An ongoing complaint of shippers that their logistics service providers (LSPs) struggle with being proactive and innovative in solving complex supply chain problems seems to be, well, still ongoing.
According to the Outsourced Distribution Report issued by the Tompkins Supply Chain Consortium, 37 percent of survey respondents were either "dissatisfied" or "very dissatisfied" with their partners' ability to bring new solutions to the table and to do so without any prompting from the customer. Nearly 26 percent of the respondents were neutral on the issue, according to the survey. Only 37 percent said they were satisfied with the status quo.
The study was based on a survey of 95 companies by the Consortium, which provides data on supply chain benchmarking and best practices. What the survey may have lacked in quantity of respondents, it made up in heft. More than half of the respondents had annual revenue of $1 billion or more. Nearly 14 percent reported annual revenues of more than $25 billion.
The results again raise a long-standing problem in shipper-provider relationships. In the 2010 Third-Party Logistics Study led by academic C. John Langley Jr. only 68 percent of shippers surveyed said their logistics partners were delivering new and innovative solutions to improve logistics effectiveness. In contrast, 95 percent of providers said they were bringing new ideas to shippers, according to the 2010 survey.
In response to the criticism that they are not innovative enough, logistics service providers contend their customers often exclude them from strategic discussions. As a result, they can't obtain the business intelligence they need to be as proactive and innovative as they and their customers would like. One of the most vocal proponents of this argument has been Kane is Able Inc., a Scranton, Penn.-based third-party logistics provider. According to comments that Vice President of Marketing and Sales Scott Moran made through a company spokesman, providers still find it difficult to crack the customers' organizational code.
In a statement accompanying the Tompkins study, Chris Ferrell, director of the consortium, said more frequent communications between shippers and providers "will go a long way toward improving the satisfaction ratings in innovation and problem solving."
OVERALL SATISFACTION HIGHIronically, as with the 2010 study, the Tompkins survey reflects an overall level of satisfaction on shippers' part towards their providers. For example, more than two-thirds of respondents said they were either satisfied or very satisfied with their providers' productivity efforts. In addition, nearly 77 percent said they were satisfied or very satisfied with their providers' flexibility to grow and adapt to their changing needs.
One area of potential concern is that only 55 percent were satisfied with their providers' ability to lower their operating costs. Respondents said the need to achieve cost reductions is the top reason they outsource.
About 42.5 percent of companies surveyed will have conducted a bid for logistics services or rebid their existing outsourcing agreements by the end of 2012, according to the survey. Most respondents said their 3PL contracts run more than three years.
Ferrell said shippers' decisions to rebid their 3PL contracts are being driven more by a desire to obtain better lease terms than by a general frustration with their providers' performance. "Leases that are expiring in the next 12 months are likely to find a lot of substantially more favorable opportunities available," Ferrell said in an e-mail.
The Tompkins report said that despite a shaky economy, many shippers still need additional warehousing and DC capacity supplied by their partners to support their existing network operations.
Ferrell said providers should look at the findings as an "opportunity... to increase their partnership status" and as a way to "differentiate their service and make themselves more indispensible, rather than something that puts them at-risk of getting fired."
Gartner, Inc.
