
pers to work closely together and with high
degrees of trust if success in emerging mar-
kets is to be achieved. This might be one
of the reasons people choose global 3PLs
working with local players.
Free-Trade Agreements and 3PLs
A free trade agreement (FTA) is a pact
between two or more countries or areas in
which they agree to lift most or all tariffs,
quotas, special fees and taxes, and other
barriers to trade among them to allow
faster transactions and a higher volume of
business. According to the United Nations
Statistics Division, FTAs such as the
North American Free Trade Agreement
(NAFTA), the European Union (EU-
27) and the Organisation for Economic
Co-operation and Development (OECD)
have made a defnitive impact on growth
across sectors such as machinery, manufac-
tured goods and chemicals.
FTAs, free trade zones (FTZ) and Special
Economic Zones (SEZ) have in turn fueled
19 EMERGING MARKETS
Figure 13: 3PLs Are Delivering on Shippers’ Emerging Market Needs
Providing
Financial Services
(Such as Factoring)
Managing
10+2 Filings
Screening for
Embargoed Countries and
Restricted Products
Maintaining a
Product Database for
Global Classi?cation
Establishing and/or
Managing Operations
Within a Free Trade Zone
Proactive
Compliance
Consulting
Managing and Validating
Export/Import
Documentation
Managing and Optimizing
Shipment Routing
Based on Free Trade
Agreement Knowledge
Providing Expertise
on the Latest Global
Trade Regulations
Providing Shipment
Visibility
82%
46%
58%
74%
45%
46%
28%
34%
34%
12%
81%
69%
57%
70%
50%
37%
26%
29%
26%
11%
81%
48%
51%
64%
42%
41%
23%
23%
19%
14%
77%
60%
59%
58%
50%
38%
30%
21%
19%
17%
? Shippers
? 3PLs
Based in Emerging Markets Based in Mature Markets
Source: 2012 16th Annual Third-Party Logistics Study
20 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
the growth of third-party logistics com-
panies around these zones. For example,
increasing partnerships between US and
Mexican carriers via NAFTA have led to
growth of logistics companies on both
sides of the border, including 3PLs, cus-
toms brokers and forwarders. Mexico’s
maquiladora factory system allows mate-
rials to be imported into Mexican towns
near the US border, tariff and duty free;
after assembly, the fnished products
are exported duty-free back to the US.
The automotive, garment and electron-
ics industries make signifcant use of the
maquiladora system. Many partner with
3PLs for activities such as transportation
and reverse logistics.
With such high stakes, it’s not surprising
that the majority of shippers in mature and
emerging markets call 3PLs’ knowledge
of FTAs very important (65% and 73%,
respectively), as seen in Figure 14. 3PLs feel
somewhat less strongly; just 54% of those
in emerging markets and 38% of those in
mature markets agree.
Understanding and keeping up with the
changes and nuances of each FTA can
be critical to reaping the benefts. “Free
trade is not free trade, it’s more condi-
tional trade agreements,” says one apparel
manufacturer. One example of the need
for deep understanding is in China’s FTA,
he explains. “There is a ‘40% regional con-
tent’ rule, but many people do not under-
stand what this means. When we ask the
experts, we fnd production and labor costs
count towards the 40%, which can signif-
cantly impact the attractiveness of doing
business there.”
The VP of Operations at a large software
and peripherals developer says FTAs have
“allowed us to expand our business market,
although they have not alleviated signif-
cant duties and taxes.” Others cite the sig-
nifcant paperwork that still must be fled
to qualify for the FTA benefts, requiring
administrative resources. Shippers value
3PLs that can streamline these process-
es and maximize FTA/FTZ resources
through knowledge and execution of com-
pliant processes.
Using 3PLs in free trade zones has been
benefcial for a large pharmaceutical com-
pany, according to its VP Logistics. For
example, the company delivers product
Emerging Markets: Key Takeaways
– Compelling growth rates and incentives such as free trade agreements are attracting
many global businesses to emerging markets. But for shippers based in mature mar-
kets, dif?cult laws and regulations, cultural differences, the ability to deliver against
promises or agreed-to service levels and complicated tax regimes are just some of
the obstacles shippers cite in moving into these markets. A case in point is Brazil,
where the government’s commitment to infrastructure investment and participation
in Mercosur, the South American free trade agreement, has paid dividends in attract-
ing manufacturers including Sony and Honda. But Byzantine tax laws, political and
regulatory obstacles and immature logistics infrastructure are signi?cant challenges
to overcome.
– Shippers based in both mature and emerging markets concur that a global 3PL coor-
dinating with a local 3PL is the most successful operating model for 3PLs operating
with or within an emerging market. The 3PL capabilities they most prefer are visibility,
expertise on the latest global trade regulations and managing and optimizing ship-
ment routing based on free trade agreement knowledge. Shippers would like 3PLs to
be more proactive in helping them learn about the nuances of new markets and offer
creative solutions and local insights that will help them succeed. The majority of ship-
pers in mature and emerging markets call 3PLs’ knowledge of free trade agreements
very important, helping them to leverage signi?cant bene?ts when properly applied.
from US and Australian factories into an
FTZ warehouse in Panama for distribution
to surrounding countries, avoiding duties
and holding inventory closer to its markets.
“The 3PL does bring the knowledge, and
it also brings consolidation of customs
entries,” he says. “With FTZ we can con-
solidate multiple $300-per-entry monthly
customs entries into one $300 entry. That
saves us $8,700 per month, a pretty big sav-
ings that adds up to $100K annually.”
Free trade agreements can be an impor-
tant factor in choosing whether to enter an
emerging market, and the most advanta-
geous ways to operate in that market.
Figure 14: Shippers and 3PLs Agree That 3PL Knowledge of Free Trade Agreements
Is Important
Shippers Based in Mature Markets
Shippers Based in Emerging Markets
3PLs Based in Mature Markets
3PLs Based in Emerging Markets 54% 35% 11%
38% 56% 7%
73% 22% 5%
65% 33% 3%
? Very Important
? Somewhat Important
? Not Important
Source: 2012 16th Annual Third-Party Logistics Study
21 EMERGING MARKETS
Balancing long lead times with short product lifecycles
Electronics products are often the rock
stars of the consumer and business prod-
ucts worlds, with buyers eagerly anticipat-
ing the next release with the latest and
greatest features. But along with enviable
demand comes pressure to make products
smaller, faster, cooler and at a lower price
point. Some electronics products’ lifecycles
closely resemble fashion: What’s in today
is out tomorrow. But even everyday devices
are feeling the heat. Everyone wants to pro-
duce the next iPad.
Hitting these targets demands a fast and
nimble supply chain. The challenges of
attaining this fall into three major buckets:
global manufacturing and sourcing issues,
channel and network complexity and the
implications of an intricate, high-value
product set.
Electronics Manufacturing and
Sourcing Challenges
Electronics products lifecycles are growing
ever shorter and margins tighter, increas-
ing pressure to lower costs and manage ma-
terial and suppliers more effciently. This
has triggered the following trends in man-
ufacturing and sourcing:
– Asset Lightness: One industry trend
is toward fewer original equipment
manufacturers (OEMs) actually manu-
facturing, moving or storing their own
products. Many prefer to engage both
contract manufacturers and third-party
logistics providers for these services. For
example, Sony’s adoption of an asset
light philosophy prompted the com-
pany to sell off assets including a major
TV manufacturing facility in Mexico to
Foxconn Electronics in January, 2010.
– Emerging Markets Sourcing: Many
electronics companies have sought out
manufacturing and logistics partners
in emerging markets, a move which can
lower costs but at the same time create a
long, thin supply chain. Sourcing from
emerging markets also often means
insuffcient infrastructure and emerging
logistics capabilities, creating challenges
in expediting freight and maintaining
pipeline inventory, as well as increasing
supplier and global trade compliance
risks. 3PLs with experience in these mar-
kets can play a critical role in devising
strategies to overcome these obstacles.
– Global Supply Chain Complexity and
Risk: Too many product lines and too
many components sourced from too
many faraway places creates a com-
plex, costly and long supply chain. As
seen in Figure 15 on page 24, supply
chain complexity and risk is the second-
highest-ranked challenge for shippers.
Figure 18 on page 30 reveals that 3PLs
are somewhat more confdent in their
ability to help address this challenge
than shippers are (42% to 22%), per-
haps because more of the cost empha-
sis is on the product itself and not the
logistics wrapped around it. An excep-
tion is Philips, which merged two divi-
sions, both selling to retail and at times
to the same customers, in an effort to
reduce complexity and lower its ware-
house count.
– Make to Order/Make to Stock: A make
to order production strategy enables
electronics companies to customize
products such as computers to cus-
tomers’ exacting specifcations. Dell
achieved signifcant supply chain rec-
ognition for its work toward its make to
order supply chain model. The majority
of electronics companies in the survey
(78%) agree that for most electron-
ics companies, a make to order supply
chain model may not always be as cost
effective as a make to stock model. It
can also lead to inventory obsolescence,
especially when product lifecycles are
short. Dell maintains as many as six
supply chains. Business products are
made to order, but differing demand
requirements mean some move via air
freight while others leverage alternative
modes, according to a Supply Chain Digest
Webcast. Dell’s retail products are made
to stock and planned well in advance to
get products to market cost effectively
for peak seasons.
Complexity Inside and Out
Electronics
23 ELECTRONICS
Figure 15: Price Pressure Tops Electronics Shippers’ Logistics Challenges
Pressure to Manufacture
Onshore or Near Shore
Make/Con?gure to Order Products
High Obsolescence Rates
Associated with Stocked Product
High Product Throughput Levels
Associated with New Product
Launches and Seasonal Demand
Data Integration and Synchronization
Short Product Lifecycles
Supply Chain Security
Service Parts Logistics, Including
Product Returns Processing
Supply Chain Disruptions
Volatile/Unpredictable Demand
Lack of Supply Chain Visibility
Global Supply Chain Complexity
and Risk (Including Compliance)
Price Pressure to Reduce Operating Costs
60%
60%
47%
37%
38%
54%
47%
44%
28%
40%
37%
24%
24%
59%
54%
41%
37%
36%
36%
35%
30%
30%
20%
17%
14%
13%
? Shippers
? 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
24 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
The bottom line is that one size does
not ft all, even within one electronics
company, due to varying market and cus-
tomer needs.
