Inbound Logistics | July 2022

Whether shippers outsource their end-to-end supply chain by the pie, or just a portion of it by the slice, third-party logistics providers are meeting new challenges with updated and expanded menus. By Karen Kroll A s many supply chain professionals have experienced, “U.S.-based supply chains are out of sync,” according to the 2022 State of Logistics Report, produced for the Council of Supply Chain Management Professionals by consulting rm Kearney, and presented by Penske Logistics. Inventory-carrying costs rose by 25.9% in 2021, while transportation costs jumped by nearly 22%, leading to uneven supply chains and inconsistent product availability for consumers .

especially with the warehousing labor shortage, Reinke says. Solutions like RFID or automation help logistics providers use both their facilities and employees more effectively. Another shift concerns the traditional segmentation between front-end physical and digital marketplaces and logistics providers—both digital and physical. “As clients look to meet their customers in any channel and offer a delivery promise that is increasingly aggressive, they need logistics partners that can integrate from front-to-back and across channels,” says Scott McConnell, partner with consulting rm McKinsey & Company. One example he cites is the collaboration announced earlier in 2022 between FedEx and Microsoft to create a cross-platform “logistics as a service” solution focused on e-commerce. “Some logistics providers are

broadening their service offerings through organic and inorganic

methods to create relevance in a highly competitive market,” says Matt Comte, operations transformation practice leader with consulting rm PwC. For instance, some 3PLs offer real estate capabilities, enabling them to provide warehouse capacity faster than most shippers could obtain themselves. 3PLs also are highlighting their ability to attract and keep warehouse workers through their use of leading- edge systems and career paths for logistics professionals. These shifts are prompting others. The changes many 3PLs are making often require signicant nancial investments. Continuing to contract with customers yearly no longer makes nancial sense for many logistics providers. “Many 3PLs are looking for shippers to share that risk and enter into longer- term, collaborative arrangements,” says Matthew Beckett, senior director in Gartner’s logistics and customer fulllment practice. Momentum is moving toward fourth-party logistics (4PL) provider arrangements in which the logistics partner handles the activities typically

“The past few years denitely pulled back the curtain on the supply chain function,” says John Brewer, director of distribution and logistics with CKE Restaurant Holdings, the company behind Carl’s Jr. and Hardee’s. Not only have the disruptions been signicant, but they’ve been sustained, he adds. While no single industry can counteract the myriad supply chain obstacles facing most businesses, third- party logistics (3PL) providers have been helping their clients navigate the unprecedented challenges of the past few years in several ways. Companies that partner with logistics providers often gain a real-time view of the many moving parts of their supply chains, says Alexandra Saleh, senior consultant with Clarkston Consulting. Many logistics providers also provide transparency into end-to-end operations, leading to faster communication when issues arise, as well as improved decision-making. Moreover, given the current rate of supply chain delays and other problems, a just-in-time inventory strategy often

no longer is feasible. Logistics providers, because they often hold more warehouse space than many single shippers do, can help organizations hold greater levels of inventory. Similarly, U.S.-based companies that have explored alternative manufacturing options—say, producing goods closer to end users, although still outside the United States—can leverage 3PLs to strategically plan how to distribute goods once they arrive stateside. 3PLs TRY NEW MENUS To offer these capabilities, many logistics providers have been changing and adapting. One example is an even greater focus on leveraging both information and hardware. “Data is a valuable commodity,” says Anne Reinke, president and chief executive ofcer of the Transportation Intermediaries Association. The more logistics providers and shippers can see into the data to identify the location of their freight and any obstacles ahead, the more effectively they can act. Hardware has become critical,

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