SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Digitization of everything continues to take a foothold in supply chain, including big data and the Internet of Things (IoT), but how does this translate into innovation for third party logistics providers (3PLs)? A new report from JDA Software Group, Inc., and Supply Chain Digest (SCDigest) reveals that 69 percent of shippers surveyed feel innovation is very important to their relationship with 3PLs (tweet this).
The report entitled “3PLs Are Buzzing with Innovation: Bridging the Gap Between 3PLs and Shippers,” commissioned by JDA and conducted by SCDigest, reveals the true state of innovation as seen by both shippers and logistics companies from surveying more than 100 shippers and 3PLs. This unique report provides drill-down insights from shippers’ and 3PLs’ perspectives, revealing actionable insights that will foster better, more profitable collaboration, while meeting rising customer expectations for speed, flexibility and satisfaction.
“Among shippers and 3PLs, ongoing innovation is required to support the growing needs to support e-commerce, online fulfillment, personalization and omni-channel expectations, while helping turn around orders quickly and cost-efficiently. Based on this innovation, we surveyed shippers and 3PLs to learn more about their innovation adoption in light of the digital transformation currently underway,” said Danny Halim, vice president, industry strategy, JDA. “The data backs up our view that logistics services providers need to be on the leading edge of supply chain trends in order to keep pace with the changing needs of shippers.”
Innovate, but at what cost?
While innovation ranked highly, the results revealed that not all shippers have the same needs for innovation. Survey results highlighted the gap between what shippers expect and what logistics providers think they can deliver. When asked how they rated the 3PL sector on the ability to innovate and deliver on technology innovation, only seven percent of respondents felt the 3PL sector had high innovation capabilities. However, a promising 38 percent felt that 3PLs had the ability to deliver on innovation in the future (tweet this). Generally, respondents felt that if choosing between operational excellence and innovation, they’d choose operational excellence, because customer service and meeting customer promises exceeds the need for innovation – unless it can drive such excellence back into the business.
“The data supports a common theme – innovation is not for every customer. Therefore, a segmentation approach is needed. 3PLs need to look forward: What will their business look like in 5-10 years and who will their customers be (or become) in that time?” commented Halim.
Delivering the right innovation requires 3PL/shipper collaboration
Interestingly, when asked how shippers engage with logistics providers to develop innovation, a large number of shipper and 3PL respondents agree that 3PLs are allowed to find methods/solutions as long as they achieve the goals. Nearly 64 percent of 3PLs have a hybrid relationship with shippers, allowing for a prescriptive, yet open, approach to innovation, collaborating on what best fits their needs (tweet this). Conversely, nearly 40 percent of shippers/clients felt their relationship with 3PLs was fairly prescriptive, not leaving much room for innovation (tweet this).
Several 3PLs anecdotally claim that they can deliver innovation in the form of process or technology re-engineering – but only if they are allowed. When the client doesn’t value innovation or doesn’t foster strategic collaboration, there is resistance to change. This data reveals that while shippers appreciate 3PLs’ efforts to launch innovative technologies, they also look for expertise, best practices and solutions that can improve their business. There is disruptive innovation and there is also process/service innovation that can help the shippers improve service levels, increase inventory turns, and optimize working capital – innovations that can directly impact shippers’ P&Ls and balance sheets, driving long-term benefits.
“There is a common misperception around 3PL capacity for innovation. Overall, the survey results revealed a perceived lack of strategic relationships between 3PLs and shippers, as well as a gap between what innovation is required and what innovation is a nice-to-have,” said Dan Gilmore, editor, SCDigest. “Logistics services providers should be at the leading edge of technology and supply chain trends in order to keep up with the changing business needs of their customers. If not, they lose a crucial competitive advantage.”
Where does leading-edge technology innovation fit in?
But what about the truly leading-edge innovation: augmented reality, robotics, 3D printing, drones? Survey results are again mixed with many shippers having doubts about providers being able to lead on those innovations but many providers believing that they should. Nearly 46 percent of 3PLs believe shippers expect them to offer more advanced technologies, while only 24 percent of shippers suggested 3PLs should add such capabilities to their service offerings (tweet this). Survey results underscore the challenge between the balance of innovation that lowers operational costs versus innovation that improves business performance. Providers want year-over-year lower costs with the perception that innovation drives lower costs instead of new business capabilities. However, for regional or niche players, innovation is critical to differentiate from others, particularly as expectations mount from the bigger customers in retail and high-tech industries, driven by omni-channel, customization/personalization and product lifecycle.
“Over the last three decades, logistics providers have been on an upward path of innovation, focusing on scaling capacity by building and consolidating their networks and becoming more efficient and cost-effective in serving their markets. But now, the focus is on digitization, e-commerce, big data and IoT,” commented Halim. “Providers need to keep pace with customer expectations, and invest in innovation that will add value to their services, all in an effort to provide services that improve business performance. This report highlights innovation strategies that will differentiate and grow 3PLs’ businesses from applying segmentation, improving strategic engagement, building innovation centers, establishing an innovation platform, and launching continuous discovery.”
SCDigest surveyed more than 100 respondents via an online survey in late 2016. Forty-one percent of respondents were shippers or clients of 3PLs, 43.4 percent were 3PLs or logistics services providers, and 15.6 percent were academics, technology providers, consultants and others. The bulk of respondents (64 percent) are headquartered in North America with 11.6 percent in Europe and 14.6 percent in Asia Pacific. Other respondents included South and Latin America, the Middle East and Africa.
- Listen to the SCDigest Videocast: Innovation in Shipper-3PL Relationships Benchmark Study Results
- Read the full research report here
About JDA Software Group, Inc.
JDA Software is the leading provider of seamless supply chain planning and execution solutions for retailers, manufacturers, logistics providers and wholesale distributors. Our unmatched solution portfolio enables our clients to reduce costs, increase profitability and improve visibility so they can deliver on customer promises every time. More than 4,000 global customers run JDA, including 73 of the top 100 retailers, 71 of the top 100 consumer goods companies, and 13 of the top 16 3PLs. With JDA, you can plan to deliver. www.jda.com
“JDA” is a trademark or registered trademark of JDA Software Group, Inc. Any trade, product or service name referenced in this document using the name “JDA” is a trademark and/or property of JDA Software Group, Inc.