2016 #3PLStudy: The State of Logistics Outsourcing

2016 Third-Party
Logistics Study
The State of
Logistics Outsourcing
Results and Findings of the
20th Annual Study
Multi-Media Feed:
#3PLStudy

22016 Third-Party Logistics Study – Results and Findings of the 20th Annual Study
Contents
 About the Study
 Current State of the 3PL Market
 Special Topics
- Aligning 3PL Relationships
- 3PL Competitive Landscape
- Workforce Innovation and Agility
 Strategic Assessment

20th Year Anniversary of Annual 3PL Study
1996-
2000
2001-
2005
2006-
2010
2011-
present
1996
Study
Founded
North America
Focus
2013
Big Data
Talent
Management
2008
Green
Supply
Chain
1998
Importance
Of IT
2002
Added
Western
Europe
2003
Added
Asia-Pac
2004
Added
Latin America
2005
Added
South Africa
2012
Emerging
Economies
2009
Economic
Crisis
2006
First
Workshops
Chicago
Paris
Shanghai
2014
Omni-
Channel
Mobile
Technologies
2015
3PL
Competitive
Landscape
2006
Special
Topics

2016 20th Annual 3PL study – Major Research Thrusts
Customer Study
E-Mail Survey
Major Industry Verticals
Special Topics
Focus Interviews
Key Industry Experts
Facilitated Discussions
Capgemini Accelerated
Solutions Environment (ASE)
San Francisco
London
Singapore
Paris
Amsterdam
New York
Berlin
Hong Kong
Shanghai
Chicago
Each year, workshops are held in different locations around the world
Rio De
Janeiro
Sydney

Recent 3PL Study Themes
www.3plstudy.com
This year’s special topics:

Profiles of Respondents Represented

Contents
 About the Study
 Special Topics

Logistics Services Reported by 3PL Users

Benefits Experienced Through Use of 3PL Services
93%
3PL Relationships
Generally
Successful
83%
3PL Use Improves
Service to
Customers
75%
3PL Innovations
Improve Logistics
Effectiveness
73%
Increasing Our
Use of 3PL
Services
70%
3PL Use Helps to
Lower Logistics
Costs
3PL Value

The “IT Gap” – Where Do We Go from Here?
89%
85%
91% 90% 92% 92% 92% 88%
94% 93% 94%
98% 96% 93%
27% 33%
42% 40% 35% 42% 37% 42%
54% 54% 53% 55%
60% 59%
0%
20%
40%
60%
80%
100%
120%
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Year
IT Capabilities Necessary Element of 3PL Expertise
Shippers Satisfied with 3PL IT Capabilities
IT
“Gap”

Essential IT Capabilities Suggested by 3PL Users
• Warehouse/DC Management
• Transportation Management (Planning)
• Visibility
• Transportation Management (Scheduling)
• EDI
• Web Portals
• Network Modeling and Optimization
• Bar Coding
• Global Trade Management Tools
• Transportation Sourcing
• Customer Order Management
• Supply Chain Planning
• Customer Relationship Management (CRM)
• Distributed Order Management
• Advanced Analytics and Data Mining Tools
• Cloud-Based Systems
• Yard Management
• RFID
60% or More
40% - 59%
25% - 39%
Less than
25%

Contents
 About the Study
 Special Topics

3PLs Need to be Aligned With Their Customers and Service Providers

Strategic vs. Tactical 3PL Relationships

Business Partner Collaboration Provides the Greatest Benefit to
Shipper and 3PL as Both are Aligned to Each Others’ Goals
Tactical Partner
Service Partner
Business Partner
Benefits
Low Medium
 Highly focused on
cost
 Equates logistics with
expenses
 Service sometimes
viewed as a
commodity
 Outsourcing to gain
efficiency and
execution
 Focus on getting the
right solutions
 Cost not considered
to be the deciding
factor
 Shipper looking for
expert advice and
willing to pay for
right solution
 3PL strategic partner
 Both parties invest in
the relationship and
share returns
 3PL a crucial part of
shipper’s business
and competitive
position
 Both parties focus on
alignment to
business and
operational goals
 Sharing of
information and
strategic directions
High
Source: News Articles; Capgemini Consulting Analysis

Suggested Elements for Successful Onboarding of 3PL-Customer
Relationships

Key Strategies That Can Optimize the 3PL Relationship
Control
Risk
Mitigation
Business
Reviews
Continuous
Improvement
1
3
2
4

