New York November 6, 2001 A trend to expand outsourcing logistics to third-party logistics (3PL) providers internationally is gaining momentum among American manufacturers due to greater satisfaction with outsourcing this function domestically, according to a survey conducted by Accenture and Northeastern University.
Even the recent tough economic climate has had minimal effect in slowing down this trend, as the interest by manufacturers of logistics outsourcing is rising as the economy continues to fall.
The majority of the nation's largest American manufacturing companies (74 percent) currently use 3PL provider services, more than double the percentage a decade ago, according to the survey. Also, these same manufacturers anticipate the percentage of their logistics operating budget dedicated to 3PL outsourcing will increase from 25 percent to 34 percent in three years. This rate could accelerate, as nearly half of those surveyed believe that their companies would be even more interested in the concept of logistics outsourcing during times of economic duress.
"Ninety percent of manufacturers polled said the economic downturn has had little to no effect in changing their current level of interest or use of 3PL services. Logistics outsourcing continues to transform companies as they focus on core competencies to meet corporate objectives," said Accenture Supply Chain Management associate partner Michael Hickey.
The greatest impact of outsourcing 3PL was in containing logistics costs, with 84 percent reporting positive results in this area. The least positive impact was in the human resources area. Twenty nine percent of users of 3PL services reported a positive impact on employee morale (up from 23 percent last year). Conversely, high turnover of 3PL personnel was cited as a significant problem in outsourcing these functions.
The report also showed that many users of 3PL services use their 3PL providers for IT support, with freight payment services being the most popular IT application being used by 46 percent of the 3PL users. Of the IT applications, transportation planning and optimization applications proved to be the most beneficial.
Nearly half of the respondents indicated they were interested in the possibility of outsourcing some aspects of the companies' purchasing function. The report also shows that providers are aggressively expanding their service offerings to include purchasing capabilities, including inventory management and financial services.
In the 1999 and 2000 surveys of the CEOs of 20 of the leading 3PL providers the CEOs identified e-commerce as the most significant opportunity available to the industry. However, in this year's CEO survey the respondents indicated that the greatest opportunity is globalization. Regarding globalization, the survey indicated that Western Europe is currently the major source of international revenues for 3PLs, with the most significant revenue growth projected for Eastern Europe, Mexico and Asia.
"3PL providers are embracing the Web to provide technical support and linkages to clients even if they are not heavily involved in supporting e-commerce activities for clients. They are using the Web for specific applications to expand the range of services offered to their clients," said Dr. Robert Lieb, Northeastern University.
For more information on third-party logistics providers, look for the Global Enabled Supply Chain article on Logistics in the January 2002 issue of iSource Business.
