The State of Logistics Outsourcing

results and findings of the 13th annual study

2008 third-party logistics
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contents
Executive Summary 4
About the Study 7
Current State of the 3PL Market 11
Integrated Logistics 16
Green Supply Chain 22
Supply Chain Security 28
Strategic Assessment 34
Credits 37
About the Sponsors 38
supporting organizations

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In mid-2008, 1,644 logistics executives completed a survey
on trends and issues in third-party logistics. In addition, the
study team conducted a facilitated workshop to interpret
survey results, as well as focus interviews with experts
on three special topics covered in this report: integrated
logistics, green supply chain and supply chain security.
The fndings presented here are intended to help 3PLs and
logistics outsourcers better understand and more effectively
manage their relationships.
Current State of the 3PL Market
3PL users highly value their 3PL relationships, with 89% of all
users surveyed agreeing they represent a strategic, competitive
advantage to their companies. That sentiment is borne out by
savings in costs and fxed assets and shorter order cycles. 3PLs
are also delivering customer service and business process
effciencies. But these benefts result only from deliberate
efforts to form strong relationships and through the use of
detailed contracts that include clear expectations and metrics.
Due diligence is required to ensure proposed 3PL partners have
demonstrated the ability to meet service-level commitments,
invest in continuous improvements and achievements in service
offerings, and reduce costs the most common problems users
have with their 3PLs. One area warranting particular scrutiny is
a 3PL s planned technology investments; the gap between user
IT expectations and 3PLs ability to meet those expectations
has persisted over several years of this study.
Although customers are spending more on average for
logistics outsourcing, the percentage of budget devoted
to outsourcing logistics, and the services outsourced,
havent changed dramatically over the past several years.
Companies continue their general tendency to outsource
relatively commoditized services and to keep customer-
facing or more strategic logistics services in-house.
Integrated Logistics
Historically, the needed integration of systems and services
was accomplished by companies themselves as they purchased
individual logistics services. Today, the 3PL sector has
become a capable source of both systems and services
integration for their customers. Often, this is referred to by
3PL marketers as bundled, comprehensive, or one-stop
shopping, and usually involves integration of processes,
technology, people, and services.
Three-quarters of 3PL users rely upon their 3PL providers
for systems and services integration, particularly those with
more mature, complex supply chains. Easing the burden of
internal management, gaining effciencies, lowering costs
and improving overall effectiveness are highly valued
benefts. But asking 3PLs to provide integration of systems
and services may not be a ft for every situation. Loss of
control, visibility and internal competency and perhaps
most of all, fear of dependency by customers on 3PLs, make
potential customers hesitate. These factors also may help
to explain why some customers limit outsourcing contracts
to more routine, commoditized services, instead of more
innovative, strategic services. 3PL users should take steps
to avoid excessive dependency and structure contracts that
balance the costs and risks. What is clear is that assigning
responsibility for the integration of systems and services
requires serious thought and consideration.
Green Supply Chain
A substantial 86% of respondents agree that a green
supply chain is somewhat or very important today and are
almost unanimous (98%) in their belief that green supply
chain initiatives are somewhat or very important to their
companies futures. However, survey questions regarding
ROI, green as a factor in selecting 3PLs, and changing
transportation modes reveal mixed opinions: Around one-half
Executive Summary
The State of Logistics Outsourcing in 2008
of 3PL users are optimistic about taking action and reaping
benefts from green initiatives while the other half are either
unsure or even pessimistic. Clearly, there is widespread
uncertainty about how to move forward with green supply
chain initiatives.
Focus interview and workshop participants feel strongly,
though, that doing nothing is not an option. They see transforming
to a green supply chain as requiring three steps: becoming
educated, measuring the companys carbon footprint and
identifying change levers, and then embarking on business
case-supported initiatives. Green initiatives should clear three
hurdles: they must be acceptable fnancially, environmentally,
and socially.
As green becomes a factor in operating a supply chain, those
companies outsourcing these functions will inevitably rely
on 3PLs to help satisfy green goals. The options for greening
of supply chain operations range from small process changes,
such as retraining drivers, to substantial capital investments
including setting up green distribution centers. A number
of changes, particularly those that involve improved use of
transportation services, can be made today, often with the
assistance of 3PLs. Generally, 3PL users would prefer that
green supply chain initiatives not incur extra costs, but feel
when costs do occur, they should be shared equitably between
the 3PL and the customer. Early adopters are fnding that
green projects can generate savings. The ultimate challenge
is to fnd ways that green can simultaneously reduce costs,
increase revenues, and improve the environment.
Supply Chain Security
Government supply chain security regulations are highly
focused on deterring terrorism, but for 3PL users, theft is the
top-of-mind security concern. However, the changing business
environment means companies must focus more attention on
ensuring protection from a range of potential causes of supply
chain disruption: other security threats, natural disasters, port
or transportation shutdowns, and product tampering. Users
are generally satisfed with 3PLs security performance to
date, with 76% calling their 3PLs secure or very secure.
However, a review of specifc supply chain security measures
reveals a gap between 3PL users expectations and the current
security capabilities of their 3PLs.
3PL users believe physical security, collaboration and alerts
are the most effective means for 3PLs to provide security.
Users appear more concerned with the financial and
operational effects of meeting compliance mandates than the
terrorist acts theyre intended to prevent. Fortunately, there
are a number of concrete steps companies and their 3PLs
can take to assess and address security gaps, with attaining
visibility, setting up the right processes, and minimizing
touches being prominent among them. Perhaps the best
news is that companies and 3PLs innovating in supply chain
security have proved that these steps also yield considerable
collateral benefts that help recoup costs and improve the
overall state of the supply chain.
Strategic Assessment
Over the thirteen-year history of this study, we have seen
considerable progress in 3PL-customer relationships, but
growth has stalled in areas such as the type of services
outsourced and 3PL investment in IT. To attain the potential
benefts of engaging in more strategic, innovative services,
3PLs and users must step up their willingness to collaborate.
Such behavior is also required for those seeking to successfully
outsource the integration of supply chain systems and services.
Openness to collaboration and use of integration-enabling
technology by 3PLs are essential elements to successful use
of 3PL systems and services integration.
While engaging a 3PL for integration of systems and services
can be considered potentially powerful, but discretionary,
our two other special topics, green supply chain and supply
chain security, cannot be regarded as optional.

