To survive in this volatile business environment, third-party logistics providers and their customers must work together to build up their digital capabilities and talents while also focusing on meeting the end customer’s needs.
C. John Langley Jr., Ph.D. (jlangley@psu.edu) is Professor of Supply Chain Management at Penn State University’s Smeal College of Business and the Department of Supply Chain and Information Systems, and Founder of the “Annual Third-Party Logistics Study.”
Sylvie Thompson is a supply chain executive focused on driving revenue, margin, and profitable results by combining emerging technologies with traditional supply chain best practices. She has co-led the Annual Third Party Logistics Study for the past three years.
Effectively matching supply and demand has always been challenging, but the current volatility in many supply chains has made it even harder, creating new and unique problems. Companies desperately need innovative and improved solutions to deal with supply chain complexity and create agility and responsiveness.
One key facilitator of success will be the ability of supply chain partners to be well-aligned and to optimize the capabilities of each partner within the network. Now in its 27th year, our “Annual Third-Party Logistics Study” has time and again shown the benefits of working with logistics service providers to navigate market uncertainties and achieve overall success for the supply chain.
High-level research results from this year’s study indicate three key focus areas for strengthening relationships between third-party logistics providers (3PLs) and their customers: 1) the ability to collaborate in the interest of creating value for customers and consumers, 2) the ability to create insight through digitization and analytics, and 3) the critical need for talent. (A broader and more detailed summary of the research will be presented at the CSCMP EDGE Conference in Nashville, Tennessee, on September 19.)
Creating value for the end customer
For 3PLs and shippers to have a successful relationship, both parties need to understand the overall supply chain goals and use this knowledge to create effective working relationships.
As the primary flows of products and services in supply chains are downstream toward the eventual consumers and business customers, the supply chain’s most important priorities should be related to satisfying demand and creating value for these parties.
Ideally, then, all participating supply chain organizations, including 3PLs, should have some understanding of demand patterns at the customer/consumer level that are driving requirements for the overall supply chain. One way to achieve this is by sharing available forecast and demand planning information relating to the needs of customers and consumers.
The best results are achieved when both 3PLs and their customers are working with accurate information and are well-aligned on goals, objectives, and working relationships. 3PLs and customers must also be aware of factors that may impact the ability of supply chains to meet these overall objectives. Partners should be willing to share information on potential problems and issues—these could range from a shortage of transportation capacity to unexpected volatility in the availability of needed materials and supplies.
Digitization and analytics
For many years, our “Annual Third-Party Logistics Study” has documented that shippers view IT capabilities as an essential element of their 3PLs’ expertise. That sense has intensified over the past year as 74% of customers participating in this year’s study noted that technology plays a greater role in their 3PL partnership than it did just three years ago.
Furthermore, what customers are looking for in terms of that expertise has evolved and become more sophisticated. One question for shippers that is asked in each of our yearly studies is, “Which technologies, systems, or tools are ‘must haves’ for a 3PL to successfully serve a customer in your industry?” Figure 1 compares the results from this year’s study to those of the prior year. This figure also indicates the percentages of participating 3PLs that indicate those capabilities are currently available.
[Figure 1] Importance of IT capabilities in shipper-3PL relationships Enlarge this image
While more traditional execution and transactional software—such as transportation management systems and warehouse management systems—continue to rank highly, there was a growing importance expressed for the availability of digital and analytical technologies. (In the interest of clarity, digitization refers to the conversion of information to a digital format, and analytics refers to the use of mathematical and statistical approaches to help solve problems intelligently using digital data.) A related finding from last year’s study is that 64% of customers noted that they were investing in intelligent data analytics. While there are some variations in year-over-year data, Figure 1 indicates there is a continued or growing interest in advanced analytics and data mining, warehouse automation, and global trade management solutions.
Findings from this year’s study indicate that this shift in focus toward digitization and analytics will continue to be of great importance for 3PLs as well. Referring to Figure 1, 54% of 3PLs reported having capabilities in the areas of advanced analytics and data mining tools. However, gaps are noted in the areas of automation and global trade management solutions.
We believe that to deal successfully with future supply chain challenges, 3PLs and their customers will require significant dedication to digitization and the use of analytics. Coupled with wisdom and experience, these analytical tools will facilitate the development of complex solutions to problems faced both individually by 3PLs and their customers, as well as those problems they face in collaboration.
