Pull back or go deeper—how the pandemic influenced shipper-3PL engagement
Third-party logistics providers are by design flexible and adaptable. The past year, however, challenged 3PLs in ways never before imagined—and exposed the fragility of the nation’s supply chains. What’s the post-pandemic 3PL world look like?
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
The growth of third-party logistics (3PL) outsourcing has been a consistent trend in supply chain operating strategies, of shippers large and small, across virtually every industry. Indeed, a Gartner Inc. survey of supply chain leaders released last month, titled Shippers Take Note: 3PLs Are Innovative and Here Is the Proof, reported that “nearly two-thirds of organizations mostly outsource logistics activities, and this number is set to increase as organizations look to manage the challenges and disruptions faced by the industry.”
The March 2021 report also shared this finding from an earlier, pre–Covid-19 logistics outsourcing strategy survey: “More than three-fourths of supply chain leaders believe that the number of disruptive events has increased, compared to three years ago.”
If they only knew then that what those survey findings foreshadowed would come a year later.
By March 2020, supply chain executives were starting to realize that the arrival of Covid-19 was not just any disruptive event. It was more like a 100-year storm—on steroids. March and April last year saw an unprecedented decline in economic activity and a corresponding free-fall in shipping volumes. Then by summer, it all came roaring back, and stayed hot through the end of the year and into 2021.
The pandemic represented an uncharted roller coaster of challenges that presented shippers with a conundrum: Do I go deeper with my 3PL, or do I pull back, hunker down, and try to ride out the storm alone?
Most went deeper, and in fact, pressed their 3PLs to be more innovative, agile, and responsive than ever before. The pandemic illustrated just how embedded 3PLs have become in shipper supply chain strategies. It also revealed, often in painful, stark detail, just how fragile today’s supply chains are.
THE VALUE OF TRUST
“We saw two things,” recalls Will O’Shea, senior vice president at the Concord, North Carolina-based 3PL Cardinal Logistics Management. “If you were an incumbent, you picked up a bigger share of wallet from those you were already doing business with, those who really trusted you. You became more focused on how to help them with their business [and] leverage that institutional knowledge.” The flip side, O’Shea notes, was that shippers became more risk averse and lost their appetite for “introducing new providers to the mix.”
“Shippers became more vocal and active partners with us,” says Tom Curee, senior vice president, strategy and innovation for the West Chester, Ohio-based 3PL Kingsgate Logistics. “If you think about the environment, when we face a common enemy, it can be a great incentive to come together and really solidify a relationship,” he says. “We got a lot of questions around ‘What else do you offer that we’re not tapping into?’ It was more a year of customers ‘leaning in’ than ‘backing out.’”
Andy Smith, senior vice president and chief operating officer for Memphis, Tennessee-based FedEx Supply Chain, cited stay-at-home consumer-driven e-commerce traffic and reverse logistics as high-demand areas from customers. “The largest increase FedEx Logistics saw was in … our fulfillment operations,” he says. “Throw in the impacts of testing and vaccine distribution … and it’s clear why this year has looked very different from years past.”
The growth in e-commerce volumes will continue, Smith says. FedEx originally projected the U.S. domestic package market to reach 100 million packages per day by 2026. Now, it expects that threshold to be surpassed three years earlier—in 2023—with more than 90% of that growth due to e-commerce.
LET THEM EAT CAKE …
One particular area that saw tremendous growth during Covid-19 was last-mile service. Spurred by homebound consumers who turned in droves to e-commerce, home deliveries of all types of goods exploded.
Among the beneficiaries of that surging demand for last-mile service was Roadie, which operates a nationwide network of crowdsourced “on the way” drivers who use their personal vehicles to make same-day deliveries. Roadie experienced a dramatic uptick in driver “gigs,” delivering everything from groceries and cleaning supplies to home-improvement products and home goods—even arts and crafts, recalls Marc Gorlin, founder and chief executive officer of the Atlanta-based firm.
“It’s clear the pandemic shifts in consumer buying behavior put huge pressure [on businesses] to find additional [last mile] capacity” and illustrated the need to diversify last-mile options, he says. Roadie was able to “flex up” and meet rising demand, he reports. “Our community of active drivers grew by 30% in 2020,” Gorlin noted, adding that the pandemic was a perfect test bed to illustrate how the crowdsourced model can quickly flex and tap into the latent capacity of everyday drivers to provide a scalable same-day delivery force.
