Supply chain innovation is among the main issues addressed by the 17th Annual Third Party Logistics Study conducted by Cap Gemini in collaboration with Penn State, Panalpina, Korn/Ferry International and Eyefortransport. The study incorporates the views of more than 2,300 industry executives from around the world.
According to the study results, until recently 3PLs responded to the need for innovation mainly by introducing process improvements, adding Information & Communication Technologies, or offering new services, many of which were not always created to meet the actual customer demand. However, what customers nowadays require are disruptive innovations to compete in today’s business environment. The term “disruptive” is used to identify innovations that, through the form of a new product or service idea, can disrupt an existing market or value network, by either significantly adding value or reducing costs within a supply chain setting, displacing earlier products/services.
Although innovation is considered a critical driver of sustainable growth, today’s business relationships between providers and users of 3PL services do not seem structured in ways that foster innovation. Shippers commonly engage 3PLs with a tactical focus keeping them distant from the competitive challenges they face, metrics in place (internally and between shippers and 3PLs) are counterproductive to innovation, and the current 3-5 years contract durations do not promote common investments in innovation. To make things more complex, according to the study, both shippers and 3PLs consider themselves as top innovation originators in the supply chain, and while 9 out of 10 3PLs consider themselves ready to innovate, only half of their customers agree to that. Fortunately, both shippers and 3PLs agree on the top drivers for innovation. These are: relationship and trust, talent/right people, operational excellence, a culture of collaborative continuous improvement, and technology.
Cultivating those top innovation drivers though, requires considerable funding. And it is quite interesting that shippers having participated in the study declared that they are willing to pay 3PLs for the investment required. This willingness is also certified by their 3PL providers. Top funding sources recognised by both sides are: gain sharing, additional business, and performance bonuses.
You can download the original study here.