Green is rapidly becoming a measuring stick for supply chain
success. The greening of the supply chain will have strong
and increasing effects on both strategic and tactical aspects
of supply chain management. Companies must act now to
begin their green supply chain initiatives, and they must
also take action to address the growing range of threats
to the continuous operation of their supply chains. While
compliance with government mandates is a growing burden,
if the business community takes the lead in developing
supply chain security solutions, there is a good chance that
the collateral benefts of supply chain security will address
the broader scope of risks and make a positive impact on
balance sheets.
Supply chain executives continue to face new challenges in
their quest to manage and adapt their operations to market
conditions. In the thirteen years of this study, we have
seen ample evidence that solid relationships between 3PLs
and customers render both even better-equipped to address
emerging issues such as environmental concerns, supply chain
security demands, and whatever the next challenge becomes.

Executive Summary
The State of Logistics Outsourcing in 2008
o

The third-party logistics (3PL) industry has evolved

considerably over the past two decades, and accordingly,
so has this study. What has remained unique and consistent
over this studys thirteen years is its exclusive focus on
identifying and tracking key trends and views of the 3PL
industry from the perspective of 3PL customers. The study
also includes the views of those who currently choose not
to use 3PLs.
What has changed is how we arrived at those perspectives
as well as the scope of the respondent base. Once exclusively
a survey, the 3PL study now includes three streams of
research: a web-based survey, focus interviews with industry
experts, and a facilitated Capgemini Accelerated Solutions
Environment

(ASE) workshop. The geographic reach has

also expanded; respondents now participate from North
America, Europe, Asia Pacifc, and Latin America as well
as other areas such as South Africa and the Middle East.
The number of industries covered has also increased.
Together, the broad reach and three distinct research streams
enable us to conduct a comprehensive, multi-faceted analysis
of attitudes, trends, and results experienced by 3PL users
and non-users.
2008 Study Objective
The overall objective of the 2008 Third-Party Logistics Study
is to explore trends and issues within the 3PL industry across
major industry segments and across several diverse regions
of the world.
Each year, the study results as well as greater industry
developments suggest trends that warrant closer examination.
Accordingly, the 2008 survey, conducted in mid-2008,
includes in-depth questions relating to special topics of
current relevance and importance. Included in the 2008
study are reports on integrated logistics services, green
supply chain, and supply chain security.
The principal sections of the study and the goals for each
section are as follows:
Current State of the Market:
Summarize the current use of 3PL services
Identify customer needs and how well 3PL providers
are responding to those needs
Understand how customers select and manage 3PL
providers
Examine why customers outsource or elect not to
outsource to 3PL providers
Special Topics:
Look into key issues relating to 3PL use, including
provision of integrated service offerings, green
supply chain, and supply chain security
Strategic Assessment:
Provide strategic recommendations for the future of
the 3PL industry

About the Study

Findings from the 2008 13th Annual Third-Party Logistics Study
2008 Study Methodology
The practice of outsourcing to 3PLs has expanded considerably
over time as supply chains have grown more complex and
3PL best practices have emerged. To assess these changes, the
study team uses three channels of research.
Web-based Survey
During the spring and summer of 2008, 1,644 logistics
executives in North America, Europe, Asia Pacifc and
Latin America responded to the web-based survey. A small
number of executives in other areas such as South Africa
and the Middle East also responded, although the numbers
of responses were not suffcient for an in-depth analysis or
understanding of the complexity of 3PL environments in
those regions. To ensure confdentiality and objectivity, the
respondents were not asked to name which specifc 3PL
providers they used.
Executives were contacted by email. The target respondent
typically holds the title of Manager, Director, or Vice
President of Logistics or Supply Chain Management in a
number of key industries identifed below. Those willing
to participate in the survey were asked to click an Internet
link that led them to an on-line survey. The survey was
available in English, Spanish, Portuguese, French, German,
and Dutch.
The database of logistics and supply chain executives
was expanded to include executives in a wide range of
industries, including automotive, chemical, construction/
building, consumer products, food and beverage, high-
tech and electronics, industrial manufacturing/de-
fense industry, life sciences and healthcare, retail, and
telecommunications.
Survey recipients were asked to think of a third-party
logistics (3PL) provider as a company that provides one
or more logistics services for its clients and customers and a
fourth-party logistics (4PL) provider of logistics services
as one that may include more advanced logistics outsourcing
services than a conventional 3PL normally would provide.