Facilitators of Alignment in 3PL-Customer Relationships
Elements 3PLs Customers
Agreed-upon performance expectations 87% 96%
Formal performance reviews 80 81
“Dashboards” to understand results of 3PL operations 63 73
Providing 3PLs with information relating to shippers' goals and
strategies
53 54
Visibility into workflows and process management 48 69
Cultural fit with our 3PLs 43 70
Plans for how shipper and 3PL personnel at the executive,
management, and operational levels need to work together.
37 51
Multi-enterprise collaboration systems, such as between
shippers, 3PLs, and service providers
25 43
Strategic plan for “succession” of the relationship 25 36
Calendar visualization to facilitate scheduling meetings and
activities
21 30
Pay for performance in addition to pay for services 16 33
Data indicates percentages of clients and 3PLs indicating elements are generally present in their relationships

Reported Frequencies of Interactions Among 3PLs and Customers
0%
10%
20%
30%
40%
50%
60%
70%
20%
52%
15%
8%
5%
14%
66%
16%
3% 1%
Customers
3PLs

Relationships Between 3PLs and Asset-Based Service Providers
1
3PLs are expected to have formal plans to help
manage relationships with service providers
77% 91%
2 3PLs select or help to select the service providers 80% 63%
3 Meaningful sharing of information between 3PLs,
service providers, and customers 81% 91%
4 3PLs have visibility into daily performance of
service providers
80% 70%
5 Service failure by one of the service providers is a
service failure of 3PL organization
81% 79%
6 Improvement needed in relationships between
customers, 3PLs, and service providers
83% 80%
Percent Agreement
3PLs Customers

Initiative
Percentages
Indicating Helpful
3PLs
3PL
Users
Automated way for clients to log in and see
requests from 3PLs for approvals of
decisions, activities, documents, and other
“to-do’s”
80% 84%
Real-time news feed (like Twitter or
Facebook) of everything that is happening
across all 3PLs used by a client
49% 57%
In communicating with our 3PLs/clients,
we find that most of the time email
provides the needed types of functionality
59% 70%
Communications Between 3PLs and Users

Contents
 About the Study
 Special Topics

The use of new technologies has helped 3PL players to combat
external challenges and improve internal operations

The benefits and breadth of application of cloud technology can
deeply impact a 3PL in a multifaceted way
Transportation Management
Systems (TMS)
 Provides full order visibility
 Real time connectivity with supply chain partners
 Tracking shipment and routing progress
 Role-based access for the various users in the supply chain
 Multi tenant architecture
Global Trade Management
(GTM)
 Based on the AderbeenGroup report, 55% of the companies were expected to
implement SaaS GTM solution in 2014 (compared to 37% three year ago)
 Facilitates transportation planning
 Trade compliance and customs management
Warehouse Management
System (WMS)
 Support day to day operation in a warehouse
 Tracking inventory levels and stock locations
 Billing and invoicing
 Controlling inbound and outbound inventory
Supply Chain Planning
 Achieve more than 15% higher perfect-order rates
 End to end supply chain management
 Multi-channel warehousing management
 In-store inventory management
There are 5 key benefit to implementing cloud technologies:
Lower Cost of
Set-Up
Pay-As-You-Go
Pricing and
Features
Fast Deployment Self Sufficiency
Real Time Global
Visibility

This year’s survey respondents utilize their cloud
technologies in many capacities
60%
40% 38% 38%
33% 32%
28% 27% 25%
13%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
%respondentsleveragingthetechnologies
60% of respondents named visibility across operational processes as the key driver for use
of cloud technologies in logistics

0%
10%
20%
30%
40%
50%
60%
70%
Shippers are turning to 3PLs to help continue balancing cost and
service given future complexities
Total survey respondents = 5,000 3PL users
Challenges faced by shippers, 2014
Key Shipper and 3PL interactions due to
capacity consolidation
12%
12%
13%
17%
17%
18%
20%
20%
22%
31%
32%
63%
Vendor Management
Technology Strategy and…
Expanding/sourcing from…
Expanding/Selling to New…
Regulations, Security,…
Reducing Labor Costs
Managing Inventory
Retaining and Training Labor
Supply Chai Visibility
Improved Customer Service
Business Process…
Cutting Transportation Cost