– Postponement: A related strategy
favored by electronics manufacturers,
which both reduces inventory and pro-
vides a higher level of customization, is
postponing fnal confguration, includ-
ing packaging, until the product is in or
close to the market where the product
will be consumed – services that may be
performed by 3PLs in these markets.
“People want the benefts of manufactur-
ing in China, but are doing more pack-
aging in the US,” as well as light assembly
where possible, says Wally Shaw, Market
Group Supply Lead, Americas at Philips
Consumer Lifestyle. “This helps with
forecasting by reducing the number of
SKUs you are planning, and also helps
reduce cube in transportation by using a
bulk pack.”
– Price Pressure: Shippers view price
pressure to reduce operating costs as
their top logistics challenge (59%). One
increasingly common solution is to shift
from a heavy emphasis on fast but costly
air freight to other modes according to
specifc channel needs, but this requires
signifcant advance planning. Nearly
two-thirds (65%) of electronics shippers
in the survey favor air freight over slower
modes to shorten supply chain transit
time. 3PLs believe they can play a larger
role in helping electronics shippers
address this challenge than shippers do
(Figure 18, 38% vs. 28% of shippers).
– Use of Contract Manufacturers as 3PLs:
The lines between industry groups are
blurring as contract manufacturers in
emerging markets offer services that
are more traditionally associated with
3PLs, a trend noted by about two-thirds
of shippers and 3PLs in the survey. Most
common services include transportation
management, warehousing and distri-
bution services and returns manage-
ment. Some contract manufacturers are
offering the more “advanced” services
typically provided by 3PLs, such as sup-
ply chain network design, logistics plan-
ning and consulting services. Contract
manufacturers see this as a logical
extension of their services and a higher-
margin opportunity. Discussions with
3PLs reveal that they do not see this as
a major threat yet, since logistics is their
core competency and they believe that
electronics companies will choose them
over contract manufacturers for complex
international logistics needs.
– Environmental and Social
Sustainability: Like many industries,
electronics manufacturers are con-
cerned with CO2 emissions and fuel
consumption, particularly with long sup-
ply chains. Manufacturing byproducts
such as lead from printed circuit board
production are an additional concern;
70% of heavy metals in US landflls
come from discarded electronics prod-
ucts, according to Supply Chain Brain’s
High Tech Outlook, February 2011.
Companies – and savvy 3PLs – are get-
ting creative to solve materials and pack-
aging problems. Dell is trying protective
packaging made of bamboo and even
mushrooms and is scaling down package
sizes to ft more on a pallet, according to
an April, 2011, article in Fortune.
Complex Networks and Channels
The electronics industry is notoriously
segregated, with multiple players involved
in the supply chain, not all of which are
marching to a common beat. These play-
ers include:
– Component suppliers
– Contract Manufacturers, Original
Design Manufacturers and Joint Ventures
– Original Equipment Manufacturers/
Brand Owners
– Distributors/Partners/Value-Added
Resellers
– End Customers
Electronics is also a highly dynamic indus-
try: Technology changes so rapidly that
many companies are driven to failure due
to their inability to keep up with changing
technologies. That in turn drives signif-
cant merger, acquisition, and divestiture
activity; Cisco alone has acquired more
than 145 companies in the last 18 years,
according to the company’s Web site.
Motorola recently split into a consumer
products company and a business and gov-
ernment products company while selling
off a division that makes network infra-
structure equipment.
Further complicating matters, electronics
companies sell into many vertical markets,
each with its own unique needs. Among
the most trying is retail, which offers
opportunity but also complexity to elec-
tronics supply chains. Among the challeng-
es of interacting with retailers:
– Inaccurate retail-level forecasts
– Retailers’ risk tolerance
– Exacting vendor compliance programs
with signifcant penalties
– Consumer electronics products often
have a long lead time and a short prod-
uct cycle, which creates obsolescence or
excess stock
25 ELECTRONICS
More than two-thirds of electronics com-
panies in the survey (73%) agree that
establishing a branded retail presence
themselves is a good way for consum-
er electronics manufacturers to drive
increased revenue.
Multiple layers, mashed-together supply
chains and the specifc challenges of retail
channels introduce cost, safety stock, fore-
cast challenges and additional time into
logistics processes.
One impact can be seen in electron-
ics companies’ forecast accuracy, which
averages 60% to 70%. Chris Armbruster,
Senior Director, Business Transformation,
at Motorola Solutions, who participated in
the ASE workshop in Chicago, noted that
the vertically dis-integrated supply chain
common in electronics slows and often
limits the sharing of forecasts, leading to
a bullwhip effect in inventory levels at both
the retail and sourcing levels, when chang-
es in supply or demand occur. Sharing
information on true demand more quickly
would result in improved forecasts and
reduced inventory levels. Electronics com-
panies must be agile to adapt to market
changes and unanticipated events, such as
the recent Japanese tsunami or earthquake
in China, and use demand sensing and
shaping to detect and infuence demand.
Another challenge is to design a common,
cost-effcient infrastructure across supply
chains. Lean is a common goal – reducing
inventory, containing SKU proliferation,
and limiting fxed assets, such as in Sony’s
supply chain, described previously.
These challenges provide opportunity for
3PLs to offer services such as visibility, set-
ting up inventory hubs in key locations,
helping to rationalize inventory across the
supply chain and fnding ways to reduce
cycle time on transit legs. Fully 55% of
3PLs report that they can help electron-
ics companies redesign supply chain
networks, which can help them respond
to differing channel needs while shar-
ing common infrastructure and services
wherever cost effective. However, as seen
in Figure 17 on page 29, only 14% of ship-
pers use 3PLs for this service. To capture
more of this business, 3PLs need to invest
in understanding the customer at all lev-
els in the organization. An electronics
manufacturer’s Supply Chain Manager
participating in the ASE workshop in
Utrecht noted that in his experience some
3PLs lack the ability to effectively respond
to shippers’ organizational changes.
Consumer electronics products share
characteristics with fashion retail (veloc-
ity) and consumer products (short life-
cycles, demand volatility, peak season
demands); 3PLs with experience in retail
and consumer products can also cross-pol-
linate best practices in product distribu-
tion and demand management with elec-
tronics companies.
High-Demand, High-Value Products
Electronics companies build products peo-
ple want, with the latest, most in-demand
features that appeal to specifc markets.
That makes them high valued – and sub-
ject to theft, counterfeit and the whims of
consumer tastes. These are some of the
challenges this poses:
Visibility: Global supply chain visibility is
a clear priority for electronics shippers. In
Figure 15, it’s the third-most-cited logistics
challenge (41%). Electronics shippers in
the US rank this more highly than those
in Europe and Latin America, and larger
shippers place more importance on it than
smaller companies. Visibility is essential to
provide inventory availability and order sta-
tus to customers as well as to provide secu-
rity while in transit.
In Figure 16, 74% of electronics companies
cite visibility as the top service they would
like to see from 3PLs, no matter the size or
location of the shipper. A leading comput-
er manufacturer, for example, has begun
to pursue a model in which a 4PL manages
all of its 3PLs in a given country in order to
ensure visibility.
Figure 17 reveals that improved forecast-
ing and inventory visibility is the third
most-used cost-saving strategy by elec-
tronics companies, although curiously,
despite the fact that 3PLs are ideally situ-
ated to provide visibility to customers,
both shippers and 3PLs report that 3PLs
are not very likely to be assisting in this
improvement process. Perhaps 3PLs are
providing suffcient visibility, but work
needs to be done on the shipper side to
maximize its use.
74%
of electronics companies cite
visibility as the top service they
would like to see from 3PLs
26 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Figure 16: Visibility Tops Services Electronics Companies Seek from 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
Software Loading/Flashing
Launch of New Product
Warranty Processing
Testing
Willingness to Own and Manage Inventory
Managing Global Production Supply
Lean/Six Sigma
Environmental Certi?cations Such as ISO 14000
Final Assembly/Con?guration/Postponement
Facilitate Just in Time (JIT)
Manufacturing/Kanban Systems
Kitting
Service Parts Logistics
Quality Certi?cations Such as ISO 9000
Experience with Local Product Regulations
Vendor Managed Inventory
Reverse Logistics
Supply Chain Security
Global Supply Chain Visibility
74%
56%
44%
40%
11%
6%
11%
7%
25%
12%
21%
19%
17%
12%
8%
15%
40%
38%
4%
8%
26%
11%
22%
15%
21%
9%
34%
27%
24%
32%
6%
11%
22%
9%
5%
8%
? Important Today
? Important in Near Future
27 ELECTRONICS
Security: As seen in Figure 15, 35% of ship-
pers call security a supply chain challenge;
while theft of electronics goods has steadily
declined over the past fve years, it still rep-
resents 1 in 5 thefts across all industries,
according to FreightWatch’s Annual Supply
Chain Survey. Figure 16 reveals that security
is the second most important capability
that electronics companies look for when
they hire 3PLs. Security is a particular pri-
ority in emerging markets which don’t have
all of the protections available in mature
markets. Technologies can help, such as
covert and visible shipment tracking solu-
tions, GPS and engine shutdown systems,
as well as practices including driver train-
ing and use of transportation security com-
panies such as FreightWatch. As the results
indicate, shippers are looking to 3PLs to
enact these measures.
Counterfeiting: A related need is to com-
bat counterfeiting of goods through pre-
vention and detection; electronics compa-
nies must thoroughly vet their suppliers
and employ security measures for com-
ponent parts as well as fnished goods.
Package seals with serial numbers are an
important anti-counterfeit measure. One
potential concept is to borrow e-pedigree
practices from the pharmaceuticals indus-
try; 3PLs could provide the supply chain
integrity and manage the component pedi-
gree processes.
On-Board Intelligence: Electronics compa-
nies are beginning to tap the digital supply
chain for applications such as remote mon-
itoring and diagnosis. Diebold, for exam-
ple, enables predictive maintenance of
ATMs via an embedded device, according
to a company white paper. The company is
notifed when a component is at risk of fail-
ure and dispatches a service repair person
with the correct part before it ever affects a
user, reducing costs and increasing custom-
er service. 3PLs could act as the centralized
depot in this scenario to receive service
messages and send replacement parts.