Focus Interviews
A new feature of the 3PL study in 2008 is the use of focus
interviews conducted with industry observers and experts,
primarily relating to the examination of the special topics
that were identifed for this year. These focus interviews
are exceptionally valuable opportunities to gather pertinent
information and perspectives from a wide range of
professionals who have knowledge about the 3PL sector and
the special topics: integrated service offerings, green supply
chain, and supply chain security.
ASE Session
We leveraged the Capgemini Accelerated Solutions
Environment

(ASE) as a brainstorming setting where

executives collaborate on shared issues. (For more about the
ASE see www.capgemini.com/ase.) To better understand the
results of the survey and to gain valuable perspective from
3PL users, the research team held a facilitated session at the
ASE facility in Berlin, Germany in June, 2008, focused on
the study objectives and on supply chain challenges related
to the study material.
Follow-Up Activities
In addition to this publication, the results of the 2008 13th
Annual Third-Party Logistics Study will be presented in a
variety of venues. These include:
Presentations at infuential industry conferences
such as the Council of Supply Chain Management
Professionals (CSCMP), eyefortransport, Transport
Intelligence, Industry Forum Transportation, and
Think Logistics Series (The Logistics Institute
Asia-Pacifc Singapore)
Analyst briefngs
Magazine and journal articles
A web site, www.3PLstudy.com, which includes
the downloadable report as well as supplementary
materials
Company-specifc events

The Supply Chain is Abuzz

There are many parallels between the daily challenges of operating a bee hive and managing a supply
chain. Different types of bees workers, drones, and the queen perform tasks in an integrated
fashion to accomplish the larger goals of the colony, much as activities like planning, sourcing, transporta-
tion and warehousing, and information technology must work together in a supply chain. Bees must be
vigilant to fend off threats to the colony, ranging from invading hornets to foraging bears, just as a supply
chain must be protected from security threats. Lastly, a bee hive must operate in harmony with its natural
environment a lesson supply chain executives are now beginning to embrace in green supply chain
initiatives. Given our special focus on the topics of integrated logistics, green supply chain, and supply
chain security, we believe the images of bees and their surroundings you see in this report appropriately
symbolize these important issues.
!
Figure 1: The 2008 3PL STudy incLudeS SeveraL Major geograPhieS
North America (506) 31%
Latin America (182) 11%
Europe (592) 36%
Asia Pacific (334) 20%
Other (30) 2%
Figure 2: 3PL uSerS Surveyed rePreSenT a Wide varieTy oF induSTrieS
Construction Building 3%
Food and Beverage 8%
High Tech and Electronics 17%
Industrial Mfg/Defense 8%
Life Sciences and Healthcare 9%
Retail 5%
Telecommunications 3%
3PL/4PL 7%
Other 12%
Automotive 12%
Chemical 5%
Consumer Products 11%
Figure 3: More Than one-haLF oF 3PL uSerS reSPonding rePorT currenT SaLeS over
$uS 1 BiLLion (700 MiLLion)
anticipated Total Sales for 2008 all regions north
america
europe asia Pacifc Latin
america
High US $25 billion or more
(e15 billion or more)
15% 14% 19% 14% 8%
Medium-
High
US $1 billion less than US
$25 billion (e700 million
less than e15 billion)
41 47 44 38 15
Medium US $500 million less than
US $1 billion (e350 million
less than e700 million)
16 17 15 16 17
Low Less than US $500 million
(less than e350 million)
28 22 22 32 60
Study Respondents
!!
Current State of the 3PL Market
Most Customers are Satisfied, But Improvement Opportunities Continue to Exist
In the thirteen-year history of this study, its become clear
that companies across industries and around the globe regard
logistics and supply chain management as intrinsic to their
success. Many place a high value on their partnerships with
third-party logistics (3PL) companies. They credit 3PLs
with helping them to attain goals related to service, cost, and
customer satisfaction.
In this study, 1,644 logistics and supply chain executives share
their experiences as customers or non-customers of 3PLs,
revealing important trends that can help others shape and
enhance their own 3PL relationships. See Figures 1, 2, and
3 on the page at left for more information on the geographic,
industry and revenue levels of these respondents.
3PLs Role in Logistics Success
In North America and Europe, 87% of user respondents agree
that logistics represents a strategic, competitive advantage
for their companies; 90% of respondents from Asia Pacifc
and 97% from Latin America agree.
This may be why: Each year users are asked to quantify
the result of their 3PL relationships. They consistently
report logistics cost reductions in the range of 12% to
15%, fxed logistics asset reductions in excess of 20%, and
order cycles reduced by 20% to 30%. (Percentages tend to
be a little higher for Asia Pacifc and Latin America than
for North America and Europe.) Also, an average of 76%
of respondents to the 2008 survey agree that the ability to
accommodate signifcant variations in demand with fewer
fxed assets represents a key beneft of 3PL use, and 67%
feel 3PLs help them increase service reliability.
Its not surprising, then, that so many users characterize
their 3PL relationships as successful. As indicated in
Figure 4, those rating their 3PL relationships as extremely
or somewhat successful range from 81% in Latin America
to 84% in Europe, 86% in North America, and 90% in
Asia Pacifc.
The factors cited by 3PL users as contributing to this success
can help others maximize the benefts they receive from
3PLs:
Strong relationships: A substantial 74% of 3PL users
see personal relationships at an operational level as
contributing to their success in working with 3PLs.
Just over half, 54%, agree that executive relationships
between 3PLs and customers are also important, to
help provide guidance and sponsorship. This need
for executive support is also strongly advocated by
participants in the ASE workshop, one of whom com-
ments, Everything goes well but also can fail because
of relationships. The lesson: Client and provider must
forge strong bonds up and down the organization, from
the executive level through operations.
Strong contracts: The second-most cited factor, at
60%, is a carefully designed and signed contract that
features detailed descriptions of services and perfor-
mance tracking. Although ASE participants agree with
the importance of the contract, there was a concern that
over-use of the contract on a daily basis can be
counterproductive to building strong people and
process relationships between 3PLs and their clients.

