More and more customers are asking their third-party logistcs providers (3PLs) to provide radio frequency identification (RFID) services. Logistics providers are facing increased demand for more technological innovation to compete, says a new study from Capgemini, which was presented at the Council of Logistics Management conference last week.
According to the study of more than 650 logistics and supply chain executives, more than three-quarters of respondents currently use 3PL services. More than eight in 10 say those relationships are successful. The overwhelming number one IT-based 3PL service needed in the future by all regions is RFID (North America 53%, Western Europe 61%, Asia Pacific 59% and Latin America 48%). Many users see a challenge and opportunity for 3PL providers to assist them with the implementation of this capability.
"This year's study suggests 3PL customers throughout the world seek competency in areas such as operating efficiency and effectiveness, cost management, service delivery, IT and globalization," said C. John Langley Jr., professor of supply chain management and 3PL study leader at Georgia Tech. "However, the findings once again show that 3PLs cannot rest on their laurels and need to implement capable IT, institute effective management and relationship processes, integrate services and technologies globally and deliver comprehensive solutions that create value for 3PL users and their supply chains."
The 2004 study had a number of other key indicators and metrics, including:
-- Western European respondents continue to spend a larger portion of their logistics dollar or euro (61%) on 3PL services than do those in North America (44%) and Asia-Pacific (49%), but Latin American respondents spend more of their logistics budget (65%) on 3PL services.
-- Security issues are most prominent among 3PL users in North America and Latin America (69% and 78% respectively).
-- Globally, the five most frequently outsourced activities to 3PL providers are outbound transportation (80%), warehousing (70%), inbound transportation (67%), customs clearance (56%) and customs brokerage (53%).
-- In terms of primary sources of IT solutions, the highest percentage of respondents in each region indicated they turn to internal resources for technology (North America 43%, Western Europe 41%, Asia Pacific 19% Latin America 34%), but the regions with the highest percentage (19%) of users turning to 3PL providers as their primary source of IT were North America and Latin America.
-- Transportation management technology from a 3PL provider is the most used by Western European respondents (80%) and the least used by North American respondents (53%).
-- About half the users in Latin America and Asia Pacific use Web-enabled communications from a 3PL provider, compared with 61% and 65% of the users in North America and Western Europe respectively.
-- A third of the Latin American respondents indicated that they use their 3PL provider's customer order management systems. None of the other regions are over 20% in this category.
-- Only 54% of all respondents feel like 3PL providers would be able to keep up with the challenges of global supply chain integration, down from 86% in last year's survey.
-- Overall inventory reductions ranged from 7% in North America to 16% in Latin America, while cash-to-cash cycles dropped as a result of 3PL use, with the number of days reduction ranging from 2.4 days in North America to approximately 10 days in Asia Pacific.
-- In all regions, the four biggest reasons why non-users did not use 3PL services were: logistics is a core competency; logistics is too important to outsource; costs would not be reduced; and control would diminish.
"This study documents the increased interest and sustainability of truly collaborative relationships between 3PL providers and their customers," said Greg Cudahy, global supply chain leader for Capgemini. "While the study certainly identifies ways in which all parties can improve these relationships, long-term success in the marketplace requires that more effective logistics and supply chain solutions be developed, including the next generation of RFID pilot programs."
"While 3PL's clearly provide good service to their clients today, they have considerable challenges ahead when it comes to IT," said Erik van Dort, global distribution sector and 3PL leader for Capgemini. "This is caused by a large backlog of legacy systems, while they are faced with significant technology solution demands for areas like Transport Management and RFID. In addition, the global players need to free up considerable resources to standardize and modernize their IT systems and processes in their expanding global footprint."
