3PLs in Demand but Need to Work on Innovation

More than 40% of companies that outsource intend to conduct a bid or rebid for part of their network to a logistics service provider (LSP) within the next 12 months, according to the Outsourced Distribution Report by Tompkins Supply Chain Consortium.

“Despite the uncertainty in the economy, shippers are finding their existing networks in need of additional capacity,” says Tim Pyne, VP at Tompkins International and co-author of the report. “They look to LSPs to fill this gap and want to ensure that they join up with a provider that meets their performance expectations.”

This survey-based report reveals responses from 95 shippers in retail, consumer products, industrial and wholesalers on trends and metrics in the present state of outsourced distribution. These companies also identify the largest areas in which LSPs need to improve: innovation and problem solving. While 25.9% of respondents indicated they were satisfied and 11.1% reported being very satisfied with these qualities from their providers, an equal number reported being either dissatisfied or very dissatisfied. 25.9% were neutral on the issue.

“Regular communication sessions, in addition to providing operational recommendations for positive change, will go a long way toward improving the satisfaction ratings in innovation and problem solving,” adds Chris Ferrell, Director, Tompkins Supply Chain Consortium.

For companies that already outsource, they are content with their LSP’s performance in the categories of flexibility, safety, order fulfillment accuracy, and turnaround. Beyond the classic motives to outsource – cost, flexibility, and capital – respondents also identified improved service and access to capabilities as major reasons why they hire third-party service providers.

Other results from the report:

• More than half of companies already outsource at least part of their distribution operations.

• About 74% of respondents have signed a long-term contract of three years or more with an LSP.

• Innovation enabled by technology can be a competitive advantage for LSPs who are willing to invest.

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