Figure 4: generaLLy, cuSToMerS rePorT SucceSSFuL

exPerienceS WiTh LogiSTicS ouTSourcing
All Regions
Somewhat Successful Extremely Successful
65%
65%
70%
68%
61%
25%
19%
North
America
Europe Asia Pacific Latin
America
21%
86% 86%
84%
90%
81%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
20%
13%
Study Respondents
!.
Measurable and attained metrics: Understandably,
clearly measured improvements in service levels to
customers (55%) and clearly measured cost reduc-
tions (48%) are also cited as contributing factors to
successful 3PL relationships.
The takeaway: Setting, and then driving toward, a commonly
held set of expectations is an essential element of success.
Interestingly, the larger the revenue group, the more
importance 3PL users place on a carefully designed and signed
contract that supports innovative arrangements between a
3PL and a customer. Although this was not a specifc area of
inquiry within the 2008 survey, one plausible explanation is
that higher-revenue companies may be more sensitive about
carefully drafted contracts, as they may have more at stake
fnancially and otherwise. Also, higher-revenue companies
may have policies and procedures in place that require
use of a more formal agreement or contract that includes a
commensurate level of detail.
Results are slightly more mixed when respondents are asked
whether 3PLs provide us with new and innovative ways
to improve logistics effectiveness. A full 90% of those in
Latin America agree, compared with 72% in North America,
61% in Asia Pacifc, and 46% in Europe. Clearly, the
impact of 3PLs on logistics effectiveness differs among the
geographies studied. As indicated below, however, many of
these same companies also indicate room for improvement
with the service offerings that are provided.
Interesting fndings within these results include:
Almost two-thirds feel their use of 3PL services has
had a positive impact on the services they provide to
their own customers.
The same fraction indicate their use of 3PLs has posi-
tively impacted business process effciencies.
Slightly less than half of 3PL users say their 3PLs
provide them with visibility into key processes
such as warehouse management, transportation
management and supply chain management.
About 40% are able to measure return on investment
(ROI) from using a 3PL. While this fnding may seem
surprising considering the high marks 3PL users
typically give their 3PL relationships, as discussed
previously, it may be that some users are making
more qualitative, rather than quantitative, judgments.
Of course, no relationship, or service provider, is perfect.
Some 3PL users report areas in which their 3PLs could

improve. The most frequently occurring issues, as reported

in Figure 5, are those one would naturally expect: unrealized
service-level commitments, lack of continuous improvements
and achievements in offerings, and cost reductions not
realized. As in past surveys, insuffcient IT capabilities are
also an issue. This topic is discussed in greater detail below.
There is also room for improvement in 3PL management
capabilities: Approximately one-third of 3PL users report
problems with a lack of project management skills,
ineffective management of key performance indicators and
unsatisfactory transition during the implementation stage.

What 3PL Users Spend
Another area the survey probes each year is the total
percentage of current logistics expenditures directed to
outsourcing. For 2008, respondents in North America plan
to devote 49%, in Europe its 61%, Asia Pacifc averages
57%, and Latin American respondents will allocate 48%.
Within three to fve years, 3PL users expect these proportions
to grow: North America to 56%, Europe to 69%, Asia Pacifc
to 64%, and Latin America to 59%.
Interestingly, a look back at results from this question for
the past few years reveals there does not appear to be any
measurable growth from year to year in the percentages of
overall logistics expenditures for 3PL services. Since total
Figure 5: cuSToMerS aLSo rePorT a nuMBer oF
conTinuing ProBLeMS WiTh 3PL ProviderS
outsourced Logistics Service all regions
Service level commitments not realized 51%
Lack of continuous, ongoing improvements and achievements in
offerings
42
Information technology capabilities not suffcient 39
Cost reductions not realized 36
Lack of project management skills 35
Ineffective management of key performance indicators (KPIs) 34
Unsatisfactory transition during implementation stage 30
Errors caused by excessive manual steps within business
processes
28
Lack of global capabilities 27
Lack of consultative/knowledge-based skills 25
Lack of business process integration across regions and supply
chain services
20
Inability to form meaningful and trusting relationships 17
Poor post-merger integration of acquired companies 13
No problems 12
Everything goes well but also can fail
because of relationships.
!
logistics spending tends to increase year to year, however, the
absolute amounts spent on outsourcing of logistics services
can be expected to increase. These responses suggest an
optimism or positive attitude toward outsourcing of logistics
services, as total spend on outsourcing is expected to increase
in all geographies studied.
What 3PL Users Outsource
The services 3PL users choose to outsource also dont change
dramatically from year to year. As indicated in Figure 6, the
most frequently outsourced activities in 2008 are domestic
and international transportation, followed by warehousing,
customs clearance and brokerage, and forwarding.
Some interesting observations from the results include:
3PL users in Europe and Asia Pacifc report outsourc-
ing more activities than users in North America.
Freight bill audit and payment outsourcing continues
to be more prevalent in North America than in the
other regions.
Latin American 3PL users are the most likely (22%)
to outsource customer service.
In line with the growing market-driven economies in
Asia Pacifc, outsourcing of forwarding and customs
clearance is much higher there than for the other
reporting geographies.