Packaging: Shiny packaging for often-del-
icate electronics products is designed to
attract customers, but often requires outer
boxes to protect it. Electronics companies
are testing cost-reduction and sustainabil-
ity strategies such as using new protective
materials, including the mushrooms and
bamboo mentioned on page 25, as well as
smaller packages and postponement of
light assembly and packaging to the desti-
nation market — also a SKU reducer, and
an opportunity for 3PLs.
Many retailers place electronics cartons
right on the sales foor. If this packag-
ing is too thin, it is susceptible to damage,
and glossy coatings can be slick, causing
cartons to shift in transit and pallets to
collapse, damaging cartons and, poten-
tially, contents. Sony solved this problem
by improving shipment integrity through
the use of corner boards, banding, air bags
and improved shrink wrapping techniques.
Local Market Customization: Individual
markets come with their own appetites
and preferences, such as 220-volt electric
service in Europe and Asia with different
electrical outlets in different countries vs.
110-volt in The United Sates and Canada.
Regulation may also dictate specifc design
features. 3PLs might help electronics com-
panies with software downloads or minor
localization of the hardware, such as power
supply units, as well as insight into local
regulations and import/export require-
ments, especially in emerging markets.
Short Lifecycles: Like fashion apparel,
many electronics products are made in
emerging countries such as China, Taiwan,
India and Brazil and consumed in US and
European markets. This means a relatively
long supply chain for lifecycles that often
run just six to 18 months, creating obsoles-
cence issues.
These short lifecycles combined with
the challenges of accurately forecasting
demand also means inventory obsolescence
is a signifcant problem for electronics
companies, particularly for make to stock.
The majority (69%) of electronics ship-
pers believe 3PLs can help them deal with
inventory obsolescence by proactively iden-
tifying slower moving items and items that
have been replaced with newer releases.
26%
of shippers feel 3PLs can help
them improve distribution center
processes as a cost-saving
strategy, the top-ranked way
they believe 3PLs can assist
them in lowering costs
28 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Figure 17: Electronics Companies Employ Many Logistics Cost Savings Methods
Employed More Fuel-Ef?cient Transport
Moved to a Make to Order Model
Improved Inventory Turns Through
Vendor Managed Inventory
Rationalized or Decreased the Number of SKUs
Implemented or Improved Logistics-Related
Information Technology Tools or Enablers
Improved Returns Management/
Reverse Logistics Processes
Improved Shipment Density/Load Utilization
Redesigned Supply Chain Network
Switched to Multimodal or Slower Mode of Transport
Increased Outsourcing
Instituted Internal Training Programs to Encourage
Cost Effectiveness/Lean Behaviors
Renegotiated Rates for Warehouse Services
Improved Forecasting and Inventory Visibility
Improved Distribution Center Processes
Renegotiated Rates for Logistics Services
63%
62%
57%
52%
49%
49%
48%
45%
39%
37%
18%
26%
10%
17%
10%
10%
19%
18%
14%
10%
47%
41%
37%
31%
22%
14%
16%
2%
6%
9%
? Our Company Uses
? Assisted by 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
29 ELECTRONICS
Figure 18: More 3PLs Than Shippers Believe 3PLs Can Help with Challenges
Other
Pressure to Manufacture
Onshore or Near Shore
Make/Con?gure to Order Products
High Obsolescence Rates
Associated with Stocked Product
Short Product Lifecycles
High Product Throughput Levels
Associated with New Product
Launches and Seasonal Demand
Volatile/Unpredictable Demand
Data Integration and Synchronization
Supply Chain Disruptions
Service Parts Logistics, Including
Product Returns Processing
Supply Chain Security
Global Supply Chain Complexity and
Risk (Including Compliance)
Lack of Supply Chain Visibility
Price Pressure to Reduce Operating Costs
38%
39%
42%
32%
43%
27%
17%
16%
26%
14%
13%
11%
13%
28%
24%
22%
21%
20%
17%
13%
11%
9%
4%
4%
2%
0%
1%
0%
? Shippers
? 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
30 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
3PLs could help to identify at risk inven-
tory in the warehouses that they manage,
as well as arrange intermodal and other
consolidation services to increase the sup-
ply chain velocity without dramatically
increasing transportation costs. “You need
a very good level of integration to be adap-
tive and fexible to cope with these shorter
life cycles,” says Tony Xia, Sr. Logistics
Manager with Emerson Electric.
When inventoried items become obsolete,
58% of electronics shippers in the survey
agree that online auctions are an impor-
tant means for electronics companies to
reclaim some value. Facilitating online
inventory disposition is the next logical
step in a 3PL value-added service offering.
A number of electronics companies use
FreeFlow, provider of online private mar-
ketplaces and auctions, to sell at-risk inven-
tory through secure channels for each
stage of the inventory aging process.
The Role of 3PLs
As seen throughout this chapter, electron-
ics companies favor outsourcing in both
manufacturing and logistics services.
That’s especially true in emerging markets.
Yet there is a clear gap between the services
3PLs are currently providing and the addi-
tional value they could provide.
As seen in Figures 15 and 18, electronics
shippers give low marks to 3PLs’ ability to
solve their top logistics challenges. The
largest gaps occur on their highest pri-
orities: 59% call price pressure to reduce
operating costs their top challenge, while
just 28% believe 3PLs can help them with
this challenge. A similar gap is revealed
in 3PLs’ ability to help electronics com-
panies with global supply chain complex-
ity and risk, including compliance. 3PLs
themselves also see a gap, albeit smaller,
between these challenges and their involve-
ment in helping their customers with these
challenges.
The same is true in top savings methods
used by electronics companies in Figure 17;
there are signifcant gaps between strate-
gies used and assistance by 3PLs in those
efforts, confrmed by 3PLs themselves.
At the ASE workshop in Utrecht, one con-
tract manufacturer shed some light on
one of the reasons shippers’ may not seek
to undertake problem-solving with 3PLs.
“They do not bring cost reductions and
a lean approach to the table very often,”
he said. “They will do only what they are
asked to do; they do not proactively offer
many value-added services.”
It’s clear in Figure 18 that 3PLs see oppor-
tunities to support shippers in ways elec-
tronics shippers themselves do not. Both
sides need to meet in the middle: 3PLs
need do a better job in selling the quality
and value of their capabilities to electron-
ics customers, and shippers need to be
more open to collaborating with 3PLs to
address their top challenges.
Generally speaking, electronics shippers
view 3PLs as skilled and capable at fun-
damental logistics capabilities, but don’t
necessarily turn to them for collaborative
problem-solving to address their more stra-
tegic supply chain challenges. The results
in Figure 16 confrm that they would like
to see more. Embedded throughout this
chapter are suggestions for signifcant con-
tributions that 3PLs can make to address
electronics companies’ most vexing supply
chain challenges.
Electronics: Key Takeaways
– Electronics products are complex inside and out, featuring many components and
delivered to market via a fragmented and far-?ung global supply chain. Add to that
high demand and ever-shortening product lifecycles, and you get signi?cant logisti-
cal challenges. Issues of concern in manufacturing and sourcing electronics include
complex global sourcing, including heavy reliance on emerging markets; price
pressures; and balancing make to order versus make to stock — issues 3PLs are posi-
tioned to help address. Electronics supply chains must also accommodate multiple
channels with differing needs, with retail offering substantial opportunity but also
exacting supply chain demands. Electronics also sees heavy merger and acquisition
activity and a dis-integrated supply chain, boosting its tendency toward outsourcing.
– A high-demand, high-value product set also raises issues of visibility, security and
packaging challenges, as well as the need to manage short-lifecycle issues such
as obsolescence and selling off excess inventory. While a fragmented supply chain
means electronics relies heavily on 3PLs to address these problems, survey results
reveal that electronics companies are unlikely to feel 3PLs can help them solve their
top logistics challenges. 3PLs need do a better job in selling their capabilities and
shippers need to be more open to hearing about them.
31 ELECTRONICS
Striving for excellence requires the best people
A critical shortage going on in the logis-
tics industry today has nothing to do with
inventory; it’s the shortage of well-rounded
supply chain managers prepared to step
into key management positions. According
to research by employment services pro-
vider Manpower Group, in the US, 52%
of employers are experiencing diffculty
flling supply chain positions within their
organizations, up from 14% in 2010.
For many companies, the supply chain has
become a signifcant contributor to attain-
ing strategic business goals, making well-
qualifed logistics talent essential. As seen
in Figure 19, shippers and 3PLs agree that
having the right people and leadership
in place is the number one driver of their
companies’ success in the next fve years,
slightly outranking the importance of the
right strategy and roadmap itself. 3PLs and
shippers are aligned on all of the top driv-
ers to organizational success.
Fortunately, the talent gap can be reduced.
Shippers, 3PLs and other organizations
active in the supply chain community
have the opportunity to both develop and
attract the next generation of managers
with the diverse skills required to govern
ever-more-complex supply chains. They
can get there by investing in talent man-
agement, leadership skills and succession
planning, as well as by defning the skill
sets and capabilities these leaders will
require and ensuring a satisfying work
environment.
The State of Talent
Talent management is the vigorous, sys-
tematic process of connecting a clear, well-
defned business strategy to the recruit-
ment, retention and development of talent.
At times, talent management is an over-
used term and an underutilized discipline
Overcoming the Talent Shortage
Talent Management
Figure 19: People are the Top Driver of Organizational Success
Having the Right Infrastructure
Having the Ability to
Drive Greater Innovation
Ability to Innovate
Having the Right Products and Services
Ability to Execute and Drive
Operational Ef?ciency and Improvements
Having the Right Strategy and Roadmap
Having the Right People
and Leadership in Place
Having the Right Infrastructure
Having the Ability to
Drive Greater Innovation
Ability to Innovate
Having the Right Products and Services
Ability to Execute and Drive
Operational Ef?ciency and Improvements
Having the Right Strategy and Roadmap
Having the Right People
and Leadership in Place
77%
60%
61%
33%
32%
14%
12%
61%
58%
58%
41%
27%
14%
10%
? Shipper
? 3PL
Source: 2012 16th Annual Third-Party Logistics Study
33 TALENT MANAGEMENT
– particularly in the logistics industry. Too
often, senior management turns to talent
management in crisis mode, when a key
logistics employee has given notice and
they dust off that musty, dated talent man-
agement manual sitting up high on the
bookshelf. Development may consist of an
annual performance review that gets fled
away in a drawer.
