Tuesday, August 6, 2019

New Report Tells Sad Tale of Third Party Logistics Company Failures to Deliver

3PLs Bad at Innovation with an Inflated Self Image. It's Not Pretty
Shipping News Feature
UK – In a report which will give pause for thought to many in the logistics profession, consultancy firm SCALA has outlined some findings we all in the trade should be aware of. The report examines the role and success or otherwise of UK third party logistics providers (3PLs). It is important to firstly to examine fully the meaning of that term in this context.

When used in the context of describing a company’s activities with regard to the actual set up of same, 3PL generally refers to a provider of services with some, relatively few or often no, relevant tangible assets as regards performing the services required. In other words a subcontractor which then contracts on to other companies (the dreaded term 4PL comes to mind) which themselves specialise in a variety of fields, warehousing, road haulage, shipping and forwarding services etc. (let’s not mention 5PL. Ed).

In terms of the SCALA report the term then refers to a variety of companies offering logistics services of various sorts as a package to the principal, sometimes with their own staff and equipment, sometimes otherwise, and working under the terms of a new contract. Literally in this case they become the Third Party liable for all applicable services, and it seems in this role UK 3PLs are not making a very good job of that.

This is no lightweight investigation, SCALA says it surveyed a selection of the UK’s best-known businesses and 3PLs (whose revenue runs into the billions and whose number of clients run into the thousands) to ascertain companies satisfaction rates and areas of concern regarding the performance of their respective 3PLs.

The contrast as how the suppliers were perceived by their customers to perform, and their own self assessments, are markedly different. The research looked at contract start-ups and found that 15% of customer companies have experienced a service that was below expectation in terms of either cost, deliverables or timing issues. Additionally 5% said the relationship was poor and they experienced major problems. That’s 20% of customers unhappy enough with their supplier to say so.

Meanwhile the 3PLs showed an overly optimistic view of their performance, with 54% rating their contract start-ups as highly successful, i.e. on time, to budget and with no service disruption, as compared to just 35% of customer companies with the same opinion. John Perry, managing director at SCALA, commented:

“These findings show that more work needs to be done to ensure 3PL contracts can be a success from the start. From reviewing the results, there is a clear tendency for the blame game to start during crucial periods like the start of a new contract. Rather than trying to point the finger, both parties need to work on the ‘partnership’ for relationships to succeed. Communication and collaboration need to be high on both sides.

“At our recent Annual Supply Chain Debate, attended by over 150 industry professionals, the main discussion was around how both customer organisations and 3PLs should communicate better from the outset. Customers should ensure they pick 3PLs that are a good cultural fit for their organisation so they are aligned to the same values and goals. Procurement strategies should also be less prescriptive so 3PLs can deliver more and be truly embedded within the business.”

A breakdown of the results showed just 9% of the clients felt they had achieved the best deal possible, with 23% thinking a better deal should have been a possibility. 84% of the 3PL’s thought they were good at introducing new initiatives into the client’s supply chain whilst over half the clients thought 3PLs were poor at this.

To read the SCALA 2019 Third Party Logistics Report in full click HERE.

Photo: Logistics has always been challenging. Courtesy Museum of London archive.