Logistics leaders expect outsourcing budgets to increase

New research from Gartner reveals that 66% of logistics leaders increased their logistics outsourcing budget in 2021, and 74% anticipate an increase in the next two years.

From March through May 2021 Gartner surveyed 298 supply chain professionals in the US, Europe and APAC who had decision-making capacity regarding supply chain outsourcing.

David Gonzalez, vice president analyst with the Gartner Supply Chain practice, says, "Logistics outsourcing to third-party logistics providers (3PLs) has been on the rise for a while, and there is no indication that this will change anytime soon."

He says, "However, logistics leaders are grappling with significant challenges that they can only address in collaboration with their 3PL partners.

When asked for their top three logistics priorities, the most common replies by survey respondents were: Improve or update technology (37%), cost reduction/cost optimisation (31%), increase customer satisfaction (29%).

Faced with these challenges, many logistics leaders turn to their outsourcing partners for support, the analysts state.

Although 3PLs can help address these priorities, it requires collaboration and inevitably compromise on both sides. For example, a 3PL can upgrade or acquire new technologies on behalf of their shipper customer.

However, this will only be an option for the 3PL if the shipper extends their contract agreements to allow the depreciation of the investments and/or partly shares the financial burden with the 3PL partners.

Gonzalez says, "Nearly two-thirds of survey respondents said 3PL service providers had a positive or extremely positive effect on their competitiveness. This is the perfect foundation to build a long-lasting and meaningful partnership that enables joint investments and transparent information exchange."

To have a productive and collaborative work relationship, both shippers and 3PLs must listen to each other and understand the other parties' perspective, Gartner states.

For example, shippers must ensure that they have a clear understanding of the 3PLs' capabilities and needs. Similarly, 3PLs must carefully listen to their shippers to manage expectations and identify future areas of opportunity.

Gonzalez continues, "The 3PL community has a lot to offer, and the shipper community has a lot to gain. In the face of ongoing disruptions, growing carrier influence and customer selection, shippers and 3PLs must work together to mutually protect their vested interests. If they can enter a trusted relationship, there's lots of room for future innovation and opportunities."

Gartner clients can read more in "How to Resolve the Shipper and 3PL Dichotomy of Logistics Outsourcing".

Non-Gartner clients can learn more in the complimentary webinar "Use the Gartner Magic Quadrant for Logistics Insight Into a Post-COVID-19 World".

The Gartner Supply Chain Practice brings together relevant analysis, peer-based best practices, metrics and data across Gartner to offer supply chain decision makers a platform to learn more and drive forward their business.