The experience of one manufacturer is
typical of the industry: many executives on
its supply chain team boast more than 20
years at the company. That speaks volumes
about its attractiveness as a workplace. But
the company lacks a robust talent develop-
ment process; as those supply chain execu-
tives reach retirement age, the depth of
executives on the bench may be limited.
Many progressive companies leading their
industries focus on effective execution of
total management principles. Talent man-
agement becomes a strategic tool integrat-
ed into a company’s business practices and
a part of every business manager’s respon-
sibilities. Talent is tied to business strategy,
so that if, for example, the company was
moving into an emerging market, or enter-
ing new trade lanes, the need for talent
would be a part of that strategic discussion.
At Kraft Foods, for example, “Supply chain
executives are part of day-to-day manage-
ment, an integral part of the business
planning roundtable and are partnering
with other key functional business lead-
ers on the board,” says Mauricio Ferreira,
Latin America Supply Chain Director. At
one large pharmaceutical manufacturer,
recognition of the signifcant impact of
supply chain has elevated its importance in
the executive suite. “Supply chain has been
waiting outside the board room for some
time, but it’s getting recognition now,”
says its VP Logistics, who sits on the com-
pany’s Global Risk Management board.
“The eruption of the volcanoes in Europe
brought this to the table and made it front
of mind that disruptions can occur.”
Talent can be a critical differentiator for
3PLs. With many of their services under
threat of becoming commoditized on
price, superior talent becomes a competi-
tive advantage. Only those organizations
with the very best people in place deliver
the innovation and standout service that
will set that company apart.
Logistics and the Talent Cycle
The Talent Cycle in Figure 20 captures the
complete lifecycle of an employee’s experi-
ence, not just the initial recruitment, but
all of the activities that occur to develop
that person through the end of his career.
The survey results suggest that many ship-
pers and 3PLs are troubled by the current
state of talent management within their
organizations and see an opportunity to
improve it.
Identifying and Attracting skilled talent
starts with creating a workforce strategy
to align with your business strategy, then
devising ways to discover and communi-
cate what your company has to offer to
attract a diverse and talented workforce.
This part of the talent cycle presents tre-
mendous opportunity and high risk. Risk
is highest during the frst 60 days of tran-
sitioning a leader into a new role either
from inside or outside.
Recruiting and Hiring entails devising
strategies for understanding talent needs
and sources, executing business/talent
plans, establishing interviewing methods
and skills and managing the talent acqui-
sition investment. Often in the logistics
industry, hiring occurs through word of
mouth or hiring from within; as seen in
Figure 21, 39% of shippers and 37% of
3PLs are concerned or signifcantly con-
cerned that their company could do more
to increase diverse external perspectives,
such as hiring from other industries (tal-
ent recruitment).
Onboarding and Integration processes
apply to the period just before and after an
employee is hired, including planning and
supporting transitions and deploying peo-
ple in the right teams and leadership roles.
Continuous Learning and Development
Experiences occur through formal and
informal training as well as experience-
and relationship-based learning and coach-
ing, follow-through, and support. Shippers
and 3PLs report similar experiences within
their organizations; 36% of shippers and
37% of 3PLs say that their companies’ lack
of a meaningful and objective process of
Figure 20: The Talent Cycle
Succession
Planning
The
Talent
Cycle
Alignment
of Leadership
Transitioning
Engaging
and
Retaining
Recruiting
and Hiring
Onboarding and
Integration
Continuous
Learning and
Development
Experiences
Promotion
and
Rotation
Identifying
and
Attracting
Source: Heidrick & Struggles
34 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
measuring performance and issuing con-
sequent actions, such as coaching, is a con-
cern or a signifcant concern (talent review
process). In addition, 41% of shippers and
36% of 3PLs are concerned or signifcantly
concerned that their organization has a
number of stars, but their culture/history
has not encouraged them to work collabor-
atively as a team (team effectiveness).
Engaging and Retaining employees’ inter-
est in a shipper or 3PL as an employer
requires active communication and perfor-
mance and career management exercises.
Companies need to encourage and enable
a work/life balance and ensure recogni-
tion and rewards along the way. A substan-
tial 43% of shippers and 40% of 3PLs say
the struggle with keeping their strongest
talent in the organization is a concern or
a signifcant concern (retention).
Promotion and Rotation means creating
a talent development process with clearly
defned promotion and rotation criteria
and a system for assessment, feedback,
and coaching. The top concern of both
shippers and 3PLs regarding talent man-
agement is the lack of a robust system of
preparing rising leaders for the future,
such as through job rotations, training and
mentoring. (53% of shippers and 54% of
3PLs are concerned or signifcantly con-
cerned about talent development)
When one telecom company outsourced
logistics ten years ago, it lost a lot of expe-
rienced supply chain talent. So when the
company later began to insource some
logistics functions, it instituted a system
to identify and map potential logistics
leaders, ensuring a balance of gender and
ages, and established training programs to
develop their expertise.
Alignment of Leadership is all about iden-
tifying and developing candidates with
high potential, including leadership devel-
opment and coaching. This is the third-big-
gest talent management concern for ship-
pers (47%), and second-biggest for 3PLs
(48%). These respondents are concerned
or signifcantly concerned that the capabil-
ities of current leaders are not aligned with
what is necessary to address future strate-
gic challenges (skills and experience).
Succession Planning requires defning
roles and needs, creating evaluation crite-
ria and then developing, supporting and
coaching successors. Another top-three
concern for both shippers and 3PLs (48%
of shippers and 47% of 3PLs) is that their
leadership does not take an active inter-
est in understanding the pipeline of good
people in the organization and ensuring
there is a robust succession planning pro-
cess in place.
Transitioning means enabling smooth
career transitions and staying connected
with alumni and retired employees.
Organizations that embrace the activities
of the talent cycle have the opportunity to
ensure a continuous supply of experienced,
well-rounded logistics talent.
Figure 21: 3PLs and Shippers are Concerned About Their Talent Management and Development Practices
Talent
Review Process
Talent
Recruitment
Team
Effectiveness
Retention
Skills and
Experience
Succession
Planning
Talent
Development
47%
40%
37%
50%
51%
61%
60%
3%
2%
4%
54%
48%
36%
43%
37%
58%
59%
3%
1%
3%
3% 53%
4%
50%
3% 43%
55%
6% 39%
58%
48%
44%
48%
3% 47%
54%
4% 41%
55%
4% 36% 3%
? Concern or Signi?cant Concern
? Mild or Not a Concern
? Not Relevant
? Concern or Signi?cant Concern
? Mild or Not a Concern
? Not Relevant
Shippers 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
35 TALENT MANAGEMENT
Grooming Leaders
As supply chains grow more complex and
intrinsic to a company’s ability to attain its
business goals, they require leaders who
are more diverse and multi-faceted.
Unfortunately, as seen previously in
Figure 21, a signifcant number of ship-
pers and 3PLs feel their current leaders
don’t have what it takes to address future
business challenges. Developing leaders
requires devoting considerable effort and
resources into defning and delivering
training in a broad range of competencies.
Organizations differ in the skills and attri-
butes they see as essential in supply chain
leadership. As seen in Figure 22, both ship-
pers and 3PLs place the highest value on
operational execution in their functional
or business leaders – not surprising since
many supply chain executives have come
up through the operations ranks.
Surprisingly, for both shippers and 3PLs
this is followed by leaders’ people manage-
ment and development skills. People are
indeed essential to logistics; the impor-
tance of the daily decisions people make,
as well as relationships among the people
at both the 3PL and the shipper, cannot be
underestimated. But given respondents’
assessment in Figure 21 of the current state
of talent management in their frms, it’s
clear many executives are not backing up
this belief in people management with real
structure and resources.
While shippers and 3PLs agree on these
top two capabilities they value in a leader,
after that the difference between a busi-
ness where logistics is the core competency
and one where logistics supports the core
competency becomes evident: 3PLs rank a
leader’s ability to drive growth as a strong
third, while shippers feel it is about equal
to strategic planning.
Figure 22: Operational Execution the Top Skill Shippers and 3PLs Value for Leaders
International Business Exposure
Change Management
Technical Competence
Relationship Building and Networking
Strategic Planning
Driving Growth
People Management and Development
Operational Execution
60%
54%
47%
34%
39%
18%
15%
51%
43%
40%
39%
27%
26%
23%
14%
17%
? Shippers
? 3PL
Source: 2012 16th Annual Third-Party Logistics Study
36 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Opportunities for Tomorrow
Today’s supply chain leaders have been
required to grow well beyond their opera-
tions backgrounds, developing a broad
range of competencies including manag-
ing sophisticated technology, undertak-
ing competitive and fnancial analysis and
managing people in multiple locations, as
well as dealing with fat growth, emerging
market expansion and merger and acqui-
sition activity. In many organizations, top
logistics offcers acquired these additional
skills on the job and are clearly skilled at
acquiring new competencies. Despite this,
Figure 23 confrms that shippers and 3PLs
are concerned about the learning agility
of their leaders.
Tomorrow’s leaders will need to come into
the job with an even broader set of capa-
bilities. Figure 23 also reveals that while
the largest percentage of shippers and
3PLs feel their leaders possess solid skills
today, and feel their current leaders pos-
sess the required skills in relatively equal
measure, they are concerned about those
abilities long term. While current leaders
were learning on the job, few organizations
were indoctrinating these new competen-
cies into mid-management training and
development. When the time comes for
this cohort of managers to move up, the
gap between the demands of the job and
the skills of the available workforce will be
even larger.
“Often we adopt a strategy that if it’s not
broken don’t touch it,” admits the VP
Operations at a large software and periph-
erals developer. “This sometimes leads to
a scenario where investment in recruiting
new supply chain talent is overlooked.”
In addition, many logistics companies
ceased their involvement in supply chain
graduate and apprentice programs in the
mid-1990s. Today they are experiencing
the effects of turning off the pipeline more
than a decade ago.
Of course, depth of expertise remains
important to fulfll mid-level positions.
“There is a strong need for specialists as
well because there are so many best prac-
tices/changes happening in the industry,
which one can turn into opportunities for
the company,” says Arun Salvi, Logistics
Manager Asia Pacifc for Shell Lubricants.