When outsourcing practices are considered by revenue

category (high, medium-high, medium and low as outlined
in Figure 3, page 10), it is apparent that higher-revenue
companies are more likely to outsource individual logistics
activities than lower-revenue companies. For example, high-
revenue companies are most likely to outsource domestic
transportation (91%), followed by medium-high (89%),
medium (87%), and low (78%).
At the ASE workshop, the wisdom of outsourcing services
not considered a core competency was a key theme. The
general feeling is that when a 3PL is able to provide a better
service and/or lower cost, the move to outsourcing should
be considered. This is particularly true where a 3PL may
have strong experience in a particular vertical market and a
demonstrable track record in providing the desired services.
As a caution to those who may be protective of the choice
to insource key logistics and supply chain activities, one
participant notes, Even within your core competencies, you
need to fgure out if you are good at them or not.
A related ASE theme is the potential need for multiple 3PL
relationships to foster on-going competitiveness and attain
cost and service improvements. You might want to play
them out against each other or use them along regional
boundaries, one group of participants suggests. You may
also segregate them based on different product categories,
offers another. While this need to manage multiple 3PL
relationships is quite valid, it also argues for the continued
Figure 6: cuSToMerS currenTLy ouTSource a Wide range oF LogiSTicS ServiceS
outsourced Logistics Service all regions north
america
europe asia Pacifc Latin
america
Domestic transportation 85% 78% 92% 91% 70%
International transportation 81 69 89 89 70
Warehousing 72 70 73 75 62
Customs clearance and brokerage 65 66 57 81 56
Forwarding 52 48 44 70 45
Shipment consolidation 46 46 43 55 38
Reverse logistics (defective, repair, return) 38 31 42 41 34
Cross-docking 38 37 43 35 25
Transportation management (shipment planning
and execution with one or more carriers)
37 39 38 36 25
Product labeling, packaging, assembly, kitting 36 29 42 37 35
Freight bill auditing and payment 30 54 20 21 14
Supply chain consultancy provided by 3PLs 17 21 15 14 14
Order entry, processing and fulfllment 15 12 14 21 17
Fleet management 13 9 15 14 15
LLP/4PL services 13 11 13 14 12
Customer service 12 11 10 12 22
!~
growth of the LLP (lead logistics provider) and 4PL concepts
to provide value-added professional/commercial assistance
in managing these multiple relationships. Having multiple
providers also provides surge capacity and is a risk mitigator,
ensuring that you do not depend upon a single provider for
a critical service.
Consistent with previous years studies, customer-facing or
more strategic logistics services are outsourced less frequently.
This is continuing evidence that 3PL users are reluctant to
outsource activities that may directly affect revenue or
customer relationships.
The Role of Information Technology
Information technology continues to be a high priority for
3PL users. This is confrmed by survey results as well as by
executives participating in the ASE workshop. IT capabilities
also are seen as exceptionally critical to the integration of
logistics services provided by 3PLs, as well as the ability to
facilitate green supply chains and supply chain security.
As seen in Figure 7, the IT services most commonly
outsourced to 3PLs remain consistent with previous years
results. Both web-enabled communications and visibility tools
are or will be outsourced by 91% of 3PL users, followed by
warehouse/distribution center management and transportation
management/execution (both at 83%). This year, bar code
generation and scanning was added as a survey option, and
80% of respondents indicate use now or in the future.
RFID continues to be a focus of optimism, but not widespread
adoption. This year, 13% of 3PL users currently report use
of RFID from their 3PLs, while 61% indicate plans to do so
in the future. Interestingly, we have seen similar current and
future percentages for the past several years and have yet to
see any increase in the extent to which users indicate current
use of RFID.