As the landscape is changing, new companies have pushed the
envelope by offering fulfillment services
 Two-Day delivery was
launched
 Grocery delivery at
convenient time
 Examples:
 Introduction of same-
day delivery services by
Shutl
— The company helped
to match same-day
orders with high-
speed couriers
 Examples:
 Shop for items from local store and get delivery same day or
overnight by Google
 Sunday delivery was started by Amazon
 Adoption of free and same day delivery by various e-
commerce companies
— Amazon launched same day delivery in the US and the UK
— China Smart Logistic Network (CSN) was launched by Alibaba
to offer same day delivery across all cities in China
 Examples:
2005-2007 2008-2011 time period2012-2014
Reduced fulfillment days
and customized delivery
time
Introduced one day
Fulfillment
Complete adoption of one day fulfillment and
introduction of overnight, same day and Sunday
delivery
Over the past decade, the delivery time has shrunk from a couple of days to same day
EvolutionofDelivery

How are most companies meeting these growing expectations...?
Investing in new
capabilities yourself
Leveraging new
capabilities from other
companies in different
industries
Choosing not to invest Leveraging new
capabilities from
competitors
58%
40%
20%
15%

Large, global 3PLs still seem to be dominating the landscape
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Large, global providers (e.g., Panalpina, UPS)
Regional, full service providers (e.g., Toll)
Specialized providers (e.g., freight forwarders, air)
Evolving service providers (e.g., UberRush, Amazon, Google Express)

Some new capabilities in last mile fulfillment are needed to
maintain service while controlling costs
Last Mile
Requirements
Description
Constraints to
Implementation
Source: Talking Logistics, Capgemini Consulting Analysis,
High Medium Low
Adoption
Electronic
Confirmation
and Proof of
Delivery
 The confirmation of delivery of goods has evolved from
mobile signatures
 The system confirms appointments while en route; validates
presence (they came and you were not home); electronic
proof of delivery; and follow-up on customer satisfaction
 The wide industry still uses
paperwork for closing the
financial transaction
Mobile and
Telematics
 Logistics players use GPS and AVL for precise locating and
directing of vehicles
 Technologies also provide driver instructions, monitor delivery
status, and link to execution for real-time routing changes
 Many fleets are yet to fully
implement these services
 Regulation will aid the
adoption of telematics
Dynamic
Incentivized
Scheduling
 Logistics providers need to devise economic models and
dynamic schedules which are attractive choices to the
customer and profitability to shipper
 Logistic providers provide a variety of pickup or drop points
and also time slots for delivery
 Limited availability
 Lack of visibility and
predictive analysis over
delivery operations
Continuous
Route
Optimization
 Logistics companies need to optimize the large number of
stops within a route
 The traditional ERP or TMS system are unable to deal with
constraints such as real-time congestion, vehicle type, driving
time regulations and delivery time windows
 Need complex decision
making and powerful
optimizers to cope with the
last mile process

Contents
 About the Study
 Special Topics

An unprecedented labor shortage
• Worldwide transportation functions across various industry face a
major labor shortage in blue collar jobs
• Worldwide warehousing and logistics functions face a shortage mainly
in middle management jobs
• Major countries facing a truck driver shortage
• High insurance
rates for the
youth
• Licensing laws
increasing
waiting periods
Australia
• Other Industries
more attractive
than trucking
• Regulation
scrutinizing
driver operations
• Abolition of
compulsory
military service
• Three year
training period
• Fall in Large good
vehicle licensing
• Regulation
scrutinizing
driver operations
• Lower wages
• Aging population
• Lack of proper
training
US Germany
UK Japan Canada

Skilled labor shortage will increase in the coming 5 years; truck
driver and warehousing staff shortage is expected to surge the most
75%
60%
58%
55%
44%
70%
62%
52%
43%
32%
Skilled Labor
Supply Chain
Planners
Entry-Level
Logistics
Managers
Truck drivers
Warehousing
Staff
Talent Shortage in the Logistics
Industry (% of companies)
2014 Next 5 years
 Warehousing staff responsibilities have evolved from basic moving of goods
to planning, developing, organizing, directing, managing and evaluating
operations
 These responsibilities are expected to be handled by warehousing managers
 Many countries over the past years have reported truck driver shortage
 Truck driver shortage is expected to intensify in the coming years as
majority of the baby boomers will retire and regulations are becoming more
stringent
 The lagging behind logistics curriculum has contributed to shortage of entry
level managers in the logistics industry
 Logistics companies are trying to increase awareness and tying up with
education institutions to bring them on par with the industry needs
 The increasing emphasis on efficiency across the supply chain operation has
increased the demand for supply chain managers
 Companies are employing supply chain management tools to gain better
visibility over operations
 Changing dynamics of the logistics industry has increased the demand for
skilled labor
 This trend is likely to continue in the coming years
Total= 1,757 global industry players
Source: Trends and Strategies in Logistics, LPI 2014 – World bank at Kuehne Logistics University; News Articles; Capgemini Consulting Analysis
Most of the logistics companies are facing a shortage of talent, as the dynamics
of the logistics industry change