Talent
The need for and availability of talent in supply chains have become critical issues for many organizations. This includes both shippers and 3PLs. Almost 80% of shippers stated that labor shortages have impacted their supply chain operations, and 56% of 3PLs stated that labor shortages have impacted their ability to meet customer service-level agreements (SLAs). In particular, roughly two-thirds of all respondents to the “27th Annual Third-Party Logistics Study” survey noted that recruiting and retaining both hourly and certified/licensed/skilled hourly workers is an area that they are struggling with and believe they will continue to struggle with for some time.
But retention challenges are not limited to hourly employees. Bloomberg, in the spring of 2022, reported that supply chain managers have been quitting their jobs at the highest rate since at least 2016.1} This assertion was based on calculations performed by LinkedIn. Each month, the website analyzes the number of people who left their job in the past month and then compares that number to a baseline average from 2016. The average “separation rate” for 2020–2021 for supply chain managers was 28%, the highest in the five years since the company started tracking this data. According to the article, factors for these turnovers include burnout, desire for increased compensation, and demand for experienced supply chain managers to solve supply chain problems at nontraditional supply chain organizations.
Further complicating the recruitment and retention challenges is the fact that supply chain roles are evolving quickly, and the skills and talents needed today are different than they were just a few years ago. For example, supply chains are increasingly becoming data-driven, and the need for real-time visibility continues to grow. As a result, skills related to data analytics and digital technologies are vital and in high demand.
Meeting the rising challenge
The success of 3PL–customer relationships always boils down to their ability to create value for their customers and their businesses, as well as for consumers and end customers. But as disruption and complexity increase, effectively meeting those needs has become even harder.
In response, 3PLs and their customers will need to work together to enhance their agility and responsiveness. Technology, data, and analytics certainly will help supply chain practitioners meet these shifting needs and implement new and innovative supply chain strategies. In addition, both 3PLs and their customers will need to ensure that they have the right people with the right skills and talents. 3PLs and customers will need to work together to establish technology and talent-acquisitions strategies that complement each other, as they work to create more resilient and effective supply chains.
Supply Chain Xchange Executive Editor Susan Lacefield moderates a panel discussion with Supply Chain Xchange's Outstanding Women in Supply Chain Award Winners (from left to right) Annette Danek-Akey, Sherry Harriman, Leslie O'Regan, and Ammie McAsey.
Supply Chain Xchange recognized four women who have made significant contributions to the supply chain management profession today with its second annual Outstanding Women in Supply Chain Award. The award winners include Annette Danek-Akey, Chief Supply Chain Officer at Barnes & Noble; Sherry Harriman, Senior Vice President of Logistics and Supply Chain for Academy Sports + Outdoors; Leslie O’Regan, Director of Product Management for DC Systems & 3PLs at American Eagle Outfitters; and Ammie McAsey, Senior Vice President of Customer Distribution Experience for McKesson’s U.S. Pharmaceutical division.
Throughout their careers, these four supply chain executive have demonstrated strategic thinking, innovative problem solving, and effective leadership as well as a commitment to giving back to the profession.
The awards were presented at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference in Nashville, Tenn. In addition to the awards presentation, the leaders discussed their leadership philosophies and career path during a panel discussion at the EDGE conference.
The surge of “nearshoring” supply chains from China to Mexico offers obvious benefits in cost, geography, and shipping time, as long as U.S. companies are realistic about smoothing out the challenges of the burgeoning trend, according to a panel today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Those challenges span a list including: developing infrastructure, weak security, manual processes, and shifting regulations, speakers said in a session titled “Nearshoring: Transforming Surface Transportation in the U.S.”
For example, a recent Mexican government rail expansion added lines to tourist destinations in Cancun instead of freight capacity in the Southwest, said panelist Edward Habe, Vice President of Mexico Sales, for Averitt. Truckload cargo inspections may rely on a single person looking at paper filings on the border, instead of a 24/7 online system, said Bob McCloskey, Director for Logistics and Distribution at Clarios, LLC. And business partners inside Mexico often have undisclosed tier-two, tier-three, and tier-four relationships that are difficult to track from the U.S., said Beth Kussatz, Manager of Northern American Network Design & Implementation, Deere & Co.
Still, dedicated companies can work with Mexican authorities, regulators, and providers to overcome those bottlenecks with clever solutions, the panelists agreed. “Don’t be afraid,” Habe said. “It just makes sense in today’s world, the local regionalization of manufacturing. It’s in our interest that this works.”