Other technologies with lesser adoption so far, and whose
future use outweighs current use, include collaboration tools,
supplier relationship management, supply chain planning,
Internet-based exchanges, and global trade management.
Despite the widespread adoption of some technologies, over
the past seven years of this study a gulf has persisted between
the importance respondents attach to 3PL IT capabilities and
their satisfaction with those capabilities. This difference has
been referred to as the IT expectation/performance gap
(i.e., the IT Gap), and Figure 8 shows the persistence of this
gap over the past seven years.
Figure 9 sheds some light on the reasons behind this
phenomenon. The most prominent IT-based service problems
are the inability to provide sufficient order/shipment/
inventory visibility and a lack of integration among internal
3PL systems. The need for more visibility is a high priority
expressed by ASE participants.
Why Not Use 3PLs?
Reasons for not using 3PL services are as informative as
the experiences of those who do. For example, considering
logistics to be a core competency of the company is the
most frequently cited reason for not using or considering
use of 3PL services. This reason is named by 44% of
non-users, in comparison with 37% from the survey
conducted in 2007. Other highly rated reasons include: Cost
reductions would not be realized, control over outsourced
logistics functions would diminish, and logistics is too
important to consider outsourcing.
Figure 7: There conTinue To Be SigniFicanT oPPorTuniTieS
For ouTSourcing oF iT-BaSed ServiceS
iT-Based Services Provided
by 3PLs
all regions
current Future Total
Web-enabled communications (3PL-user) 65% 26% 91%
Visibility tools (e.g., tracking/tracing, event
management)
58 33 91
Warehouse/distribution center mgt. 66 17 83
Transportation management (execution) 63 20 83
Barcode generation and scanning 50 30 80
RFID (Radio frequency identifcation and
asset tracking)
13 61 74
Transportation management (planning) 44 29 73
Collaboration Tools (e.g., inventory levels,
production schedules)
26 36 62
Customer order management 31 26 57
Supplier relationship management (e.g.,
procurement, payables)
26 30 56
Supply Chain Planning (e.g., forecasting,
inventory planning, network optimization)
22 33 55
Internet-based transportation-logistics
exchanges (auctioning)
21 34 55
Global trade management 20 31 51
Customer relationship management 21 28 49
Yard management 24 16 40
!
Also, it is frequently the case that non-users are quite familiar
with 3PL providers and service offerings. Many current
non-users have direct experience with 3PL services from
previous work experiences, or may work with colleagues
who have direct experience.
The Takeaways
3PL users rate their relationships with their providers highly,
citing 3PL use as a route to cost reductions, asset reductions,
and shorter order cycles as well as a source of innovation.
For many, customer service and business process effciencies
can be enhanced through relationships with 3PLs. But
these benefts usually only happen as the result of focused
initiatives to form strong relationships and through the use
of detailed contracts that include clear expectations and
metrics. Due diligence is also required to select providers
who have demonstrated the ability to meet service-level
commitments, invest in continuous improvements and
achievements in offerings, and reduce costs the most
common problems users have with their 3PLs.
One area warranting particular scrutiny is a 3PLs planned
technology investments; the gap between user IT expectations
and 3PLs ability to meet them persists. Its possible that
because of all these issues, the percentage of budget devoted
to outsourcing logistics, and the services outsourced, havent
changed much over the past several years. Perhaps more
investment on the part of 3PLs, and more willingness from
users to try additional 3PL services, is required to push the
results of 3PL relationships to the next level.
Figure 8: iT exPecTaTion/PerForMance gaP 2002-2008
(aLL regionS)
2002 2003 2004 2005 2006 2007 2008
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
IT Capabilities Necessary
Element of 3PL Enterprise
E
x
p
e
c
t
a
t
i
o
n
/
P
e
r
f
o
r
m
a
n
c
e