Close behind learning agility as a solid
competency in today’s supply chain lead-
ers are their ability to execute, deduce and
lead visionary change and organization
buy-in, although shippers and 3PLs differ
somewhat in their rankings of the impor-
tance of these abilities. Also notable is the
percentage of companies developing expe-
rienced technical leaders, but struggling
with leader competencies.
“At Emerson Electric, highly valued logis-
tics leader qualities include rich experi-
ence in supply chain functions, willingness
to drive change, and a long tenure of ser-
vice at Emerson, so that the leader is famil-
iar with people throughout the company’s
complex corporate and divisional orga-
nization,” says Tony Xia, Senior Logistics
Manager at Emerson Electric. The compa-
ny rotates its candidates through different
areas of responsibility to season them and
give breadth of experience.
One telecom company defes the trend
toward overlooking leadership develop-
ment; the company maintains three sepa-
rate leadership training programs, each
emphasizing the following capabilities over
fve different aspects of leadership:
– Customer understanding
– Execution
– Strategic thinking
– Innovation
– Bringing the best out of everyone
– Breaking down complexity
– Mobilizing teams
– Adaptability
Figure 23: Logistics Leaders: Solid Today, But Concerns for Tomorrow
Leadership Capability
Immediate
Concern
Somehow
Managing
Today
Solid Today;
Long-Term
Concern
Outstanding
Leadership
for Today
and Future
I Don’t Know
Learning Agility: Under-
standing Their Environment
Shippers 13% 24% 37% 24% 2%
3PLs 10 24 39 25 2
Envision: Leading Visionary
Change and Organization
Buy-In
Shippers 12 29 33 22 4
3PLs 12 29 35 22 2
Engage: Open Communica-
tion, Modeling Values and
Ethics, Delegation and
Empowerment
Shippers 13 27 30 28 2
3PLs 12 25 30 31 2
Execute: Leading Results
and Decisiveness/Decision
Making
Shippers 12 24 35 28 1
3PLs 12 21 32 33 2
Deduce: Mastering Complex
Business Problems
Shippers 11 29 34 22 4
3PLs 12 27 32 26 3
Source: 2012 16th Annual Third-Party Logistics Study
37 TALENT MANAGEMENT
In Search of…
The scarcity of supply chain talent pres-
ents a real challenge for many shippers
and 3PLs. To date, the majority of both
shippers and 3PLs recruit from inside
their own industries – 64% of shippers,
and 71% of 3PLs, as seen in Figure 24. But
3PLs are more likely than shippers (41%
versus 37%) to look outside their own
industries. Companies with private equity
investment tend to be more likely to take
this tack than others. Both shippers and
3PLs may be forced to begin searching in
adjacent industries as the talent pipeline
continues to dry up.
When one third-party logistics provider
sought to infuse top talent into its global
leadership team, the company conducted
an external search to discover candidates at
industries with similar dynamics, including:
– Business-to-business outsourcing services
– Businesses with large numbers of people
working at multiple sites
– Industries with some kind of route-based
transportation network
– Warehouses and light manufacturing
plants, such as contract manufacturers
Shippers and 3PLs favor recommenda-
tions by colleagues/word of mouth as
their number one talent recruitment
strategy (51% of shippers, 63% of 3PLs),
and are equally likely to use head hunters
(46% and 47%). Social networks are used
by a surprising 21% of 3PLs and 22% of
shippers for recruitment.
Attracting Talent
Enticing the best candidates is far easier
when the company searching is a great
place to work. Shippers and 3PLs dif-
fer marginally in ranking the top quali-
ties of an attractive workplace, but as seen
in Figure 25 company success and per-
formance, attractive salary and benefts
and personal development opportunities
within the company are top-three for both.
“Attractive remuneration packages and
clear career paths are important,” agreed
an executive at a telecom company.
People want to work at one large com-
puter manufacturer, for example, because
it’s “constantly changing,” says its Supply
Chain Director. “It’s a fast-moving compa-
ny and there is always a challenge. We are
constantly reinventing and reassessing how
we do supply chain and systems.”
Talent Management: Key Takeaways
– Shippers and 3PLs agree that having the right people and leadership in place is the
number one driver of their companies’ success in the next ?ve years. But the supply
chain industry is experiencing a talent recruitment crisis. Many shippers and 3PLs
are troubled with their talent processes today; too often, executives turn to talent
management only when a key employee gives notice. Organizations that embrace the
activities of the talent cycle have the opportunity to ensure a continuous supply of
experienced, well-rounded logistics talent.
– Shippers and 3PLs most highly value operational execution in their functional or
business leaders – not surprising since many supply chain executives have come
up through operations. The largest percentage of shippers and 3PLs feel their lead-
ers possess solid skills today, but they are concerned about those abilities long
term. While current leaders were learning on the job for today’s expanded logistics
demands, few organizations were indoctrinating these new competencies into mid-
management, limiting their suitability for leadership roles.
– Most shippers and 3PLs recruit from inside their own industries, but 3PLs are slightly
more likely than shippers to look outside their own industries, a growing need as the
talent pipeline dries up. Company success and performance, attractive salary and
bene?ts and personal development opportunities within the company are top-three
factors for attracting logistics talent.
Figure 24: Companies Look Inside Industry First for Logistics Talent
Publications
Social Network
From Companies Outside the
Industry (e.g., 3PLs or Logistics
Department on Shippers Side)
Headhunters
Recommendations by
Colleagues/Word of Mouth
From Companies
Inside the Industry
71%
63%
47%
41%
21%
14%
64%
51%
46%
37%
22%
18%
? Shippers
? 3PL
Source: 2012 16th Annual Third-Party Logistics Study
38 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Figure 25: Company Success and Personal Opportunity Make For Attractive Employers
Location
Flexibility
Status as a Top Three Industry
Leader (Size and Brand)
Reputation for Innovation
Entrepreneurial Spirit/
Culture of Individual Ownership
Attractive Working Environment
with Engaged and Good People
Attractive Salary/Bene?ts Conditions
Personal Development Opportunities
within the Company
Company Success and Performance
57%
55%
53%
48%
30%
18%
13%
10%
7%
57%
57%
54%
41%
20%
18%
15%
12%
9%
? Shippers
? 3PLs
Source: 2012 16th Annual Third-Party Logistics Study
39 TALENT MANAGEMENT
Attaining supply chain consistency amid constant change
Static: It’s one word you don’t hear in sup-
ply chain circles very often, and for good
reason: Logistics is synonymous with move-
ment, both in goods and information, and
in the design and evolution of the supply
chains that make that movement pos-
sible. Constantly changing economic and
political dynamics necessitate continual
re-evaluation of supply chain decisions.
The job is never dull, challenging supply
chain professionals to think creatively and
strategically.
Inspired by the fndings of this year’s study,
this strategic assessment examines several
trends spurring yet more change and inno-
vation in the supply chain world. First is
the overall rise in outsourcing of logis-
tics, followed by the growing use of supply
chain control towers – both indicators of
the increasingly complexity of managing
today’s supply chains.
Emerging markets are a key factor in that
complexity, and a trend to nearshoring is
another sign of constantly changing glob-
al dynamics. Companies have moved pro-
duction to emerging markets in pursuit
of lower costs, but that decision changed
conditions in those very markets, chal-
lenging companies to reconsider the eco-
nomics and in some cases turn to near-
shoring. Finally, a change impacting every
industry is the emergence of social media,
and like others, the supply chain industry
is in the early stages of working out how to
best leverage its power to enhance day-to-
day business functions while minimizing
the risks.
Global Trends in Outsourcing-
Insourcing of Logistics Services
Outsourcing of logistics activities is on the
rise, according to survey fndings reported
in the Current State of the Market Chapter.
Nearly two-thirds (64%) of shippers report
an increase in their use of outsourced
logistics services, and 76% of 3PL respon-
dents agree this is what they are seeing
from their customers. At the same time,
24% of shippers are returning to insourc-
ing some of their logistics activities, a
trend confrmed by 37% of 3PLs. Both are
consistent with past Annual 3PL Studies. So
overall, there is a greater momentum for
shippers to outsource logistics activities
and processes than to insource them. Is
there a tipping point? The point at which
outsourcing reaches saturation? Possibly
there is, but it is our belief that this has not
yet occurred.
Shippers in Asia-Pacifc (76%) and Latin
America (73%) are leading the way, with
shippers in these regions much more likely
to increase their use of outsourcing than
those in North America (58%) and Europe
(57%). This suggests that shippers in devel-
oping regions of the world have a greater
inclination to increase their use of out-
sourcing than those in the more developed
economies in North America and Europe.
One possible reason is that 3PLs’ func-
tionality has developed to the point that
the 3PL sector is considered a useful
alternative for companies in regions that
are trying to build out logistics capabili-
ties and infrastructure to support supply
chain activities. Or, it may be that shipper
decision-makers in more mature markets
have become more defensive when making
outsourcing-insourcing decisions, opting
at times for an insourcing strategy they
consider to be less risky. This rationale may
also help to explain why many shippers
appear to be risk-averse, and generally not
very adventuresome, when making deci-
sions as to what activities and processes
they are willing to entrust to 3PLs.
Given all that, it might be surprising to
hear that shippers in Asia-Pacifc and Latin
America also report they are returning to
insourcing some of their logistics activities
to a greater extent than their counterparts
in North America and Europe. While this
could be viewed as contradictory to the
fndings above, it also could suggest that
shippers in these regions are more likely
to make changes to their outsourcing-
insourcing strategies (one way or the other,
or more often) than shippers in the gener-
ally more developed regions.
In Supply Chain, the One Constant is Change
Strategic Assessment
41 STRATEGIC ASSESSMENT
Overall, these results support the assertion
that the markets for outsourced logistics
services in Asia-Pacifc and Latin America
can be very attractive, and are clearly tar-
gets for globally focused 3PL operations.
Considering the increasing complexity of
supply chains and the growing challenges
of managing global business activity, there
is a strong argument that shippers should
be looking carefully at bolstering logistics
capabilities with services and processes
available from 3PLs and 4PLs.
Creating Supply Chain
Control Towers
As addressed throughout this report, sup-
ply chain management is becoming ever
more complex. Globalization trends such
as offshoring, nearshoring and outsourc-
ing of manufacturing and logistics, togeth-
er with increasing customer demands and
competitive pressures, have made visibility
even more critical for effective decision
making within and across organizations.
