To streamline their supply chains, numerous companies have turned to third-party logistics providers, or 3PLs, to handle tasks like inventory management, warehouse stocking, order fulfillment, pallet packing, and returns processing. Particularly amid the pandemic, businesses have grappled with meeting customer demands, addressing shipping delays, and managing sudden surges in demand. In essence, if logistics isn’t a company’s core competency, it’s prudent to rely on experts.
To assess the current landscape of 3PL, we organized a brief roundtable discussion with Philippe Gilbert, President of UPS Supply Chain Solutions, and Phil Roe, Chief Customer Officer and Strategy Director at DHL Supply Chain. Here’s their insight:
What are the primary advantages of partnering with a third-party logistics provider?
“Effective supply chain visibility and planning present significant challenges for modern supply chains,” remarks Phil. “Supply chains now span multiple jurisdictions over considerable distances. Moreover, they’re omnichannel, meaning that multiple pathways to the customer are standard practice.” Philippe adds, “3PLs can offer efficiencies and resources throughout the supply chain that most businesses find challenging to replicate.”
According to a UPS Global Logistics study, five key challenges drive companies to outsource:
- Limited Space
- Heightened Customer Expectations
- Accelerated Order Fulfillment
- Reduced Labor Costs
- Diverse Fulfillment Channels
The pandemic has expedited the adoption of 3PL services. In the same UPS survey, 29% of respondents indicated they would shift to outsourcing their logistics directly due to the past year’s events. “One of the most pressing issues impacting our current customers is the timing of inventory levels,” notes Philippe. “Production delays from APAC have resulted in delayed receipts and a backlog of products.”
How are 3PLs assisting businesses in managing broader disruptions, such as Brexit, transport bottlenecks, and driver shortages?
“We can categorize supply chain disruptions into three main areas: demand-side, supply-side, and environmental,” explains Phil. “Some disruptions are more manageable than others, but all benefit from proper oversight and the ability to adapt quickly.” For instance, when Brexit was finalized, DHL expanded areas requiring specialized support, such as customs processing. “We can leverage our network and redeploy resources as needed,” he adds.
When the Brits finalized Brexit, for example, DHL scaled up areas that needed specialist support, such as customs processing. “We can leverage our network and redeploy on demand,” he explains. “Additionally, 3PLs like ours have the expertise and resources to navigate through such disruptions effectively.”
Certainly, here’s an expanded response:
“In response to Brexit finalization, DHL swiftly mobilized resources to bolster areas requiring specialized assistance, particularly customs processing,” Phil elaborates. “Our extensive network allows for agile redeployment of resources as needed to mitigate disruptions and maintain operational continuity. Furthermore, 3PLs possess the requisite expertise and infrastructure to navigate through such challenges adeptly, offering reassurance to businesses during periods of uncertainty.
Regarding UPS, the company devised a post-Brexit Supply Chain Solutions (SCS) strategy enabling clients to maintain inventory proximity to their UK customers. Philippe explains, “We maintain a diverse carrier and provider portfolio to swiftly adapt to supply chain disruptions, allowing customers to circumvent service delays, additional costs, and administrative burdens associated with customs clearance.”
Turning to the impact of e-commerce growth on 3PL, Phil remarks, “The unprecedented growth witnessed over the past 18 months shows no signs of abating. Consumer behaviors have shifted, some permanently.” DHL’s fulfillment division has experienced a 150% surge in demand over the past eight months. To meet this demand, DHL has embraced data, automation, and robotics solutions alongside its workforce. Phil explains, “We’ve integrated technology and data to manage demand, fulfill customer expectations, and streamline labor requirements.”
E-commerce expansion has necessitated additional labor and space. Philippe observes, “This presents a unique opportunity for 3PL. Emerging retail platforms, albeit currently small, aim to disrupt major retail players, leveraging proximity to urban customers and digitalizing SME brick-and-mortar retailers.”
Shifting customer expectations, such as the Amazon Effect, have prompted 3PLs to enhance their networks and integrate fulfillment with last-mile delivery. Philippe notes, “Expanding reverse logistics and investing in warehouse space is essential.” Data analytics can improve visibility and efficiency. Philippe emphasizes, “With the right technology, businesses can access accurate, connected data and derive actionable insights.”
Predictive analytics, coupled with artificial intelligence and machine learning, enable companies to anticipate and mitigate supply chain disruptions. Philippe adds, “This proactive approach allows businesses to prepare for or avoid disruptions entirely.”
Furthermore, 3PLs play a pivotal role in assisting organizations in achieving their Environmental, Social, and Governance (ESG) objectives, including reducing carbon emissions. UPS’s Eco-Responsible Packaging Programme evaluates clients’ packaging processes to minimize environmental impact. Philippe elaborates, “By 2025, we aim to source 40% of all ground fuel from alternative sources and increase renewable electricity usage to 25%.”
Similarly, DHL offers a suite of GoGreen solutions enabling customers to minimize their environmental footprint. Phil explains, “This encompasses carbon reporting, analytics solutions, and investments in globally recognized climate protection projects. Sustainability initiatives foster collaboration between DHL and its customers.”
As for UPS, their post-Brexit SCS solution aimed to help clients maintain efficient inventory management close to their UK customer base. Philippe highlights, “We maintain a diverse network of carriers and providers to swiftly adapt to supply chain disruptions, allowing clients to navigate through service delays, additional costs, and the administrative complexities of customs clearance.”
