3pl landscape & selection strategies · fulfillment strategies continue to evolve but have a...
TRANSCRIPT
FIND YOUR WOW
3PL Landscape & Selection Strategies
Presented by:
St. Onge CompanySponsoring Company
Logo Goes Here!
FIND YOUR WOW
Presenter
2
Bryan JensenChairman/EVPSt. Onge Company
FIND YOUR WOW
Source Documents & Study Information
• 2019 23rd Annual Third-Party Logistics Study: The State of Logistics Outsourcing – C. John Langley Jr., Ph.D., and Infosys, 2019
• Respondents to study
• Shippers – 62%
• 46% Shippers currently using 3PL/4PL
• 16% Shippers not using 3PL/4PL
• 3PL/4PLs – 38%
• Annual State of Logistics Report - CSCMP
• 28th Annual Report
• 29th Annual Report
• 3PL Market Analysis – Armstrong
• 3PL Global Market Analysis - Armstrong
3
FIND YOUR WOW
Our 3PL Practice Clients Include
4
FIND YOUR WOW
Agenda
• 2019 Executive Summary
• State of the 3PL Market
• State of the 3PL Workforce
• The Push for Agility
5
• The “Last Mile Yard”
• Omni-channel Retailing
• Contemporary Issues
FIND YOUR WOW
2019 EXECUTIVE SUMMARY
6
FIND YOUR WOW
2019 Executive Summary
1. Partnerships between 3PLs and Shippers remain strong
• Perception from 3PLs – 98% successful
• Perception from Shippers – 91% successful
2. Contribution to Shipper’s success
• 3PLs point of view – 98%
• Shipper view – 89%
3. Improved Shipper Effectiveness
• 3PL view – 91%
• Shipper view – 73%
4. IT from the Shipper’s perspective
• Importance – 93%
• Satisfied with 3PL – 55%
7
Most Prevalent Outsourced %
Domestic Transportation 81%
International Transportation 71%
Warehousing 69%
Freight Forwarding 50%
Customs Brokerage 40%
Most frequently outsourced activities are those that are transactional, operational,
and repetitive.
FIND YOUR WOW
2019 Executive Summary
5. 3PLs contributed to reducing overall logistics cost
• Perception from 3PLs – 95%
• Perception from Shippers – 72%
6. Shippers increasing their use of 3PLs
• 3PLs point of view – 86%
• Shipper’s view – 63%
5. Consolidating number of 3PLs used
• 3PL view – 73%
• Shipper’s view – 61%
6. Shippers returning to insourcing logistics
• 3PL view – 36%
• Shipper view – 28%
8
Shipper’s Logistics and 3PL Expenditures
3PLs consistently over-estimate key aspects of success
FIND YOUR WOW
STATE OF THE 3PL MARKET
9
FIND YOUR WOW
Domestic Logistics Expenditures
• 11% of total logistics expenditures are related to outsourcing. This is unchanged from 2018. Included in the percentage is transportation, distribution, warehousing, and value-added services.
• Total logistics expenditures directed to outsourcing
was slightly higher at 53%.
• Transportation spend managed by 3PLs decreased by 5% from 2018.
• Warehouse operations spend managed by 3PLs decreased by 5% from 2018.
10
FIND YOUR WOW
International Logistics Expenditures
• Global 3PL revenues increased for all seven regions.
• Global 3PL revenues increased to $869 billion from $804.2 billion.
• Highest % increases in 3PL revenues: CIS/Russia at 17.5%, followed
by South America at 13.9%, then North America at 9.8%.
11
CAGR = compounded annual growth rates
CIS = Commonwealth of Independent States
The most recent completed global study was 2017
FIND YOUR WOW
Activities OutsourcedMore strategic and customer-facing activities tend to be outsourced less than more tactical and operational
12
FIND YOUR WOW
Information Technology
• Information technologies required by Shippers and perceived by 3PLs
• Transportation management (planning) and Warehouse Management Systems continue to be the top needs of Shippers
• Most frequently needed technologies continue to be execution and transaction-based
13
FIND YOUR WOW
Information Technology Gap
Shippers’ view of 3PLs IT capabilities
14
In the most recent
study, Shippers agree
93% of the time that IT
Capabilities are
necessary for 3PLs.
However, 55% of
Shippers are satisfied
with 3PL IT
capabilities.