G
a
p
Satisfied With 3PL IT
Capabilities
Figure 9: cuSToMerS have exPerienced SPeciFic
ProBLeMS WiTh 3PL iT-BaSed ServiceS
Problems experienced with iT-Based Services all regions
Inability to provide suffcient order/shipment/inventory visibility 52%
Lack of integration among internal 3PL systems 52
Inability to correctly invoice for services provided 32
Inability to quickly provide quotes for special services 23
Time required to onboard customer 22
Inability to accept orders electronically 22
Other issue with technology capabilities 28
!o
An underlying premise to the theory of supply chain
management is that, to be successful, supply chain processes
and activities both systems and services must be
integrated. For example, the order management system
needs to talk to the warehouse management system, and
warehouse activities in turn need to be coordinated with
transportation. The greatest imperative, then, is to determine
which organization or organizations within the supply chain
will take responsibility for ensuring the effective integration
of systems and services.
Historically, the needed integration of systems and
services was accomplished by companies themselves as
they purchased individual logistics services. Today, many
3PLs are capable of providing this systems and services
integration for their customers. Often, this is referred to by
3PL marketers as bundled, comprehensive, or one-stop
shopping, and usually involves integration of processes,
technology, people, and services.
Overall, three-quarters of 3PL users surveyed prefer to
look to their 3PLs for needed integration of systems and
services, rather than trying to accomplish this internally.
This is particularly noticeable for companies with mature,
complex supply chains. The preference for 3PL integration
is strongest in Asia Pacifc and Latin America, where 87%
and 85% of 3PL users expressed agreement, and was evident
to a lesser extent in Europe (72%) and North America (69%).
Interestingly, in last years study, Asia Pacifc and Latin
America were the areas most interested in collaborating
with 3PLs. This suggests a possible relationship between
3PL users who prefer integrated services to be provided by
their 3PLs, and those who also evidence the greatest interest
in collaboration.
The petroleum (88%), high-tech and electronics (84%), and
automotive (78%) sectors report the greatest use of integrated
logistics services provided by 3PLs. Interestingly, these sectors
also operate mature, complex supply chains. Also, of the 3PL
users who ask their providers for integrated systems and
services, just over half indicate they are able to quantify the
value of those services over individually provided services.
Given the interest in integrated services, the study team
decided to explore this question: What is the purpose and
value of procuring services in an integrated manner, in
contrast to the unbundled or standalone option? The results
of the survey, focus interviews with industry experts and
ASE workshop reveal valuable insights into when, and how,
to make the most of integrated services. Most important,
they affrm that integration of logistics systems and services
is a core competency that must be accounted for in the
relationships between a company and each of its 3PLs.
Benefts of Having 3PLs Provide Needed
Integration
The appeal in looking to the 3PL/4PL sector for help with
logistics integration lies most strongly in its ability to reduce
internal burdens. As seen in Figure 10, three-quarters of
survey respondents cite greater ease of managing outsourced
logistics services, such as having one point of contact, as
a beneft. Focus interview participant Danny Garst, Vice
President of Supply Chain Management and Information
Technology at electronics manufacturer Philips Consumer
Electronics, notes that integrated logistics is a way to attain
end-to-end accountability from a 3PL. Other popular reasons
include reduced management time (69%) and the ability for
the company to focus on core business (67%).
Integrated Logistics
Managing Systems and Services for Best Results
!
Integrated Logistics
Managing Systems and Services for Best Results
!c
The importance of cost and services are also clearly on the
minds of 3PL users; more than half state that effciency of
overall logistics/lower costs (such as volume discounts) and
overall logistics effectiveness and improved service were
important benefts. Just over half say outsourcing logistics
to an integrated services provider allows a reduction in the
number of logistics service providers; this is consistent
with the 47% of 3PL users who indicate they are moving to
rationalize or reduce the number of 3PLs they use. Another
beneft, mentioned by both focus interview experts and ASE
participants, is the ability of 3PLs to better handle variances
within the business.
ASE participants also note the ability to exploit a 3PLs
international experience coupled with its integration
capabilities to more easily move into new markets. Its
a particular beneft to midsized companies (shippers) that
are involved in global supply chains and dont have the
personnel and expertise that are needed, adds Rosalyn
Wilson, Supply Chain Consultant and co-author of the book
Securing Global Transportation Networks. But this requires
a tradeoff between cost and experience and the level of risk
the company would like to take.
Some Limitations to Consider
Turning to the 3PL sector for needed integration of logistics
systems and services is certainly not appropriate for every
company, however. Flexibility was the most-selected reason
respondents had for preferring individually provided services
over integrated services, as seen in Figure 11. Just over half
of those 3PL users surveyed that do not prefer integrated
logistics services actually provide their own integration of
logistics services, and 44% expressed a desire not to be
dependent upon any external party. This was true no matter
the size of the companys revenues, although the preference
not to integrate too much with logistics suppliers in order to
stay independent tends to become more of a priority among
larger organizations.
Loss of control is also a big issue for some companies. They
fear losing internal competencies, as well as visibility into
their own supply chains. Its hard to check on the 3PLs
performance, says Vincent van Blitterswijk, Logistics
Consultant for the Dutch Shippers Council (EVO). If only
one integrator is used, it can be hard to compare performance
with others. The lack of visibility to areas for improvement
can damage trust, and bundled solutions can hide cost, notes
one focus interview participant.
ASE participants express doubt regarding the ability of some
3PLs to be equally competent at all the services offered
plus integration of those systems and services. One asks,
Is sustaining quality and cost savings with an integrated
provider more challenging than with a 3PL that does not
provide integrated services? Managing the change required
to pull off outsourcing of integration was another diffculty;
companies must not only switch gears, but also develop
competency in managing an integrated logistics provider.
Benefts all
regions
Greater ease of managing outsourced logistics services (e.g., one point
of contact)
75%
Reduced management time and effort 69
Enabled our company to focus more on our core business 67
Overall logistics effciency/lower cost (e.g., volume discounts) 56
Overall logistics effectiveness/improved service 56