A quick reaction in the first 24 hours is critical for keeping your business running after a cyberattack, according to Estes Express Lines, the less than truckload (LTL) carrier whose computer systems were struck by hackers in October, 2023.
Immediately after discovering the breach, the company cut off their internet, called in a third-party information technology (IT) support team, and then used their only remaining tools—employees’ personal email and phone contacts—to start reaching out to their shipper clients. The message on Day One: even though the company was reduced to running the business with paper and pencil instead of computers, they were still picking up loads on time with trucks.
“Customers never want to hear bad news, but they really don’t want to hear bad news from someone other than you,” the company’s president and COO, Webb Estes, said in a session today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
After five or six painful days, Estes transitioned from paper back to computers. But they continued sending clients daily video updates from their president, and putting their chief information officer on conference calls to answer specific questions.
Although lawyers had advised them not to be so open, the strategy worked. It took 19 days to get all computer systems running again, but at the end of the first month they had returned to 85% of their original client list, and now have 99% back, Estes said in the session called “Hackers are Always Probing: Cybersecurity Recovery and Prevention Lessons Learned.”
As the final hours tick away before a potential longshoreman’s strike begins at midnight on the U.S. East and Gulf coasts, experts say the ripples of that move could roll across the entire U.S. supply chains for weeks.
While some of the nation’s largest retailers were able to pull their imports forward in recent weeks to soften the blow, “the average supply chain is ill-prepared for this,” Tom Nightingale, the former CEO of AFS Logistics, said in a panel discussion today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Despite that grim prognosis, a strike seems virtually unavoidable, CSCMP President & CEO Mark Baxa said from the stage. At latest report, the White House had declined to force the feuding parties back into arbitration through its executive power, and a voluntary last-minute session had failed to unite the International Longshoremen’s Association (ILA)’s 45,000 union members with the United States Maritime Alliance that manages the 36 ports covered under their expiring contract.
The ultimate impact of a resulting strike will depend largely on how long it lasts, the panelists said. With a massive flow of 140,000 twenty foot equivalent units (TEUs) of shipping containers moving through the two coasts each week, each day of a strike will require 7 to 10 days of recovery for most types of goods, Nightingale said.
Shippers are desperately seeking coping mechanisms, but at this point the damage will add up fast, whether a strike lasts for an optimistic “option A” of just 48 to 72 hours, a pessimistic “Option B” of 7 to 10 days, or even longer, agreed Jon Monroe, president of Jon Monroe Consulting.
The first full day of CSCMP’s EDGE 2024 conference ended with the telling of a great American story.
Author and entrepreneur Fawn Weaver explained how she stumbled across the little-known story of Nathan Green and, in deciding to tell that story, launched the fastest-growing and most award-winning whiskey brand of the past five years—and how she also became the first African American woman to lead a major spirits company.
Weaver is CEO of Uncle Nearest Premium Whiskey, a company she founded in 2016 and that is part of her larger private investment business, Grant Sidney, Inc. Weaver told the story of "Nearest" Green—as Nathan Green was known in his hometown of Lynchburg, Tenn.—to Agile Business Media & Events Chairman Mitch MacDonald, in a keynote interview Monday afternoon.
As it turns out, Green—who was born into slavery and freed after the Civil War—was the first master distiller for the Jack Daniel’s Whiskey brand. His story was well-known among the local descendants of both Daniel and Green, but a mystery in the larger world of bourbon and a missing piece of American history and culture. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
“I believed it was a story of love, honor, and respect,” she told MacDonald during the interview. “I believed it was a great American story.”
Weaver told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest, and has channeled it into an even larger story with the founding of the brand. Today, Uncle Nearest Premium Whiskey is made at a 323-acre distillery in Shelbyville, Tenn.—the first distillery in U.S. history to commemorate an African American and the only major distillery in the world owned and operated by a Black person.
Weaver and MacDonald's wide-ranging discussion covered the barriers Weaver encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she said she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, emphasizing a recent project to fast-track a new Uncle Nearest product in which collaborating with the company’s supply chain partners was vital.
Uncle Nearest Premium Whiskey has earned more than 600 awards, including “World’s Best” by Whisky Magazine two years in a row, the “Double Gold” by San Francisco World Spirits Competition, and Wine Enthusiast’s “Spirit Brand of the Year.”
CSCMP’s EDGE 2024 runs through Wednesday, October 2, at the Gaylord Opryland Hotel & Convention Center in Nashville.