Logistics Service Providers: Decision Time

Fluctuating capacity, increased shipper demands and disruptions within the industry are creating a volatile decision-making environment for shippers and logistics providers trying to optimize the supply chain.

Both parties are increasingly using information and analytics to drive their decisions. To help optimize the supply chain, shippers are becoming less concerned about the mode of transportation and instead are opting for the most efficient means of moving products. That has resulted in the growth of mode-neutral logistics providers, and 3PLs are using data aggregation and analysis to determine the best shipment methods. More than half of 3PLs— 62%—said that over the past two to three years, their customers showed interest in changing their use of various modes of transportation.

Nearly three-fourths of shippers—71%—said real-time analytics from 3PLs help them better understand shipping alternatives, and 61% valued 3PLs’ assessments of trade lanes and origin-destination pairs in terms of cost and service levels.

To provide increased information and datadriven solutions, 3PLs are broadening service offerings, increasing their employee base and their organization’s skills, expanding their geographical coverage and investing in new technology.

Logistics providers have turned to mergers and acquisitions to fill gaps in service areas, expand their global network, and leverage best practices and technology across a global scale.
The value of M&A deals nearly doubled from 2014 to 2015, growing to $173 billion from $87 billion. Also, cross-border deal values have quadrupled from 2014 to 2015, growing to $115 billion from $28 billion.

Shippers have mixed reviews of the M&A activity, with 27% reporting that added options and versatility within a provider are good for shippers and 34% saying that they are concerned about reduced competition based on price.

Despite the growth, challenges remained.  Shippers and their logistics providers faced oil price volatility, a drop in global demand and excess shipping capacity. Carriers and 3PL providers also dealt with increased regulations, including the implementation of the electronic logging device mandate, and remain concerned over the worsening driver shortage. All those factors continued to drive the need for optimization. More than half of logistics providers—59%—listed improving logistics optimization as one of the top three most important goals, and 53% also listed improving process quality and performance.

Shippers show a desire for a more global, unified platform. About half—49%—of shippers named “global expansion” as a supply chain transformation their organization considered in the past two to three years, and 40% of 3PL/4PL providers indicated “global expansion” as something they believed their customers are pursuing.

And as many would expect, data-driven optimization will continue to shape the supply chain industry in the future.  Providers that excel in data analytics will develop a competitive advantage.