A growing number of companies are
addressing this need via supply chain con-
trol towers. A supply chain control tower
is a central hub with the required technol-
ogy, organization and processes to cap-
ture and use supply chain data to provide
enhanced visibility for short- and long-term
decision making that is well-aligned with
strategic objectives. Once this is in place,
every product ordered; every shipment
shipped; every document created; every
cost accrued; and every event generated
in the fow of product from order to fnal
delivery is captured, organized and stored
in the tower.
A well-designed supply chain control tower
enables a company to measure and con-
trol the effectiveness of the supply chain
in terms of agility, resilience, reliability
and responsiveness. This delivers benefts
across inbound and outbound logistics pro-
cesses as well as operational benefts.
One Capgemini electronics customer, for
example, leveraged a supply chain control
tower to attain quick information retrieval
and analysis, faster transactions, in-transit
visibility and compressed cash-to-cash cycle
times. A pharmaceutical manufacturer
used its supply chain control tower to real-
ize increases in transit time consistency,
effciency in handling of insurance claims,
customer service levels and increased focus
on critical service issues while reducing
safety stock.
Such results don’t come without chal-
lenges, of course. One common mistake
in implementing is underestimating the
amount of IT collaboration needed with
trading partners to obtain the messaging
and data. Companies also tend to want to
track movement of goods at a level that
is challenging in terms of granularity,
resulting in excess cost and over-satura-
tion of information. Inadequate transpor-
tation management, such as mismanaged
spend and use of non-integrated carri-
ers, means those shipments will not be
tracked effectively.
Aside from the need for careful and capa-
ble planning and implementation of the
control tower concept, this trend should
be viewed as a giant step forward in terms
of better understanding and managing
overall supply chain activities and pro-
cesses. Correspondingly, it is natural that
development of these capabilities will be
accompanied by the further emergence
of logistics providers who establish a core
competency in assisting shipper-customers
with refning and implementing capable
supply chain control towers. Some 4PLs
are already offering such services, as noted
in the Electronics chapter. Although this
concept may seem to be more applicable
to shippers having complex global supply
chains, steps in this direction can help to
enhance the effciency, effectiveness, and
professionalism of the supply chains of
frms of all types.
Reconsidering Emerging
Near-Shore Markets
The term emerging markets often brings
a list of countries to mind: Russia, India,
China, and so on. But what if those emerg-
ing countries are not in proximity to the
markets where a company intends to sell
its goods? As companies begin to recon-
sider the long, thin supply chains that
have chased the lowest prices for key input
factors, many are taking a second look at
emerging or somewhat-more-developed
countries near their target markets whose
proximity makes up for somewhat higher
factor costs. A case in point: The Boston
Consulting Group forecasts net labor costs
for manufacturing in the US and China to
converge by about 2015, and total landed
cost differentials to be in the single digits
to zero.
In the 2009 14th Annual Third-Party
Logistics Study, a chapter on Supply Chain
Optimization noted the trend to recon-
sider sourcing strategies, fueled by several
factors. For one, after an extended period
of decline, inventory and transportation as
a percent of the US gross domestic product
has been growing. Other factors include a
rise in labor rates in emerging markets as
growth fuels the formation of middle class,
rising fuel prices, the impact of govern-
ment intervention and emerging transport
alternatives such as the Panama Canal and
intermodal options. Quality and security
concerns are also driving the trend.
The chapter reported that a critical con-
sideration in choosing offshoring versus
near-shoring is the role 3PLs can play in
restructuring the supply chain to better
meet current and emerging conditions, as
42%
of shippers are already near-
shoring or will within three years
42 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
well as serving in a more strategic capac-
ity in the new infrastructure that results.
Nearly 60% of shippers said this was the
time in which to re-evaluate their relation-
ships with their 3PLs and possibly drive
these relationships deeper.
Lower freight costs, improved speed to
market and lower in-transit inventory costs
are the most attractive advantages shippers
expect when they choose near-sourcing,
according to Alix Partners’ Low Cost Country
(LCC) Analysis, 2010, a survey of compa-
nies selling into the US market. That study
found 42% of shippers are already near-
shoring or will be within three years. In
comparison, 37% are taking an offshor-
ing approach in that time period. Despite
concerns about security and safety, 63% of
those moving to near-shoring and 42% of
those moving to offshoring favor Mexico as
their number one outsourced production
location, driven largely by favorable total
landed cost calculations.
What is clear is that when it comes to pro-
duction outsourcing, the right decisions
are growing less and less clear. As the cost
differential for factors such as component
price and transportation costs narrows
among production locations, metrics such
as total landed cost become critical infor-
mation necessary to fuel decision making,
alongside factors such as market pressures
for agility, speed and increased capabil-
ity. Another key decision point is the value
3PLs can offer in enabling production in
near or offshore markets.
Leveraging Social Media
in the Supply Chain
Social media are weaving themselves
into our personal and professional lives.
As the day progressed at the ASE work-
shop in Chicago, social media repeatedly
emerged as a potentially useful compo-
nent of logistics, so much so that by day’s
end, it became the focus of a special
breakout session.
Among the benefts of social media such
as LinkedIn and Facebook are a high
scalability and ease of use combined with a
low level of investment. It allows more self-
reliance while providing greater visibility
and more real-time information.
Social media has already found an
important role in many businesses. A
survey by Econsultancy and Adobe found
31% of European businesses believe social
media marketing is a highly signifcant
trend for them; 53% rated it as quite
signifcant. According to Gartner, by 2012,
spending on social software to support
sales, marketing and customer service
processes will exceed $1 billion world-
wide.¹ Popular business functions include
marketing and advertising (i.e., crowd-
sourcing), speed to customer feedback
(real-time insight) and recruiting.
These concepts can easily be adopted
by supply chain managers. For example,
crowdsourcing (leveraging the mass col-
laboration enabled by Web 2.0 technolo-
gies) can drive forecasting by amassing
insights into purchase intent or price
elasticity. Transportation carriers could
tap social media for real-time insight into
traffc issues. Social media is already serv-
ing as a rich venue to locate new talent
with the right skills for a particular posi-
tion, or generate interest in supply chain
internship programs.
1 Gartner, Inc.: “Predicts 2011: CRM Enters a
Three-Year Shake-Up”, Ed Thompson, et al 22
November 2010
Those aren’t the only possibilities. Other
potential uses of social media include:
– Collaboration to solve problems, inno-
vate solutions and set benchmarks
– Industry focus groups
– Procurement and sourcing
– Personalized product offers from social
media sites linked to an order entry page
– Background checks
– On-demand training
Of course, logistics will be heading up
a steep learning curve alongside other
industries, working out the best ways to
leverage social media’s power. Companies
will need to develop rules, formats, poli-
cies, training programs, case studies and
proof of concept cases, and must learn
to manage user experimentation and
expectations. Issues of concern likely to
emerge include liability, inter-generational
confict, pockets of non-users, emerging
hacker risks and a tendency to overweight
the value of chatter compared with other
sources of information.
“Rate negotiations and contracts are cur-
rently being freely discussed on blogs,”
noted eyefortransport participant Peter
Starvaski, Director Product Management,
Kewill, calling attention to one of the
trends occurring in social media. Such
struggles are inevitable with any new para-
digm. In fact, the Annual 3PL Study team is
undergoing similar challenges in discern-
ing the best ways to leverage social media
to enhance data gathering and analysis
as well as create a richer user experience
of the study results. Ideas include use of
LinkedIn, Twitter and Facebook as well as
location-based services, use of QR codes,
and formats including ePubs and Kindle
that enable readers to share and bookmark
content and engage in real-time, interac-
tive feedback. The study team welcomes
your feedback on social media venues
you would fnd valuable, as well as on any
aspects of this report on which you would
like to comment.
31%
of European businesses believe
social media marketing is a highly
signifcant trend for them
GO ONLINE
For more information go to
www.3plstudy.com
43 STRATEGIC ASSESSMENT
Goals for each portion of the study include:
Current State of the Market:
– Understand what shippers outsource and
what 3PL providers offer.
– Identify trends in shipper expenditures for
3PL services and recognize key shipper
and 3PL perspectives on the use and provi-
sion of logistics services.
– Update our knowledge of 3PL-shipper
relationships, and learn how both types of
organizations are using these relationships
to improve and enhance their businesses
and supply chains.
– Quantify the bene?ts reported by shippers
that are attributed to the use of 3PLs.
– Document what types of information tech-
nologies and systems are needed for 3PLs
to successfully serve customers.
– Comment on the importance of fuel ef?-
ciency and carbon emissions information
in the 3PL selection process.
– Examine why customers outsource or elect
not to outsource to 3PL providers.
Special Topics:
– Emerging Markets: Examine the role of
3PLs in emerging markets, the challenges
faced by both shippers and 3PLs, and fac-
tors that impact the success of conducting
logistics and supply chain activities in
these evolving business environments.
– Electronics: Conduct an in-depth analysis
of the electronics industry. To identify key
issues relating to shippers and their 3PLs
and how they work together to achieve
individual and mutual objectives.
– Talent Management: Understand the stra-
tegic importance of talent management as
a key set of processes and activities that
can greatly in?uence the success of a ship-
per or 3PL operation. This is the ?rst Annual
3PL Study to consider Talent Management,
and the ?ndings and recommendations
should be instructive for shipper and 3PL
organizations that place a high priority on
succession and sustainability of the talent
needed to manage their organizations.
About the Study
This report presents ?ndings from the 2012 16th Annual Third-Party
Logistics Study, which was conducted in mid-2011.
This is the 16th year that the Annual Third-Party Logistics Study has
documented the growth and evolution of the third-party logistics (3PL)
industry. The study has evolved and expanded over its history to remain
as current as possible while offering additional perspective and enhanc-
ing its value to both users and providers of 3PL services. For example,
while the study has always looked at 3PL services from the point of view
of users of 3PL services (shippers), this is the third year that the study
also has included the viewpoints of providers of 3PL services.
Four streams of research make up the 2012 3PL Study methodology:
a web-based survey, desk research, focus interviews with industry
experts and facilitated shipper workshops, two of which were held at
Capgemini Accelerated Solutions Environment
®
(ASE) locations. Study
respondents and participants represent a broad range of industries and
are predominantly from North America, Europe, Asia-Paci?c and Latin
America, in addition to other locations throughout the world such as
Australia, South Africa and the Middle East.
