Gartner: Logistics Leaders Expect Their Outsourcing Budget to Increase in the Next 2 Years

December 15, 2021

Critical Priorities Can Only Be Achieved by Collaboration with 3PLs

Sixty-six percent of logistics leaders increased their logistics outsourcing budget in 2021, and 74% anticipate an increase in the next two years, according to a survey from Gartner.

From March through May 2021 Gartner surveyed 298 supply chain professionals in the U.S., Europe and APAC who had decision-making capacity regarding supply chain outsourcing.

“Logistics outsourcing to third-party logistics providers (3PLs) has been on the rise for a while, and there is no indication that this will change anytime soon,” said David Gonzalez, vice president analyst with the Gartner Supply Chain practice. “However, logistics leaders are grappling with significant challenges that they can only address in collaboration with their 3PL partners.”

Ken Bays, Vice President Product Management at Inmar Intelligence noted, "Supply chain service providers will win by making their service reliable and easy to implement. That means perfect execution and self-service data exchange capabilities that do not require an elongated engineering engagement, which is true for any service along the supply chain - from sourcing to last mile."

When asked for their top 3 logistics priorities, the most common replies by survey respondents were:

Improve or update technology (37%)

Cost reduction/cost optimization (31%)

Increase customer satisfaction (29%)

Faced with these challenges, many logistics leaders turn to their outsourcing partners for support. Although 3PLs can help address these priorities, it requires collaboration and inevitably compromise on both sides. For example, a 3PL can upgrade or acquire new technologies on behalf of their shipper customer. However, this will only be an option for the 3PL if the shipper extends their contract agreements to allow the depreciation of the investments and/or partly shares the financial burden with the 3PL partners.

"It is interesting the top shipper priority is to improve their logistics technology, while the recent annual 3PL study by Dr. Joh Langley of Penn State once again found a large gap between the importance shippers place on a 3PL's technology and their opinion of where 3PLs stand in IT," said Dan Gilmore, chief marketing officer at supply chain software provider Softeon.

Gilmore added that "too many 3PLs are still using dated systems in areas such as Warehouse Management and Billing Management, while many 3PLs with more modern commercial technology aren't using what they have in to nearly it full potential."

“Nearly two-thirds of survey respondents said 3PL service providers had a positive or extremely positive effect on their competitiveness. This is the perfect foundation to build a long-lasting and meaningful partnership that enables joint investments and transparent information exchange,” Gonzalez said.

"Globalization and e-commerce are clearly driving rapid growth in the WMS and Warehouse Automation markets. These software and hardware innovations enable warehouse operators to execute faster, more accurately, and more efficiently," said Brian Zheng, HAI ROBOTICS U.S. General Manager.

Relationship Management Will Become an Essential Task for Logistics Leaders

To have a productive and collaborative work relationship, both shippers and 3PLs must listen to each other and understand the other parties’ perspective. For example, shippers must ensure that they have a clear understanding of the 3PLs’ capabilities and needs. Similarly, 3PLs must carefully listen to their shippers to manage expectations and identify future areas of opportunity.

“The 3PL community has a lot to offer, and the shipper community has a lot to gain. In the face of ongoing disruptions, growing carrier influence and customer selection, shippers and 3PLs must work together to mutually protect their vested interests. If they can enter a trusted relationship, there’s lots of room for future innovation and opportunities,” Gonzalez concluded.

Bob Bova, President and CEO of AccuSpeechMobile explained, "3PLs are a driving force for manufacturers and distributors to remain competitive in today’s consumer driven product expectancy market. The right partner combined with internal resources are the strongest way to stay ahead of the curve, mitigate negative outcomes and deliver to the expected customer experience."

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