Are you prepared?
52%
• Shippers feel they can rely on their
3PL’s preparation for the labor
shortage’s impact on their business
79%
• 3PLs feel their shippers are unprepared
for the labor shortage’s impact on their
supply chain
The industry will likely depend on 3PLs to prepare for the labor shortage

Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; Gartner Supply Chain Executive Conference 2014 ; News Articles; Capgemini Consulting Analysis
58.6%
25.5%
16.0%
Talent Finding, 2014
Hard to Find
Talent
No Change
Become Easier to
Find Talent
54.4%29.5%
16.2%
Expected Logistics Hiring, 2014
Increased
Remained the
Same
Decreased
The industry is struggling to find the right talent to fill positions, and hiring is expected to
intensify in the coming years
 Labor shortage was of the leading challenges facing the industry at the at the APICS, Gartner Supply Chain
Executives and CSCMP annual conferences
 Executives participating in the conference expressed that filling roles over the coming years will becoming tougher
 Going forward, the demand for supply chain jobs is likely to increase, however the supply of labor is expected to
shrink
– Supply chain jobs are expected to grow by 25% over the next decade
– Almost 25% of the current workforce in supply chain management is expected to retire by 2015
Total: 5,178 employees of Supply chain and logistics industry from 80 countries
Current Talent Scenario in Supply Chain Industry (1/2)

Supply chain operation have become complex over the years, requiring employees at
all levels with better analytic capabilities
Current Talent Scenario in Supply Chain Industry (2/2)
48.3%
42.2%
9.5%
Workforce distribution based on
designation, 2014
Non Management
Employees
Middle Management
Senior Management
(e.g. CEO, CFO)
Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; Gartner Supply Chain Executive Conference 2014; News Articles; Capgemini Consulting Analysis
40.2%
42.8%
4.8%
12.2%
Workforce qualification, 2014
Undergraduate
Postgraduate
No tertiary
qualification
Other tertiary
qualification
Total: 5,178 employees of Supply chain and logistics industry from 80 countries
 Less than 20% of the current workforce in the
industry have the new required skill set
 The number of supply chain university courses have
increased over the past years, however the
academic curriculum still lags behind the current
needs of the industry
 Executive, management and non-management skills
have drastically changed over the last 20 years:
 dealing with a crisis
 understanding various technology
 increased complexity and transparency of supply
chain

Logistics employees prefer in-house trainings by
professional mentors and instructors
3.3%
3.3%
6.8%
10.6%
31.2%
45.0%
9.1%
9.2%
15.8%
13.3%
19.4%
33.4%
None of these
Books or other reference
material
On-line courses
Tuition reimbursement for
off-site courses or seminars
Professional Mentoring
On-site workshop sessions
led by an instructor
Training Preference, 2014
Training received
Employee expectations
Source: Employment Market Survey Report 2013-14, Supply Chain & Logistics, Executive Logistics; News Articles; Capgemini Consulting Analysis
Total = 5,178 employees of Supply chain and logistics industry from 80 countries
Almost 25% of the logistics companies provide on-line courses and books or other reference material
trainings while only 10% of the employees prefer these modes of trainings
 On-site workshop session, professional monitoring and
online courses are mainly provided for improving workers
skill levels
 Employees prefer professional mentoring and on-site
workshop sessions by instructors to other training
 Employees laid the most emphasis on three training and
development areas namely
– Technical/Professional development
– Management development
– Leadership development
Areas with large gap
between expectation and
actual trainings
41.4%
27.5%
25.3%
5.8%
Orientation and Training received, 2014
Satisfied
Netural
Dissatisfied
Not applicable

The labor shortage will alter 3PL workforce challenges
Today’s workforce challenges for
3PLs and shippers
Developing leaders
Retaining high performers
Enhancing employee motivation and
engagement
Attracting the best talent
Reducing workforce costs
1
2
3
4
5
Workforce challenges of
tomorrow due to labor
shortages
Lack of continuity and thus quality
of service or product
Growing turnover
Decreased productivity and output
Not finding the right people fast
enough
Inability to promote and accelerate
careers of high potentials
1
2
3
4
5

3PL & Shipper Response
Innovative and dynamic employee development and hiring strategies will play
a critical role in most organizations’ response to the anticipated labor shortage.
Developing built-in succession or talent pipeline programs (career
acceleration and identifying opportunities for high potential workers)
Training programs to develop "homegrown" labor/talent
Cross-training or role transitioning (warehouse roles, warehouse worker
to driver, etc.)
Increased mobile or remote workforce
Increased use of HR outsourcing and recruiting providers
Establishing partnerships/sponsorship with programs like driver schools,
supply chain conferences, etc.