Multiple research streams and a broad array of perspectives result in a
rich and heterogeneous collection of the attitudes, trends and results
experienced by 3PL users, non-users and 3PL providers.
Observant readers will note that last year’s study was the 2010 15th
Annual Third-Party Logistics Study. The study team chose to call this
year’s report the 2012 Study to better re?ect the time frame in which
the results enjoy the most active and lively discussion.
2012 Study Objective
The overall objective of the 2012 Third-Party Logistics Study is to discov-
er and explore 3PL industry trends, issues, and opportunities.
Each year, the study results together with developments in the global
economy and the logistics industry suggest trends that warrant clos-
er examination. Included in the 2012 Study are special topic reports on
emerging markets, electronics and talent management.
The 2012 3PL Study also provides perspectives on what shippers and 3PLs
are doing to enhance their businesses and their business relationships.
44 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Strategic Assessment
– To provide a view of the future of the 3PL
industry and shipper-3PL relationships.
– To comment, as appropriate, on topics
that are relevant to the future success of
business relationships among shippers
and 3PLs.
– To examine ideas that may help to explain
how the 3PL sector may work more effec-
tively with its customers and clients to
provide meaningful solutions to relevant
supply chain issues and challenges.
– Essentially, to provide a forward-looking
dialogue that may spawn topics that will
end up being future areas of inquiry for
the Annual 3PL Study.
2012 Study Methodology
Rapidly changing global and industry dynam-
ics and the evolution of the logistics industry
have driven considerable transformation in
the capabilities and uses of 3PLs over the
sixteen years of this study. To gain insight
into these changes, the study team uses four
complementary streams of research.
Web-Based Survey
During the spring and summer of 2011, a link
to a web-based survey was sent via email to
logistics and supply chain executives in North
America, Europe, Asia-Paci?c, Latin America,
as well as other regions and geographies of
the world. In addition to shippers, surveys
were sent to executives from companies
providing 3PL services in order to gain their
perspectives on many of the issues and topics
included in the user survey. The study team
extends its appreciation to the global orga-
nizations that facilitated the participation of
their members and contacts in the web-based
survey. These organizations are recognized
with the respective logos appearing below the
Table of Contents for this report.
The contact database of logistics and supply
chain executives represented a wide range
of industries, the most prevalent which were
automotive/transport equipment, chemical,
consumer products, food and beverage,
healthcare, electronics, manufacturing,
retail, and 3PL/4PL.
The survey was available in English, Spanish,
Portuguese, French and German. To ensure
con?dentiality and objectivity, 3PL users
were not asked to name which speci?c 3PL
providers they used.
Survey recipients were asked to think of a
“third-party logistics (3PL) provider” as a
company that provides one or more logistics
services for its clients and customers and a
“fourth-party logistics (4PL) provider” as one
that may manage multiple logistics providers
or orchestrate broader aspects of a custom-
er’s supply chain.
3PL Users: Figure 26 indicates the number
of survey responses received from logistics
and supply chain executives (i.e., shippers)
in various regions of the world. These totals
re?ect the numbers of users and non-users
of 3PL/4PL services who responded to the
Figure 26: Shipper Respondents Represented Several Major Geographies
(Includes both users and non-users of outsourced logistics services)
North America (479) 31%
Europe (514) 33%
Asia-Paci?c (307) 20%
Latin America (188) 12%
Other (73) 4%
Total Shippers: 1,561 (100%)
Source: 2012 16th Annual Third-Party Logistics Study
45 ABOUT THE STUDY
web-based survey. Many of the shipper sur-
vey respondents held corporate positions
including Manager/Director, VP/SVP, and
Corporate Of?cer/President/CEO. Figure 27
and 28 provide information on the industry
classi?cation and anticipated total sales
for 2011 as reported by respondents who
identi?ed themselves as users of 3PL/4PL
services. A comparison of the sales break-
downs in Figure 28 with those from last year’s
study reveals that this year there were more
respondents (37%) in the lowest sales cat-
egory than in the previous year’s study (29%).
3PL Non-Users: Included in the totals shown
in Figure 26 are non-users of 3PL services
who provided their perspectives on why they
do not currently use 3PLs, and on a number
of other topics relevant to their classi?cation
as non-users.
3PL Providers: Responses were also received
from 697 executives and managers repre-
senting the provider side of the 3PL business.
General characteristics of these respon-
dents included: 1) a wide spread of operating
geographies; 2) an extensive list of industries
served (actually quite similar to the indus-
tries represented by the participating 3PL
users); 3) a range of titles, from managers to
Presidents/CEOs; 4) approximately 37% of the
3PL ?rms expected 2011 company revenues
in excess of US $1 billion (approximately €750
million), while about 53% reported revenues
of less than US$500 million (approximately
€375 million).
Desk Research
The research team, with the support of Cap-
gemini’s Strategic Research Group, assayed
a variety of published research related to the
special topics to create survey questions and
analyze the responses.
Focus Interviews
Industry observers and experts lent their
expertise to the study team through a signi?-
cant number of “focus interviews” primarily
relating to the special topics addressed in
this year’s report. These focus interviews
provided exceptionally valuable opportu-
nities to gather pertinent information and
perspectives from a wide range of profes-
sionals who have knowledge about the 3PL
sector and these special topics.
ASE Workshops
We leveraged the Capgemini Accelerated
Solutions Environment
®
(ASE) as a brain-
storming setting where participants, all
shippers, collaborated on shared issues.
(See www.capgemini.com/ase for more
about ASEs.) To better understand the
results of the survey and to gain valuable
perspective from 3PL users, the research
team held facilitated ASE sessions based
on sample supply chain challenges related
to the study material. ASE sessions were
held in Chicago, Illinois and in Utrecht, The
Netherlands. A similar, non-ASE work-
shop, which included a broader base of
participants, was held in June, 2011, at
the eyefortransport 3PL Summit held in
Atlanta, Georgia.
Follow-Up Activities
In addition to this publication, the results of
the 2012 16th Annual Third-Party Logistics
Study will be presented in a variety of venues.
These include:
– Presentations at in?uential industry confer-
ences such as the Council of Supply Chain
Management Professionals (CSCMP), eye-
fortransport 3PL Summit and Chief Supply
Chain Of?cer Summit.
– Analyst brie?ngs that are typically con-
ducted in the weeks following release of the
annual study results in the fall of each year.
– Magazine and journal articles in publica-
tions such as Supply Chain Management
Review, Logistics Management, Inbound
Logistics, Logistics Quarterly, and Supply
Chain Quarterly.
– Webcasts conducted with media and publi-
cations such as Supply Chain Management
Review, Logistics Management, and others.
– A web site, www.3PLstudy.com, which
includes copies of the report for download
as well as supplementary materials.
46 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
Figure 27: Eight Industries Represent Just Over 70% of Shipper Respondents
9%
16%
12%
18%
8%
9%
10%
7%
6%
5%
? Manufacturing
? Automotive/Transport Equipment
? Electronics
? Consumer Products
? Healthcare
? Food and Beverage
? Chemical
? Retail
? Additional
? Other
Source: 2012 16th Annual Third-Party Logistics Study
Figure 28: Nearly 50% of Shipper Respondents Anticipated 2011 Sales in Excess of US $1 Billion
(€750 Million)
Latin
America
Asia-
Paci?c
Europe North
America
All
Regions
14%
12%
34%
43%
15%
14%
37%
31%
11%
30%
14%
45%
20%
35%
13%
32%
18%
23%
18%
41%
? US$25 Billion or More/€20 Billion or More
? US$1 Billion - Less Than US$25 Billion/ €750
Million - Less Than €20 Billion
? US$500 Million - Less Than US$1 Billion/
€375 Million - Less Than €750 Million
? Less than US$500 Million/€375 Million
Source: 2012 16th Annual Third-Party Logistics Study
47 ABOUT THE STUDY
Capgemini
With 112,000 people in 40 countries,
Capgemini is one of the world's foremost
providers of consulting, technology and out-
sourcing services. The Group reported 2010
global revenues of EUR 8.7 billion.
Together with its clients, Capgemini creates
and delivers business and technology solu-
tions that ?t their needs and drive the results
they want. A deeply multicultural organi-
zation, Capgemini has developed its own
way of working, the Collaborative Business
Experience™, and draws on Rightshore
®
, its
worldwide delivery model.
Capgemini Consulting is the Global Strategy
and Transformation Consulting brand of the
Capgemini Group, specializing in advising
and supporting organizations in transform-
ing their business, from the development
of innovative strategy through to execu-
tion, with a consistent focus on sustainable
results. Capgemini Consulting proposes to
leading companies and governments a fresh
approach which uses innovative methods,
technology and the talents of over 3,600 con-
sultants worldwide.
For more information:
www.capgemini.com/services/consulting/
Penn State University
Penn State is designated as the sole land-
grant institution of the Commonwealth of
Pennsylvania. The University’s main campus
is located in State College, Pennsylvania.
Penn State’s Smeal College of Business is
one of the largest business schools in the
United States and is home to the Supply
Chain & Information Systems (SC&IS) aca-
demic department and the Center for Supply
Chain Research (CSCR). With more than
30 faculty members and over 600 stu-
dents, SC&IS is one of the largest and most
respected academic concentrations of sup-
ply chain education and research in the
world. SC&IS offers supply chain programs
for every educational level, including under-
graduate, graduate, and doctorate degrees,
in addition to a very popular online, 30-credit
professional master’s degree program in
supply chain management. The supply chain
educational portfolio also includes open
enrollment, custom, and certi?cate programs
developed by Smeal’s Penn State Executive
Programs and CSCR, which helps to integrate
Smeal into the broader business community.
Along with executive education, CSCR focus-
es its efforts in research, benchmarking,
and corporate sponsorship. CSCR corporate
sponsors direct the Center’s research initia-
tives by identifying relevant supply chain
issues that their organizations are experi-
encing in today’s business environment. This
process also helps to encourage Penn State
researchers to advance the state of scholar-
ship in the supply chain management ?eld.
Penn State’s Smeal College of Business has
the No. 1 undergraduate and graduate pro-
grams in supply chain management, according
to the most current report from Gartner.
