Users of third-party logistics companies are becoming increasingly dissatisfied with some of their providers' IT capabilities, according to a global study of 1,100 companies.
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
The 2005 Third-Party Logistics Study, produced by Capgemini and the Georgia Institute of Technology, with SAP and DHL, said, "The implementation of IT ranked third behind only cost pressures (97%) and improving supply chain management (89%) as a leading factor affecting third-party logistics user organisations in 2005."
The study, now in its 10th year, found user satisfaction was declining. During 2005 only 42% of European customers were satisfied with their third-party logistics suppliers' IT expertise. This was down from 45% in 2004, and 56% in 2003.
Erik van Dort, global sector leader for distribution at Capgemini, said, "Third-party logistics suppliers' capabilities are evolving and many satisfy user requirements around basic services, such as transportation or warehousing. However, as users become more accustomed to outsourcing and more innovative IT solutions are brought to the market, a gap develops between user expectations and what logistics providers are delivering.
"As a result, we are seeing that customers increasingly identify ongoing development of IT capabilities as a key issue they look for from their logistics provider."
John Court, IT director at TNT Logistics, agreed. "Customer expectations have certainly risen, particularly during the last decade, and IT-related services that would previously have been viewed as exceptional have become more a condition of market participation," he said.
"TNT Logistics has established centres of IT excellence for certain key competencies. We deploy both in-house developed solutions and partner with best-of-breed service partners where appropriate."
Lack of satisfaction with the technology capabilities of logistics companies was mirrored by users' reluctance to rely on their logistics suppliers for IT leadership. "Only 30% of survey respondents look to their third-party logistics provider as a source for IT leadership," the report said.
With third-party logistics users looking to implement their supply chains with a wide range of partners, some of those surveyed emphasised the importance of interoperability and supplier-neutral offerings.
"One participant in the European focus group pointed out that third-party logistics providers are keen on selling their own technology as part of the solution, but what third-party logistics users really need is a neutral technology that connects all parties involved, not just logistics provider to logistics user," the report said.
The point was emphasised by van Dort. "There is far too much diversity when it comes to processes and IT systems, which are often designed bespoke for each customer. Logistics users need to be assured technology applications and processes can run on a standard operating platform to enable integration of IT solutions and a reduction in costs.
"Once core processes are streamlined globally, logistics providers can introduce new IT-based services to differentiate themselves and to deliver the advanced services that users increasingly demand," he said.
RFID tops companies' wish lists
Radio frequency identification (RFID) is still at the top of the IT wish list of companies working with third-party logistics suppliers.
In Western Europe, 55% of respondents to the 2005 Third-Party Logistics Study said they would like their third-party logistics suppliers to support RFID technology.
"As the adoption and roll-out of RFID technologies becomes more common, third-party logistics users will increasingly look to their providers to be in a position to capture, manage and use the rich product information that RFID affords as part of the more advanced logistics solutions offerings," the report said.
Other areas of future interest were internet-based logistics and supplier management systems.
Users' top five IT services
The 2005 Third-Party Logistics Study found that companies were using a range of IT services from their third-party logistics firms.
The top five services were:
- Export, import, freight forwarding and customs clearance
- Transportation management
- Shipment tracking, tracing and event management
- Warehouse and distribution centre management
- Web-enabled communications.
The report said these services were "tactical enablers", rather than "strategic". "Strategic" would refer more to applications such as supply chain planning, supplier management and customer order management.