Most common challenges attracting labor
Long time to hire
Poor quality of labor pool
Hard to fill niche talent
positions
1
2
3
Absence of technology or
technology deployed but
not optimized
Underdeveloped or
under-performing
presence in new talent
channels
Inability to offer
competitive compensation
package
4
5
6

Outsourcing of Labor Management
62%
24%
10%
4%
Managing Labor within Warehouse, 2014
Company operated
Mix of company and 3PL
Company owned with plans to outsource to 3PL
3PL
Reduce direct (i.e. salary,
benefits, etc.) and
Continuous improvements in
productivity and quality
Reduced human and
equipment assets
Reduce indirect (i.e.
recruiting, training, etc.) labor
costs
Fear of losing control
Feel the company can do it
for less cost
Fear of possible lack of
knowledge about their work
environments
Reasons for Outsourcing Reasons against Outsourcing
Companies outsourcing warehousing labor management to 3PL have realized improved productivity,
and reduced direct and indirect cost
 Labor cost accounts for 50% to 70% of the total expenses of warehousing function
 Outsourcing of labor management to third party logistics helps in maintaining labor cost and also improves productivity and quality of work
 Companies outsourcing their labor management expect 3PL to provide continuous improvement program and demand-driven workforce
flexibility
Total = 252 top logistics and supply chain managers
Source: Labor Management Strategies in the Warehouse, Logistics Management, August 2014; News Articles; Capgemini Consulting Analysis

Initiatives for Talent Management
Partnering to Develop Curriculum Graduate Training Programs School and University Guest Lectures
Automation of Operations
Real Time Monitoring to Improve
Productivity
Labor forecasting, planning and
scheduling
 Logistics companies are trying to bring
logistics curriculum up to par with current
operational needs
 Paid Internships, sponsoring projects and
consulting assignments or research are
some of the practices adopted
 Graduate training programs offer
employees the opportunity to cross train
across various departments
 Companies connect with other industry
graduate trainees and the broader future
workforce
 Interweave theory with practice through
collaboration with institutions
 Employees from leading logistics
companies give guest lectures to attract
and contact potential employees at a
early stage
 Accurate forecasting of labor requirement
and scheduling based on demand
 Logistics companies are able to cater to
more business with less capacity
 Some logistics companies are trying to
improve their current productivity to deal
with labor shortage
 Companies are adopting real time
monitoring to increase labor productivity
 Automation has been introduced across
various material handling and
warehousing operations
 However, a vast majority of the industry
still run a human driven process for most
logistics operations
Source: Labor Management Strategies in the Warehouse, Logistics Management, August 2014; News Articles; Capgemini Consulting Analysis
High
Example
Adoption
Example
Adoption
High
Example
Adoption
Example
Adoption
Example
Adoption
Low Medium
Example
Adoption
High
High

Initiatives
Example
Adopters
Driverless Trucking Foreign Employees Increase Female
Participation
 Trucking associations
such as Victorian
Transport Association
and Linfox are encourage
women to enter the
industry
 US and Japan is also
planning to adopt the
same approach to deal
with labor shortage in
their countries
 Australian Trucking
Association appealed to
the government to make
available 457 visas for
foreign truck drivers
 Japanese government is
considering opening the
labor market to foreign
employees
 Lead truck operated by a
human driver followed in
close formation by a
small fleet of driverless
vehicles “tethered” by a
series of sensors
 Japanese caravan
program and EU the
SARTRE program are
testing driverless trucks
Current campaigns to overcome labor shortage

Contents
 About the Study
 Special Topics

Strategic assessment topics for 2016
The
Greening of
the Supply
Chain
Securing
the Supply
Chain
The
Widening
of the
Panama
Canal
Building an
Employer,
Industry
Brand to
Attract
Workers

Questions?
Thank You!
For further information:
Pick up a copy of the study at one of
the Media Boxes
Check out our website at
www.3plstudy.com

2016 #3PLStudy: The State of Logistics Outsourcing

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2016 #3PLStudy: The State of Logistics Outsourcing