Two annual reports focused on the third-party logistics (3PL) market were released last month, and the research results were presented at the Council of Supply Chain Management Professionals (CSCMP) annual conference. The 16^th Annual 3PL CEO Survey, sponsored by Penske Logistics and authored by Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, is based on responses from 35 third-party logistics CEOs across North America, Europe and Asia-Pacific.  The 2009 Fourteenth Annual Third Party Logistics Study, authored by Dr. John Langley at Georgia Tech and sponsored by Oracle, Panalpina, and Capgemini Consulting, is based on a survey of logistics and supply chain executives, as well as 3PL executives, from around the world.

There is way too much information in these reports to summarize here, so I recommend that you read both reports.  But here are my key takeaways:

• The recession has thrown sand in the gears of the industry. 3PL executives have dialed back their growth projections for the next few years, especially in Europe.  But where will growth come from?  Increasing business with existing clients and taking customers away from other (smaller) service providers are perhaps the best opportunities in North America and Europe, while increasing business in China and India represent the best opportunities in Asia.
• 3PLs are from Mars, clients are from Venus.  3PLs and their customers continue to view their relationships in very different ways.  According to the Langley study, “[There is] a gap evident throughout the study results between the ratings shipper respondents assign to various aspects of the 3PL provider-customer relationship and a somewhat more positive evaluation by the 3PL respondents themselves. For example, 50% of shipper respondents agree that 3PLs provide them with new and innovative ways to improve logistics effectiveness, while 82% of the 3PL respondents feel they provide services of this nature. Similarly, 59% of shipper respondents feel their use of 3PLs has a positive impact on service to their customers, while 88% of the 3PL respondents feel this way about their customers’ businesses, and 79% of shipper respondents state that 3PLs provide operational flexibility, compared with 89% of the 3PL respondents who participated.” According to Lieb’s study, 3PL CEOs across all regions reported that about a quarter of their business relationships have become more adversarial as a result of the recession (this was offset a bit, however, with more collaborative relationships with other customers).
• There is no better time for 3PLs and customers to transform their relationships to achieve greater value. The recession is a catalyst for change. This is the basic message Darin Cooprider from Ryder (a Logistics Viewpoints sponsor) wrote about in his guest commentary a few weeks ago (see “What Doesn’t Kill Us, Makes Us Stronger: A New Model of Logistics Excellence”). And the opportunities are clear. As the Langley study highlights, 3PLs can help clients “restructure their supply chain networks to improve financial performance,” or help them “expand to new markets or offer new products”, or play a key role in helping clients “convert fixed costs to variable costs.” But how do you change the status quo? By changing your mindset—and that is the foundation of performance-based outsourcing, a topic I have written about many times this year, and it is the focus of our upcoming seminar in February.

So, what is the state of the 3PL industry?  Better than other industries, but still far short of its optimum potential.