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Logistics1 Photo: Sean Kilcarr/Fleet Owner

Study: New wave of change building for logistics industry

Advent of Blockchain, plus more automation and digitization of logistics work, will also change talent requirements for supply chain professionals.

A conference call discussing the 2018 Annual 3PL Study – compiled by the Smeal College of Business at Penn State University, Infosys Consulting, Penske, and Korn Ferry and based on a survey of 10,000 shippers and third party logistics (3PL) providers – indicates a “new wave” of change is building within global supply chain networks as new processes and technologies are introduced at a rapid clip.

Hosted by Stifel Capital Markets, the review of the study’s findings also indicated that there remains a broad swath of uncertainly among both shippers and 3PLs regarding new processes and technologies, such as Blockchain, the Internet of Things (IoT), autonomous vehicles, and the like – especially in terms of how to pay for them.

But with all the disruption facing shippers in the context of new customer demands such as faster and cheaper delivery of e-commerce goods, they will need to use technology to drive efficiencies and enable top line growth, argued Dustin Ogden, principal at Korn Ferry, a global executive search firm.

“Automation may change traditional jobs [in logistics] but it will create more and different types of work for people,” he explained. “It will help humans speed up the throughput of delivery.”

Ogden stressed that the rise of automation, such as warehouse robots and self-driving vehicles, will not decrease the need for skilled workers in the logistics field; in fact, he believes the reverse will be true.

“Technology and automation will take repetitive tasks away so [logistics operations] can look for improvements thru such innovation,” Ogden pointed out. “People still outperform machines [and] they increase value to the business over time. The value of human labor and knowledge is worth twice as much as physical capital and provides a strong return over time. So investing in talent clearly helps organizations.”

He added that being able to speedily handle the physical movement of goods is no longer the base “table stakes” required for competing in the logistics industry – the need to collect and analyze data and react to situations is the big competitive factor now.

“We’re shifting the focus from physical movements of loads around to the world to managing the global supply chain thru data – improving operations through insights and analytics,” Ogden stressed. “Shippers expect to see improvement in supply chain thru analytics.”

The survey found that the broader use of big data analytics is a key focal point for shippers and 3PLs alike, yet a bigger information technology (IT) “gap” is developing between the capability of 3PLs to provide such analytics and shipper satisfaction with it.

In fact, that “gap” widened nine percentage points alone in 2017, according to the survey, following a nearly decade-long narrowing trend.

“There’s been an uptick in dissatisfaction,” noted Shanton Wilcox, a partner with Infosys Consulting, who added that shippers are looking for more predictive big data analytics that can drive more proactive decision making, while 3PLs have been somewhat slow in responding to this desire.

“The big data analytics shift … has been talked about this in logistics space for several years now, but it’s an area where we are moving from it being a ‘buzz term’ to truly being a true focus of investment,” added Melissa Hadhazy, an associate partner with Infosys. “Shippers are looking to use [analytics] to meet end customer needs; they areiInterested in getting more information about where products are in the supply chain and to decrease lead time for moving them. What’s standing in way is a lack of funding, competing IT projects, plus a non-digital culture and mindset. Until we start to see strong case studies, investment will remain laggard.”

Blockchain is another technology that, while viewed as offering much potential to boost visibility and transparency in supply chain operations, remains clouded in uncertainty.

According to the study’s findings, both shippers and 3PLs are beginning to evaluate it as a mechanism to speed up the transaction processing timetable, streamline supply chain costs, provide heightened visibility of freight flowing through the logistics pipeline, reduce human error, boost data security, mediate disputes, and accurately execute contracts.

Shippers seem most interested in Blockchain’s ability in the following areas: load traceability, supply chain visibility, regulatory compliance, and ethical compliance. While 3PLs are interested in all of those applications, they also seek to use it to ensure greater security for “high risk” products and to monitor the condition of loads while in transit.

Yet 67% of the shippers and 62% of the 3PLs participating in the study said they “don’t know what to expect” when it comes to Blockchain’s capabilities; by contrast only 9% and 15%, respectively, are “optimistic” about what it can potentially offer.

“The challenge is that this is as very new technology,” said Infosys’ Wilcox. “There is a lack of information available how to operationalize it and how to drive value.”

Other findings from this annual study include:

  • When it comes to what specific supply chain services are outsourced to 3PLs the most by shippers, 83% indicated some or all of their domestic transportation needs, followed by warehousing (66%), international transportation (63%) and customs brokerage requirements (46%).
  • What it comes to what services are outsourced or used the least, those are: supply chain consulting provided by 3PLs (15%), customer service (11%) and fleet management (10%).
  • While automation and digitization are “hot topics” among shippers are 3PLs, neither are investing in them much. According to the study, 65% of shippers are investing zero to 5% of capital expenditures in those two areas – a low rate of investment mirrored by 71% of the 3PLs polled.
  • Uncertainty regarding return on investment (ROI) is the main reason cited by shippers and 3PLs for their low rates of capital expenditure on automation and digitization, 18% and 25%, respectively. Lack of funding was cited by 17% of shippers and 13% of 3PLs, while 22% of 3PLs and 16% of shippers blamed “competing core IT projects.”

There is a “whole new set of DNA” being developed among a “new breed” of supply chain and logistics leaders, Korn Ferry’s Collins noted in the study. “These are people who can navigate and be agile in less structured and less predictable environments, where technology changing so rapidly,” he said. “There is a big need for people able to deal with more unpredictability in their day-to-day lives in this industry

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