Shippers, 3PLs Seek to Close Relationship Gap

Relationships, collaboration and customer service make up the foundation of today’s supply chain, according to the 2024 28th Annual Third-Party Logistics Study, which provides the latest perspectives on shipper and 3PL relationships.

The study found that shippers and their logistics providers are looking to get more out of their partnerships to add value, enable better decision-making, and manage costs while providing agility and resiliency.

“Shippers are looking for more than just the transactional relationship,” says Tim Brindley, vice president, supply chain operations at Chainalytics, a part of NTT DATA. “Long gone are the days of 3PLs providing labor, trucking, and warehousing capabilities. They are counted on to provide meaningful KPIs and metrics, automation that drives increased throughput, and predictive analytics to make better decisions upstream.”

3PLs have made significant improvements in their services over the last few years to meet these demands, and they seem to be paying off. This year’s study shows that most shippers (95%) agree their relationships with 3PLs are successful, up from 83% last year. Furthermore, 89% of shippers reported that 3PLs contributed to improving service, and 80% said 3PLs helped reduce overall logistics costs.

The shipper-3PL power dynamic is shifting

The last three years have been disruptive to the supply chain to say the least, with shifting capacity significantly impacting the relationship between shippers and their 3PL partners. The study shows that both parties said shifting power dynamics impacted them, with 39% of shippers and 3PLs agreeing that shippers have gained leverage.

“COVID was particularly hard on both parties,” says Brindley. “What was surprising and encouraging was that the bounce back was pretty quick. I think it indicates that shippers and 3PLs worked together to get through the challenges and the relationship came out stronger because of it.”

Another way that these relationships are changing comes down to negotiations. The study found that shippers and 3PLS agree that longer-term contracts in some instances may better serve their relationships, with 38% of shippers and 3PLs reporting an increase in average contract length.

“Since the structure of many of these relationships involved significant capital investments by either party…this provides a lengthened time frame in which the investments may be appropriately amortized,” says C. John Langley Jr., Ph.D, professor of supply chain management at Penn State University

The study also found both shippers and 3PLs are prioritizing ways in which their relationships can grow and improve. This includes the sharing of data, joint planning involvements, collaboration on risk analyses that would include mitigation or removal of likely sources of risk, and a commitment to enhancing the functioning of entire supply chains.

“Shippers and 3PLs realize there are ways in which successful relationships can create value for both parties and for the overall supply chain,” says Langley. “While earlier such relationships may have been more adversarial in certain ways, the priorities of the future include joint participation in the development of service level agreements; mutually beneficial technology solutions; aligning priorities on planning, operations, and continuous improvement; and focusing on value-creation for the overall supply chain.”

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