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Each year, Dr. C. John Langley looks forward to the final week of September and CSCMP Edge, the annual conference of the Council of Supply Chain Management Professionals. This year, Dr. Langley, Clinical Professor of Supply Chain Management at Penn State University, and a group of consultants sat on a panel discussion as they normally do to discuss their findings in the 22nd Annual Third Party Logistics Study. The Study is a collaboration between Penn State, Infosys, Korn Ferry, and Penske and can be found and downloaded at www.3PLstudy.com.
This year’s study covered a number of topics, with many of the findings less than surprising for keen watchers of the Third Party Logistics (3PL) industry and marketplace. The report focused on several macro-trends in the world of 3PL/Shipper relationships, including:
For us here at Columbian Logistics Network, the discussion of those trends ranges from informational – as with blockchain technology – to redundant – as with the rise of self-driving automobiles and the gap in logistics talent across the country. What’s more interesting, however, is what can be found when looking at the differences between the perceptions of 3PLs and those of their customers (shippers).
The IT Gap
Professor Langley identifies “The IT Gap” as the difference in the perceptions of shippers and 3PLs when it comes to IT capabilities. Specifically, in 2017, 91% of shippers responded that IT capabilities are a necessary element of 3PL expertise, but only 56% of shippers reported that they are satisfied with the IT capabilities of their 3PL provider. This difference of 45% is referred to as the IT Gap, and it widened this year for the second year in a row.
What does this really mean when the rubber meets the road? If 45% of respondents are unsatisfied with their provider’s capabilities, why aren’t we seeing more turnover in the industry? Why aren’t shippers insourcing to get rid of their providers and close the gap? Does anyone even care?
The answers to these questions are far more nuanced than the report’s citation of shippers looking to providers to make analytical decisions. At Columbian, we have a few thoughts on why this gap might exist, and what we can all do to close it:
Business Goals – At Columbian, we like to say that for every customer we have, we see a different reason to outsource. Inherent in our business model is that we assist customer organizations in achieving their business goals, regardless of what those goals are. Sometimes those include IT capabilities, sometimes not.
Expectations – “Technology capabilities” may be very important to most shippers, but when pressed, many shipper representatives would struggle to explain exactly why that’s the case, other than that’s what they hear, or that’s what they read in an industry publication. Technology comes at a price, so it’s not a stretch to think that while a shipper may want its provider to upgrade IT capabilities, s/he may not want see financial value in it.
Communication – It seems elementary, but far too often, gaps in knowledge or expectations can be closed with simple communication. A robust request for proposal (RFP) process when searching for the right provider can weed out 3PLs with cultural differences that don’t meet a shipper’s needs. Even after implementation, a regular, formal review process ensures that 3PL performance and shipper business goals don’t drift apart over the duration of a relationship.
So what of the IT Gap? Is it a fabrication of an academic mind, explained only in a series of charts and graphs? Is it a fundamental pillar of the shipper-3PL relationship that causes pain either explicitly or implicitly? At Columbian, we’d love to have a deeper conversation. We would love to hear what investments in the forefront of IT capabilities would do for a shipper’s confidence in its 3PL. We invite the chance to discuss how to accomplish business goals with multiple tools, including but not limited to IT capabilities. Call us. Tweet us. Contact UsContact us through www.columbianlogistics.com. Come chat with us at our next Pints with Peers series happy hour. Let’s see if we can close that IT Gap through collaboration, insight, and meaningful discourse.
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