Among Roadie’s most active users: bakeries. National chain Nothing Bundt Cakes grew into a “top 10”-volume customer. Local businesses engaged as well. Piece of Cake is an independent bakery company in Atlanta. Gorlin cited several days where the bakery did “as much business as several of our airline partners combined”—referring to the air carriers for which Roadie provides baggage delivery service. “Apparently, we love ourselves some cake during a pandemic,” Gorlin quipped.
A FOCUS ON FLEXIBILITY
As for what shippers want from their 3PL partners, Steve Sensing, president of supply chain and dedicated transportation solutions for Miami-based Ryder System Inc., noted that creativity, reliability, and being able to turn on a dime and adapt to changes were the top shipper demands—and will continue to be. Ryder, one of the nation’s largest 3PLs, manages some $6 billion worth of freight on behalf of its customers, over all modes, and has 20,000 carriers in its network. Its supply chain portfolio includes brokerage, dedicated transportation, warehousing, e-commerce fulfillment, and last-mile services—supported by a robust technology suite.
“Customers want flexibility and resiliency,” especially in disruptive times, Sensing observes. “That’s part of why the business continues to grow.” Ryder didn’t see clients pulling back during the pandemic. If anything, the crisis created opportunity. While early on, some sectors, like automotive, shut down for a period of time, other industries, like CPG (consumer packaged goods), retail, technology, and health care, surged. In response, Ryder was able to redirect resources and assets to those sectors. “That’s the luxury of working across many industries,” Sensing noted, adding that processes and best practices developed for one sector often can be applied to others.
“A lot of our customers’ supply chains are changing so rapidly you have to [be able to] move assets and resources in and out of those networks,” and be able to deploy enabling technology that ties it all together and gives the customer a real-time view into what’s happening and where things are, he notes.
Those pandemic-driven logistics challenges have given shippers a new appreciation of their 3PL partners, experts say. The toughest mindset to change, notes Dave Giblin, executive vice president, transportation, at Columbus, Ohio-based ODW Logistics, is a strictly transactional, siloed, price-driven approach. The pandemic did two things: focused shippers on risk management, and emphasized the importance of open communication, transparency, and truly collaborative 3PL relationships with carriers.
“It’s not really about the lowest rate all the time,” he notes. “It’s about knowing what your options are and how not to blow your budget.” He sees a key value of 3PLs as helping shippers identify and employ alternative cost-saving measures across a spectrum of supply chain activities that can achieve objectives without “beating down the carrier on rates.”
NO MORE SLOW SEASON
Third-party service providers navigated many new and pressing challenges in 2020, some of which have continued into 2021. One unique challenge, if you can call it that, has been the absence of any “slack” season for freight.
In past years, January and February, coinciding with the arrival of the Chinese New Year, typically foreshadowed a slowdown in shipping activity.
Not anymore. The peak shipping volumes that surged through 2020 barreled into the new year, showing few signs of subsiding. In fact, many industry executives project a sustained strong freight environment through the remainder of the year.
With inventory-to-sales ratios still low, restocking continues apace. At the same time, Covid-19’s impact on port workers also has slowed port operations—as of early March, the ports of Los Angeles and Long Beach had over 30 containerships at anchor waiting to unload.
And as if the pandemic were not enough of a disruption, February’s brutal winter storms provided yet another shock to the system. That “really painted the picture of how fragile supply chains still are,” notes Geoff Turner, chief executive officer of Preston, Maryland-based 3PL Choptank Transport. “It just caused incredible havoc with supply and demand of trucks.”
Trucking capacity already was stressed, as the pandemic has driven many independents and small fleets—the backbone of the truckload market—out of business. Between regulatory mandates, a driver shortage, skyrocketing insurance rates, and rising equipment, maintenance, and fuel costs, trucking operators are under extreme pressure, Turner says.
“Drivers cost more, and there are fewer of them [entering the business]. Every possible cost scenario is increasing [for carriers],” he notes. “No way can they operate profitably without passing along these costs to shippers.”
Turner’s team does its best to explain these realities to shippers, “but they have to realize at the end of the day that without profitable carriers—and drivers who are adequately compensated for their work and their time—freight will sit on the docks.”
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”