Study: Gap between 3PL and shipper innovation expectations
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Digitization continues to take a foothold in supply chain, especially through the expansion of big data and the Internet of Things (IoT).
While innovation ranked highly, not all shippers have the same needs, according to “3PLs are Buzzing with Innovation: Bridging the Gap Between 3PLs and Shippers,” a report from JDA and SCDigest. The report tapped more than 100 shippers and 3PLs and reveals innovation from the perspectives of both shippers and logistics companies.
According to the survey, 69% of shippers surveyed feel innovation is very important to their relationship with 3PLs. However, when asked how they rated the 3PL sector on the ability to innovate and deliver on technology innovation, only 7% of respondents felt 3PLs had high innovation capabilities.
“Ongoing innovation is required to support the growing needs to support e-commerce, online fulfillment, personalization and omnichannel expectations, while helping turn around orders quickly and cost-efficiently,” Danny Halim, VP, industry strategy, JDA. “The data backs up our view that logistics services providers need to be on the leading edge of supply chain trends in order to keep pace with the changing needs of shippers.”
While a promising 38% felt that 3PLs had the ability to deliver on innovation in the future, there is a gap between what shippers expect and what logistics providers think they can deliver. Respondents said when choosing between operational excellence and innovation, they’d opt for operational excellence because customer service and meeting customer promises exceeds the need for innovation – unless it can drive such excellence back into the business, the report revealed.
“The data supports a common theme – innovation is not for every customer. Therefore, a segmentation approach is needed. 3PLs need to look forward: What will their business look like in 5-10 years and who will their customers be (or become) in that time?” commented Halim.
When asked how shippers engage with logistics providers to develop innovation, a large number of respondents agree that 3PLs are allowed to find methods/solutions as long as they achieve the goals. Nearly 64% of 3PLs have a hybrid relationship with shippers, allowing for a prescriptive, yet open, approach to innovation, collaborating on what best fits their needs. Yet, nearly 40% of shippers/clients felt their relationship with 3PLs was fairly prescriptive, not leaving much room for innovation.
Further, several 3PLs anecdotally claim that they can deliver innovation in the form of process or technology re-engineering – but only if they are allowed. When the client doesn’t value innovation or doesn’t foster strategic collaboration, there is resistance to change, the study said.
And when it comes to truly leading-edge innovation, such as augmented reality, robotics, 3D printing, drones, nearly 46% of 3PLs believe shippers expect them to offer more advanced technologies, while only 24% of shippers suggested 3PLs should add such capabilities to their service offerings. This underscores the challenge between the balance of innovation that lowers operational costs versus innovation that improves business performance.
“Over the last three decades, logistics providers have been on an upward path of innovation, focusing on scaling capacity by building and consolidating their networks and becoming more efficient and cost-effective in serving their markets. But now, the focus is on digitization, e-commerce, big data and IoT,” commented Halim. “Providers need to keep pace with customer expectations, and invest in innovation that will add value to their services, all in an effort to provide services that improve business performance.”