FIND YOUR WOW
Information Technology Investments• 3PLs continue to invest mainly in Warehouse and Transportation Management Systems
• Shippers continue to invest in ERP systems
15
FIND YOUR WOW
Outsourcing Vs. Insourcing • 63% of Shippers using 3PLs plan to increase their outsourcing compared to 61% last year
• 28% of Shippers using 3PLs plan to return 3PL operations to insourcing
• 61% of Shippers using 3PL plan to consolidate the number of providers
• Reasons given for not using 3PLs
16
Concerns %
Loss of Control 27%
More Logistics Expertise than 3PLs 22%
Too difficult due to IT integration 18%
Concern that cost/service would
not improve 15%
Non-3PL Users
FIND YOUR WOW
STATE OF THE 3PL WORKFORCE
17
FIND YOUR WOW
Top workforce issues
• Finding and developing talent continues to be a major concern for Shippers and 3PLs
• Some studies estimate by 2030 the global supply of labor could fall short by 16%
• The global average salary per worker is estimated
to increase by $11,164 by 2030
18
Countries facing
the greatest wage
Increase per
worker by 2030
FIND YOUR WOW
Reasons why companies are looking outside to fill key positions
Top Reasons companies have looked externally for talent in the past 12 months
19
44% of 3PLs look outside
their organizations for
talent
24% of Shippers and
3PLs reported not having
enough executive talent
21% report not having
enough mid-level talent
34% report not having
enough hourly talent
FIND YOUR WOW
The Push for Agility
20
FIND YOUR WOW
Investments to improve agility
21
FIND YOUR WOW
Top reasons for re-examining supply chains
• For Shippers and 3PLs, the number 1 reason for re-examining their supply chain is lower operating cost
• In general, 3PLs and Shippers are aligned in their reasons for supply chain optimization
22
FIND YOUR WOW
Shippers involve 3PLs with their supply chain re-designs more than any partnerThe vast majority of assistance comes from 3PLs, 71%
23
Supply chain design is the most frequently sought assistance
FIND YOUR WOW
How Shippers and 3PLs perceive top concerns about supply chain decisions
Infrastructure and workforce readiness top the list of concerns for Shippers and 3PLs when it comes to supply chain decisions
24
Technology is used to alleviate several concerns with supply chain decision
FIND YOUR WOW
73% of Shippers and 72% of 3PLs have invested in Control Towers to assist with visibility
• Control towers and predictive analytics are two of the major technology advances utilized by Shippers and 3PLs to stay nimble and agile in the supply chain
• Operational control towers combine visibility and analytics giving users the ability to respond in real-time
25
Major areas of investment
FIND YOUR WOW
THE “LAST MILE YARD”
26
FIND YOUR WOW
Redefining terms• The “last mile” is common in supply chains. It denote the final leg between supplier and
end user.
• With the advancement of e-commerce and omni-channel distribution the concept has been significantly enhanced and termed the “last yard.”
27
FIND YOUR WOW
Five key trends driving changes in last-yard logistics
• Declining volumes of physical (“snail”) mail and rising package volumes
• Significant increases in seasonal shipments
• Increases in personal packages shipped to work addresses
• Increases in value and criticality of many shipments
• Growth in perishable consumables and non-consumables
28
Shippers and 3PLs views on the Last-Yard
77% of Shippers feel that last-yard logistics services will play a critical role in how 3PLs differentiate and add value for their Shippers
FIND YOUR WOW
Major concerns by Shippers with last-yard logistics
3PLs need to understand and address these potential concerns
29
FIND YOUR WOW
Value-added last-yard logistics capabilities
• Accurate shipment documentation
• Light assembly, often in homes or stores
• Kitting and returns management
• Value-added logistics services
• Moving items to the point-of-use
• Separating/segmenting product
• Technical support
• Marketing and promotional services
30
FIND YOUR WOW
Planned investment in receiving and tracking systems
• Self-serve capabilities such as lockers allow access to shipments by recipients without the need for staff
31
SaaS = Software-as-a-service
FIND YOUR WOW
Omni-channel retailing
32
FIND YOUR WOW
Shippers are less confident today than four years ago
• One-touch integration between operations and physical product flow across all channels to provide a seamless shopping experience
• Self-assessed level of ability to handle omni-channel retailing 2015 vs. 2019
33
FIND YOUR WOW
Innovative Delivery Options
• Order online and deliver to home is still the dominant delivery option but others are making headway: Same-hour, same-day, and next-day
• Amazon Treasure Truck in select markets
• What is Treasure Truck?
At Treasure Truck, we hand-pick our favorite new, trending, local, or delicious items, load 'em up, then cruise around town spreading joy for everyone with an appetite for fun. Every time you swing by, you’ll find something new to enjoy, like games, giveaways, tasty treats, and other surprises.
34
Brick-and-mortar stores are the
new “fulfillment centers”
FIND YOUR WOW
Main issues with multiple channel fulfillment
• Shippers and 3PLs have slightly different views on challenges facing them when it comes to omni-channel fulfillment
35
System integration is the biggest challenge for 3PLs according to 42% of the respondents
FIND YOUR WOW
Fulfillment strategies continue to evolve but have a long ways to go
Over half of the Shippers surveyed and almost half of the 3PLs have not developed innovative fulfillment strategies.
