Having the ability to quickly adapt to things like change management, emerging technologies such as AI, and meeting consumer expectations are front and center—for both shippers and 3PLs.
That could well be viewed as the chief takeaway of the annual 2024 29th Annual Third-Party Logistics Study, entitled “Navigating Change: Insights Into Evolving Dynamics in Supply Chain,” which was released today at the Council of Supply Chain Management Professionals (CSCMP) EDGE Conference in Nashville.
This study was created in conjunction with NTT Data, supply chain professor and researcher Dr. C. John Langley, and Penske Logistics.
The study’s findings were based on feedback from several hundred usable responses from shippers, or users of 3PL services, and non-users of 3PL services, as well as 3PL sector respondents.
As usual, the study was replete with interesting data points, highlighting the differences in how 3PLs and shippers approach the same issues.
Change Management: Addressing change management, the study found that 61% of shippers and 73% of 3PLs viewed the need for supply chain change management as critical or significant. And that was due to various factors, including customer demands, economic factors, and technological advancement, with the study also noting that supply chain visibility was the most-identified area in need of change, with 69% of shippers and 68% of 3PLs confirming that.
In an interview, Tim Brindley, Vice President and Practice Lead of the Supply Chain Operations Competency at NTT DATA Supply Chain Consulting, explained that the commitment, or how to get to a proper framework to address change, is mixed, when looking at the findings.
“The majority of respondents don’t have a real framework around it, so we listed off a few frameworks and what we saw was either they don’t have a framework or they have something they consider as proprietary in-house, which, from my perspective, is that they don’t have something,” he said. “When you think about resourcing to address it, change management tends to be the thing that is cut, in terms of how much is dedicated towards it. If you don’t have the buy-in from the customer or the end user, it tends to fail or becomes very difficult.”
The study also found that roughly one-quarter of shippers and 3PLs indicated they are extremely receptive to change, whereas 45% of shippers and 53% of 3PLs indicated their organizations are moderately receptive to change.
AI impact: A common theme between shippers and 3PLs in the study was that they agree that AI can enhance efficiency, accuracy, and resilience, in various ways like automating data analysis, identifying patterns or solve problems, and also be a tool used for automating repetitive, mundane tasks.
Key AI-related findings in the study indicated that 33% of shippers are seeking AI-focused implementations related to supply planning and demand forecasting, with 19% of 3PLs saying they plan to consider implementations in this area. What’s more, 27% of shippers are demanding transportation and route optimization, and 22% of 3PLs are planning to implement AI capabilities.
But there are also AI adoption challenges to be aware of, too, with 28% of 3PLs citing integration with existing systems, and 25% noting a lack of skilled personnel, and 14% indicating high initial investment costs. From a competitive perspective, the study found that “the majority of shippers” said 3PLs’ usage of AI would influence their choice of a 3PL partner, adding they would be very likely (13%) or somewhat likely (32%) to switch 3PL providers based on their AI capabilities.
Brindley said he expects those percentages to rise should AI be able to take out costs and help shippers to make better decisions.
“The biggest opportunity is supply and demand planning,” he said. “Demand planning is massive. If you can keep your inventory working capital down and you’re able to make better decisions from a demand forecast perspective, that is massive if you can get there. And that is the right place, I think, for something with an AI to actually have an impact. The transportation piece also makes sense.”
From an integration perspective, he said that supply chain practitioners can see challenges related to AI, given the myriad IT platforms within supply chain that exist today that he described as point solutions along the supply chain, for things like manufacturing, transportation, and distribution, among others.
“That is the biggest challenge—which is a lot of different data sets and a lot of different points in the supply chain—how do you integrate all of that together,” said Brindley. “There is not going to be a silver bullet for AI to do all of that. But you need to find the right place, from sort of the ability to automate processes or make better decisions within the supply chain.”
E-commerce: Consumer expectations for fast deliveries of their online orders was evident, with 48% of shippers and 53% of 3PLs stating that customers expect deliveries in two days or less, with 27% of shippers and 26% of 3PLs highlighting three-day or less delivery expectations. And the study also found that 44% of shippers and 38% of 3PLs are willing to absorb a small percentage of costs related to shipping speeds, with a common theme being that delivery speed and further visibility are strong areas of differentiation.
“Delivery in three days or less is the bottom line,” said Brindley. “You don’t want to pay for it indirectly. You want to pay for it in the sense of when you set thresholds. So, if there is an order minimum of $100, that is one way to actually cover some of the costs from a parcel perspective. What I see becoming more prevalent—and we see it with our customers, too—is that consumer promises are also heavily weighted towards returns, with a focus on the ease of convenience for customers from a returns perspective as we buy more online and how do we give customers more options.”