For more information, please visit
www.smeal.psu.edu/scis and
www.smeal.psu.edu/cscr.
About the Sponsors
48 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
The Panalpina Group
The Panalpina Group is one of the world's
leading providers of supply chain solutions,
combining intercontinental Air and Ocean
Freight with comprehensive Value-Added
Logistics Services and Supply Chain Services.
Thanks to its in-depth industry know-how
and customized IT systems, Panalpina
provides globally integrated door-to-door
solutions tailored to its customers' supply
chain management needs. The Panalpina
Group operates a global network with some
500 branches in more than 80 countries. In
a further 80 countries, it cooperates closely
with partner companies. Panalpina employs
approximately 15,000 people worldwide.
Panalpina has extensive experience with
customers in many key industries. With
dedicated experts in key global markets,
Panalpina has the people, products, skills
and capabilities to meet the demanding
needs of its global customers.
Panalpina delivers reliable Supply Chain
Solutions that provide value to our customers
– every time. No matter what the size, exact
business and location is – we are always driven
by qualitative, safety-related and environmen-
tal principles that best serve our customers’
and thus our own long-term interest.
For more information please visit
www.panalpina.com.
Heidrick & Struggles
Heidrick & Struggles, the leadership advi-
sory ?rm providing senior-level executive
search and leadership consulting services,
has one of the industry’s leading, dedicat-
ed Transportation and Logistics practices
round the globe. We have a demonstrable
track record of delivery in each niche of the
segment with truly global coverage. Clients
include Integrators, Freight Forwarders, 3PL
Providers, Ocean Carriers, NVOCCs, Airlines,
Rail Operators, Port Operators, Terminal
Operators, and Airport Operators. Our rela-
tionships go beyond cargo transportation and
logistics companies themselves as further
convergence emerges in the industry - we
hold key relationships with PE Firms, venture
capitalists, infrastructure funds, deal makers
(both buy and sell side), investment bankers,
management consultants and the academ-
ic community. We know the talent and with
our team dispersed all over the world, we are
uniquely equipped to serve an industry that is
being rede?ned locally, regionally and globally.
For more information, please visit
www.heidrick.com.
eyefortransport
Established in 1998, eyefortransport has
become one of the leading providers of busi-
ness intelligence, independent research,
news and executive level events for the
supply chain & logistics industries. eyefor-
transport has two primary focuses.
1) To provide executive networking opportu-
nities in the supply chain & logistics indus-
tries via the more than 15 events we annually
organize and host in North America, Europe
and Asia and online via the tens of thou-
sands of users of www.eft.com. The events
are designed to complement and enhance
the business connections available through
our online network, and bring together the
industry elite. Regularly attended by CEOs
and senior management from the transport
and logistics industry and Heads of Supply
Chain of major companies, the events focus
on current developments and latest trends,
and are enhanced by high-level, exclusive
networking opportunities.
2) To deliver industry education through doz-
ens of industry reports, surveys, newsletters,
webinars and senior-level presentations at
leading events.
For the list of current research, news and
conferences we produce please visit
www.eft.com.
49 ABOUT THE SPONSORS
Dan Albright Capgemini Consulting
Michael Alf Capgemini
Frank Arendt Procter & Gamble
Chris Armbruster Motorola Solutions
Matt Bernstein Helix Logistics
Erik Bootsma Capgemini
Gohkan Carmat Ori?ame
Ravdeep Chawla Capgemini Consulting
Strategic Research Group
Greg Colabello Raytheon
Neil Collins Heidrick and Struggles
Maarten Cornelissen Ahrend N.V.
Zack Deming Heidrick and Struggles
David Dorgan Raytheon Technical Services Company LLC
Ana Esper Energizer
John Ferguson SCI Group Inc.
Mauricio Ferreira Kraft Foods
Brett Fletcher Capgemini Consulting
Cyrill Gaechter Panalpina
Patrick Gueth Panalpina Welttransport GmbH
Andreas Hackl Roche Diagnostics
Brian Hancock Martin-Brower
Marjanka Haxe Canon Europe B.V.
Jim Hay Capgemini
Sven Hoemmken Panalpina Management Ltd.
Chris Hughes Sherborn Ventures, LLC
Johan Jemdahl Cisco
Rick Jordon Panalpina Management Ltd.
Mathieu Karel Philips
Casey Kelly Heidrick and Struggles
Michael Keong Levi Strauss & Co
Marco Kranenbroek Panalpina
Bill Ladd Frito Lay
Dr. John Langley Penn State University
Theo Leuthardt Panalpina Management Ltd.
Renee Machovec Annie’s Inc.
Kasper Madsend Carlsberg
Robert Mellin Ericsson
Jim Morton Capgemini Consulting
Shekar Natarajan formerly Pepsico
Jim Nelles Capgemini Consulting
Anne Patterson FreeFlow
Conrad Persels Corvedia
Monika Ribar Panalpina Management Ltd.
Shyamal Roy Capgemini Consulting
Arun Salvi Shell Lubricants
Wally Shaw Philips Consumer Lifestyle
Mike Sherman Sony Electronics
Peter Starvaski Kewill
Michael Stolarczyk Kontane Logistics
Lisa Terry Lisa Terry Editorial Services
Igor Uman Capgemini Consulting
Strategic Research Group
Floris Van Tol Western Digital
Eric Vennekens ASML
David Watson Capgemini Consulting
Dennis Wereldsma Capgemini
Morgan Wilson Teavana Corp
Nicholas Wyss Panalpina Management Ltd.
Tony Xia Emerson Electric
Mark Yonge Marine Highways Cooperative
Gilbert Zanon Panalpina
Sikko Zoer Medtronic
Credits
The 16th Annual 3PL Study team would also like to thank all of the
companies and individuals who shared their experiences and insights
with us through focus interviews, ASE workshops and the workshop
at eyefortransport. Your contributions are invaluable to the analysis
of the survey results and the ideas expressed in this report.
50 2012 16TH ANNUAL THIRD-PARTY LOGISTICS STUDY
The study team also thanks the North America Strategic Research
Group (NA SRG) for their work in support of the study. The North
America SRG performs strategic research and analysis to support
Capgemini’s sales and delivery teams, business development and
thought leadership.
The authors of the study would like to thank eyefortransport; the
Shanghai Logistician Club (SHLC); the Hungarian Association of
Logistics; the Latin America Logistics Center (LALC); EVO, the Dutch
Shippers’ Council; The Logistics Institute-Asia Pacific (TLI-AP); Supply
Chain Digest; the Supply Chain Council and the National Shippers
Strategic Transportation Council (NASSTRAC) for serving as sup-
porting organizations for this 16th Annual Third-Party Logistics Study.
Under the guidance of Executive Director Maria F. Rey, the LALC
provided contact information for Latin American executives, and
also translated the entire survey into Spanish and Portuguese.
Lead Writer: Lisa Terry
The study team expresses its appreciation to Jim Morton, Director
of the Study Project, and Brett Fletcher, Project Manager, both of
Capgemini Consulting, for their diligent and helpful work as leaders
of this year’s study.
Disclaimer:
The information contained herein is general in nature and is not intended as, and should not be construed as, professional advice or opinion
provided by the sponsors (Capgemini, Penn State, Panalpina, Heidrick & Struggles and eyefortransport) to the reader. While every effort has
been made to offer current and accurate information, errors can occur. This information is provided as is, with no guaranty of completeness,
accuracy, or timeliness, and without warranty of any kind, expressed or implied, including any warranty of performance, merchantability, or
?tness for a particular purpose. In addition, changes may be made in this information from time to time without notice to the user. The reader
also is cautioned that this material may not be applicable to, or suitable for, the reader’s speci?c circumstances or needs, and may require
consideration of additional factors if any action is to be contemplated. The reader should contact a professional prior to taking any action
based upon this information. The sponsors assume no obligation to inform the reader of any changes in law, business environment, or other
factors that could affect the information contained herein.
www.3plstudy.com
C. John Langley Jr., Ph.D.
Clinical Professor of Supply Chain Management
Director of Development, Center for Supply Chain Research (CSCR)
Penn State University
University Park, PA
T: +1 814 865 1866
[email protected]
Dan Albright
Vice President, Capgemini Consulting US Supply Chain Leader
Capgemini Consulting
Atlanta, GA, USA
T: +1 404 806 2169
[email protected]
Brett Fletcher
Capgemini Consulting
Atlanta, GA, USA
T: +1 404 277 8332
[email protected]
Dennis Wereldsma
Global Distribution and Transportation Sector Leader
Capgemini Nederland B.V.
Utrecht, the Netherlands
T: +31 30 689 6076
[email protected]
Michael Alf
Vice President, Head of Sales Asia Pacific
Capgemini
Melbourne, Australia
T: +6 13 9613 3378
[email protected]
Sven Hoemmken
Executive Vice President, Global Head of Marketing and Sales
Panalpina Management Ltd.
Basel, Switzerland
T: +41 61 226 1111
[email protected]
Theo Leuthardt
Global Head of Supply Chain Management
Panalpina Management Ltd.
Basel, Switzerland
T: +41 61 226 1111
[email protected]
Nicholas Wyss
Senior Vice President, Global Head of Industry Vertical Fashion
Panalpina Management Ltd.
Basel, Switzerland
T: +41 61 226 1111
[email protected]
Patrick Gueth
Senior Vice President, Global Head of Industry Vertical Hi-Tech
Panalpina Welttransport GmbH
Frankfurt, Germany
T: +49 6105 937 0
[email protected]
Lucas Kuehner
Managing Director, USA
Panalpina Inc.
T: +1 973 254 5723
[email protected]
Neil Collins
Managing Partner, Transportation & Logistics - Americas
Heidrick & Struggles
Atlanta, GA, USA
T: +1 404 783 8811
[email protected]
Zack Deming
Heidrick & Struggles
Atlanta, GA, USA
T: +1 404 682 7380
[email protected]
Chris Saynor
CEO
eyefortransport
T: 1800 814 3459 ext 7529 (from USA);
T: 1866 996 1235 ext 7529 (from Canada);
T: +44 20 7375 7529 (from Rest of the World)
[email protected]
Katharine O'Reilly
Executive Director
eyefortransport
T: +44 (0)20 73757207
T: 1800 814 3459 ext.7207
[email protected]  
For additional copies of this publication or for more information about the study, please contact any of the following:

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