36
FIND YOUR WOW
Contemporary Issues
37
FIND YOUR WOW
Reverse Logistics
Reverse Logistics Continues to Grow
• The USPS estimates that between $113 billion and $132 billion e-commerce purchases were returned in 2017
• 79% of online shoppers surveyed rate free shipping on returns as important when selecting a retailer
• Issues
• When will a product be returned
• What condition will it be in
• How much labor and space will to take to process returns
• 24% of Shippers outsource their reverse logistics
• 44% of 3PLs offer reverse logistics services – much of the time this is at a cost plus arrangement due to unknowns
38
“Sending products back through the supply chain is like swimming up a river, with waterfalls to climb up and dozens of tributaries that make it unclear which way to go” - USPS
FIND YOUR WOW
International trade
Global trade continues to be a challenge
• 42% of Shippers said 3PLs must have global trade management tools
• Customs processing
• Import/export document management
• Systems that support international trade
• 40% of Shippers outsource customs brokerage
• 42% of 3PLs offer customs brokerage services
• 42% of Shippers and 37% of 3PLs use supply chain partners for country specific expertise
39
World events like Brexit and the North American Free Trade Agreements continue to impact international trade and supply chains.
FIND YOUR WOW
How do I select the optimal provider?
40
FIND YOUR WOW
How do I know a 3PL can provide my organization value?
• They should respond to the areas of greatest concern
– Simplify Complexity
– Demonstrate IT Capability
– Provide a Material Handling Technology Evaluation (more equipment is not always better but they should demonstrate they have evaluated that)
– Establish their ability to lead logistically
– Start with Cost Plus but ensure they can support gain sharing or alternative “share the benefit” plans
– Stand on their ability to support continuous improvement processes
41
FIND YOUR WOW
How do I know a 3PL can provide my organization value?
• Simplify Complexity– Show previous success in perceived complex areas (co-
pack, kitting, direct to consumer operations, multi-channel)
• Demonstrate IT Capability– Internal WMS
– Prove success with client’s WMS
– Demonstrate interfacing capability
• Prove a Material Handling Technology Evaluation (more equipment is not always better but demonstrate they have evaluated that)
42
FIND YOUR WOW
How do I know a 3PL can provide my organization value?
• Establish their ability to lead to logistically– Share the details of their pricing methods
– Can they support location analysis? (Logistics Leadership)
– Innovative Design (with corresponding investment)
– Can they meet emerging service requirements (Big Data)?
43
Location
Time & OperatingCharacteristics
Staffing
Operating ExpenseMetrics
Volume & ProcessInformation
DATA INPUTS
Equipment
Space
Labor
CALCULATIONS
Material Handling &
Storage Requirements
SpaceRequirements
StaffingRequirements
RESULTS REPORTS
Annual OperatingExpenses
SpaceRequirements
Capital Purchases
ImplementationCosts & Staffing
FIND YOUR WOW
How do I know a 3PL can provide my organization value?
• Start with Cost Plus (or Activity Based Costing) but ensure they can support either pricing approach along with gain sharing or other approaches you may be comfortable with
• Stand on their ability to support continuous improvement processes supported by previous successes– Coupled with gain share drives a potential win/win situation
with a partner who desires long term partnerships
• Clearly define impacts to cost across the relationship– Volume, Inventory Turn Shifts, Storage Profile Shifts, Order
Profile Shifts
44
FIND YOUR WOW
How do I know a 3PL can provide my organization value?
• The best providers realize while cost is always a consideration, and customers can be won on cost, they are kept through:– Exceeding Client Expectations (even as they change)
– Frequent meaningful communications
– Clear vision of business requirements & their impact
– Willingness to invest
• Commitment by Supplier & Client is paramount
“When my customer puts their head on their pillow at night, the last worry they should have is their distribution partner’s
ability, performance and cost.”
45
FIND YOUR WOW
Take Aways
• E-com is growing
• 3PL use is growing
• The two together are causing some ‘Growing Pains’ • Labor challenges everyone (or is it payroll??)
• Technology investment and integration
• Fulfillment Growth is outpacing other distribution needs
• Seasonality presents larger and larger challenges
• Evaluate you 3PL partner in their proven abilities to solve the tougher challenges to enhance you chance of successful selection
(Or be a 3PL with the ability to solve the tougher challenges to enhance your chance to be selected!)
46
FIND YOUR WOW
Speaker: [email protected]
Website: www.stonge.com
Or visit our Booth S1855
For More Information
47