The third party logistics (3PL) model, while critical to smaller, low-volume shippers, has never been the best option for organizations shipping moderate-to-high volumes of freight. Purveyors of logistics IT solutions have been warning of the shortcomings of 3PL tech for years. Only recently has there been unbiased, independent research to substantiate these claims. The output of recent research confirms the rudimentary logistics IT solutions offered by 3PLs leaves many gaps and much to be desired.
A pair of long-running academic studies presented in late September to the Council of Supply Chain Management Professionals (CSCMP), corroborates what leading TMS providers have been telling shippers for years. The “thin-client” tendering tools and other basic TMS-style functionality offered by 3PLs – either via simplistic tendering and tracking solutions built by 3PLs or the stripped-down versions of TMS tools licensed to 3PLs by some commercial TMS providers – are not up to the challenges facing shippers in today’s competitive business environment.
The 3PL model, in which a consignee is engaged by a shipper to perform comprehensive logistics operations, came to prominence in the 1990s in the US. The first study of shipper satisfaction in 2002 revealed only 27% of shippers was satisfied with the IT capabilities offered by their 3PL provider. While satisfaction among 3PL customers did rise significantly in the ensuing decade, the numbers have declined precipitously between last year (at 65% satisfaction) and this year where only 56% of 3PL customers reported satisfaction with their 3PL’s logistics IT offerings.
This begs the question, “what’s changed and why have shippers satisfaction levels with 3PL tech dropped so quickly?”
“There’s been great compression in the shipping lifecycle due to the Amazon Effect” according to Chris Noble, Implementation Manager for UltraShipTMS, referring to the widespread and growing expectations surrounding shipment tracking and up-to-the-minute visibility. “The pursuit of On-Time-In-Full standards require more than the simplistic delivery confirmations provided by some shoestring tech tool from a 3PL” says Noble. “It’s not enough to get confirmation the day after the delivery was made” he says, “today’s shipper needs to know the moment shipments arrive in order to achieve the efficiency needed to serve customers who have grown conditioned to expect real-time shipment data.”
Both studies highlighted the importance of automation and data visibility with respect to success in transportation logistics management. Again, the 3PL-provided automation tools largely miss the mark. They’re designed mostly to automate tendering processes. However the carrier management, rate management, rate benchmarking and a host of other performance metrics are absent from the 3PL-based tools. This is largely by design as the 3PL isn’t keen on providing its customers any significant insight into costs and performance which reveal not only their markup on the freight, but also the extent to which better performing carriers could be sourced and engaged.
The levels of visibility and analytical capabilities required to maximize transportation efficiency run counter to the core business model of a 3PL. For this reason alone, there is little incentive among 3PLs to field more robust technologies (never mind the costs associated with developing such powerful applications).
In sum, it is no surprise that shippers are expressing deep dissatisfaction and growing misgivings about leaning on tech tools from 3PLs. The competition is just too stiff to leave any attainable efficiency on the barrel head. Expect to see the satisfaction levels among shippers continue to fall year by year. And, if you’re a shipper presently using a tech tool from your 3PL provider, now is the time to examine how much better your results can be using a fully mature TMS solution from a dedicated provider of proven logistics IT solutions.