Turning to the impact of e-commerce growth on 3PL, Phil remarks, “The surge in e-commerce witnessed over the past 18 months is showing no signs of slowing down, with some consumer behavior shifts becoming permanent.” DHL’s fulfillment division has seen a remarkable 150% increase in demand over the past eight months. To meet this demand, DHL has embraced technology, automation, and robotics alongside its workforce. Phil explains, “We’ve integrated these solutions to manage demand, meet customer expectations, and optimize labor requirements.”
E-commerce expansion has led to an increased demand for labor and warehouse space. Philippe notes, “This presents a unique opportunity for 3PLs. Emerging retail platforms, though currently small, aim to disrupt major retail players by leveraging proximity to urban customers and digitizing SME brick-and-mortar retailers.”
Shifting customer expectations, such as the “Amazon Effect,” have prompted 3PLs to enhance their networks and integrate fulfillment with last-mile delivery. Philippe emphasizes, “Expanding reverse logistics capabilities and investing in warehouse space are crucial.” Data analytics play a key role in improving visibility and operational efficiency. Philippe underscores, “With advanced technology, businesses can access accurate, real-time data and derive actionable insights to enhance decision-making.”
Predictive analytics, combined with artificial intelligence and machine learning, enable companies to anticipate and mitigate supply chain disruptions effectively. Philippe adds, “This proactive approach enables businesses to prepare for or even prevent disruptions before they occur.”
Furthermore, 3PLs play a vital role in helping organizations achieve their Environmental, Social, and Governance (ESG) objectives, including reducing carbon emissions. UPS’s Eco-Responsible Packaging Programme evaluates clients’ packaging processes to minimize environmental impact. Philippe elaborates, “By 2025, we aim to source 40% of all ground fuel from alternative sources and increase renewable electricity usage to 25%.”
Similarly, DHL offers a range of GoGreen solutions enabling customers to minimize their environmental footprint. Phil explains, “These solutions include carbon reporting, analytics, and investments in globally recognized climate protection projects. Sustainability initiatives foster collaboration between DHL and its customers, driving towards a more sustainable future.”
“In highly regulated sectors such as pharmaceuticals and life sciences, companies face heightened pressure on their supply chains,” explains Phil. “Adapting to rapidly evolving changes necessitates extensive expertise, a trait that global enterprises like DHL can provide.” To address regulatory hurdles, DHL assigns dedicated sector specialists to its clients, equipped with knowledge of niche industries and backed by the company’s expansive global network.
At day’s end, Philippe emphasizes the importance of 3PLs assuming responsibility for implementing compliant programs and services. “Whether licensed or not,” he states, “they must collaborate with their highly regulated clients to establish Standard Operating Procedures (SOPs) and audit processes.”
Looking ahead to the next 12 months for 3PL providers, Philippe predicts a focus on mastering omnichannel e-commerce. “Expect accelerated last-mile delivery, enhanced sustainability in logistics and packaging, and improved risk management forecasting,” he suggests. Overall, 3PLs will invest in data analytics and innovative warehouse technologies to enhance supply chain visibility.
For instance, UPS is launching a suite of digital engagement tools. Philippe notes the introduction of the UPS Forwarding Hub, UPS Customs Brokerage, and CoyoteGo portals aimed at assisting clients with their supply chain solutions. Additionally, UPS offers e-Fulfilment and Ware2Go products tailored to streamline outsourcing for small- and medium-sized businesses. “Our focus has been on integrating technologies to enhance operational efficiency,” Philippe remarks.
Furthermore, UPS’s Advanced Technology Group (ATG) has deployed robotics, drones, artificial intelligence, autonomous vehicles, and sensor technologies to boost revenues and reduce costs in 2021. Philippe highlights, “With these tools, we can meet customer demands for real-time tracking, end-to-end visibility, and personalized service.”
“In industries with stringent regulations such as pharmaceuticals and life sciences, companies face heightened pressure on their supply chains,” Phil elaborates. “Adapting to rapid changes requires extensive expertise, a capability that global enterprises like DHL can provide.” To tackle regulatory challenges, DHL assigns specialized sector experts to its clients, armed with knowledge of niche industries and backed by the company’s expansive global network.
Philippe emphasizes the importance of 3PLs assuming responsibility for implementing compliant programs and services. “Regardless of licensing, they must collaborate with their highly regulated clients to establish Standard Operating Procedures (SOPs) and audit processes.”
Looking ahead to the next 12 months for 3PL providers, Philippe anticipates a focus on mastering omnichannel e-commerce. “Expect accelerated last-mile delivery, enhanced sustainability in logistics and packaging, and improved risk management forecasting,” he suggests. Overall, 3PLs will invest in data analytics and innovative warehouse technologies to enhance supply chain visibility.
For instance, UPS is rolling out a suite of digital engagement tools. Philippe highlights the introduction of the UPS Forwarding Hub, UPS Customs Brokerage, and CoyoteGo portals aimed at assisting clients with their supply chain solutions. Additionally, UPS offers e-Fulfilment and Ware2Go products tailored to streamline outsourcing for small- and medium-sized businesses. “Our focus has been on integrating technologies to enhance operational efficiency,” Philippe remarks.
Furthermore, UPS’s Advanced Technology Group (ATG) has deployed robotics, drones, artificial intelligence, autonomous vehicles, and sensor technologies to boost revenues and reduce costs in 2021. Philippe underscores, “With these tools, we can meet customer demands for real-time tracking, end-to-end visibility, and personalized service.”