Reduction in the number of logistics services providers 51
Enhanced shipment visibility 39
Quicker response 37
Optimized capacity utilization 34
Extended global reach (network) 31
Custom-built solutions 24
Capability to work on more complex solutions 24
Risk-sharing with integrated logistics services provider 23
Inventory reduction 22
Early problem detection 22
Proactive IT approach 18
Figure 10: BeneFiTS exPerienced FroM The uSe oF
inTegraTed LogiSTicS ServiceS
Figure 11: Why reSPondenTS do noT PreFer inTegraTed
LogiSTicS ServiceS over individuaLLy
Provided LogiSTicS ServiceS
reason all
regions
We experience greater overall fexibility 61%
We provide our own integration of logistics services 51
Desire not to be dependent on any external party 44
Prefer not to integrate operations too much with logistics
suppliers to stay independent
42
Concerns with service quality available from integrated logistics
service suppliers
36
We only outsource a single logistics service 36
More expensive to use integrated logistics services provider 31
Integration of logistics services is one of our core competencies 26
Our technology systems are more fexible and more user-friendly 15
Data/message standardization problems 9
!
Figure 12: Which oF The FoLLoWing ServiceS are Provided By your 3PL in an
inTegraTed Manner?
integrated Logistics Services
Provided by 3PL
all
regions
north
america
europe asia
Pacifc
Latin
america
Domestic road transportation 78% 76% 84% 77% 64%
Warehousing 74 67 80 73 74
Shipment consolidation 66 64 61 76 60
Customs clearance and brokerage 63 62 58 74 55
International road transportation 60 54 73 47 66
Air transportation 57 55 55 68 47
Ocean carriage 51 51 48 57 45
Cross-docking 50 49 57 47 37
Value-added services (e.g., packaging, kitting,
labeling)
48 40 53 52 45
Express 47 41 53 49 38
Order entry, processing, and fulfllment 20 20 14 23 29
Supply chain planning services 17 20 17 14 16
What Services are Integrated?
To date, the same services that tend to be outsourced individually
are also those most likely to be outsourced in an integrated
manner (Figure 12): domestic road transportation, warehousing,
shipment consolidation, customs clearance and brokerage, and
international road transportation. Value-added services, order
entry/processing/fulfllment, and supply chain planning services
are less often outsourced in an integrated way, or at all. One ASE
workshop participant notes that commodity activities seem the
most likely to be outsourced in an integrated manner.
Larger frms are slightly more likely to outsource supply chain
planning services, cross-docking, and domestic transportation
through an integrated services arrangement, and less likely to
outsource integrated warehousing services.
As indicated in Figure 13, respondents use an average of
3.4 integrated services providers, with slightly more used by
respondents in Europe and slightly fewer for Asia Pacifc.
Latin American respondents report an average 2.3 providers.
Larger companies typically use more providers than smaller
ones, except in Latin America.
Making Integrated Services Work
Entrusting the integration of logistics services to a 3PL
requires commitment and preparation on both sides of the
deal. There are essential issues that must be worked out,
including who pays for the integration, what metrics will
measure and defne success, and the availability and role of
IT. One of the most sensitive areas expressed by users is how
to extract the best value while avoiding excessive dependency
on the 3PL.
Structuring the Deal: Focus interview and ASE participants
agree that a maturity model is necessary to help guide both
parties to an integrated services contract. Focus interview
experts recommend a crawl-walk-run approach, starting
with a specifc service or piece of the business and evolving
from there. After take-over the 3PL must be able to manage
the same scope with the same quality, cautions Jrg Hess,
Head of Logistics for telecom provider Swisscom. In the
next stage effciency and cost reduction must be achieved by
the service provider. In the third stage the business can be
expanded to new areas.
One of the focus interview participants offers this very
insightful remark: Very few companies have the ability to
evolve and integrate logistics services all by themselves
these same companies have diffculty acting as their own
4PL/consultant to conduct their activities in an integrated
manner using a combination of their own capabilities and
external assets.
Relationships are critical as well, adds Philips Garst. The
key to successful continuity is the people who are involved
in the relationship. You need to have people who can keep
the relationship moving in the right direction. Internally,
a strong and highly skilled project team is required to set
up the outsourcing of integrated logistics, ASE participants
concur. Once stabilized, an operational team is necessary to
monitor and control performance and adapt as required.
.
Who Pays?: Systems and services integration requires
considerable front-end investment, and the assignment of
these costs may be somewhat controversial. Although the
expectation is that costs should be split, practical experience
suggests the costs fnally have to be carried by the customer,
says one focus interview participant. EVOs van Blitterswijk
notes 3PLs must be assured their initial outlay is protected
with a long contract or other formula for compensation;
development of a business case is useful to test the benefts
to each party. Activity-based costing, open-book, and
transaction cost calculations borrowed from partner models
are useful for such relationships, adds Swisscoms Hess.
Clearly, integration of logistics systems and services is a
core competency that companies must be willing to pay for,
whether internal or outsourced.
The Role of IT: Much of both systems and services integration
is driven by information technology (IT), and many 3PL users
rely on 3PLs to furnish this aspect of integrated logistics.
More than half (56%) report lacking internal resources to
tackle integration of logistics services on their own. As one
ASE participant notes, technology is critical for fostering
collaboration, visibility, and a demand-driven supply chain.
The IT expectation/performance gap noted in the chapter,
Current State of the 3PL Market, then, is a key concern
for potential purchasers of integrated logistics services.
Assessment of a 3PLs technology infrastructure and its
ability to customize those solutions to suit the processes and
needs of the customer is a critical step in due diligence.
Avoiding Dependency
Integration is sticky; the necessary technical, process, and
people connections between customer and 3PL sometimes
make it diffcult for either or both parties to extract themselves
from such an arrangement. Thus, some 3PL users fear over-
dependence on a particular 3PL. One concern is that the locked-
in nature of the relationship can lead to 3PL complacency,
ultimately decreasing service quality and cost savings. Similar
fears surfaced in our examination of collaboration in the 2007
edition of this report.
Of those who prefer integrated services, 68% agree that their
use of an integrated services provider has created a greater
dependency on that provider than if they had purchased
services individually. This is particularly true for higher-
revenue organizations, which perhaps sport more complex
supply chains and 3PL relationships.
Risk of dependency, then, must be outweighed by results,
suggests Philips Garst. The goal is to discover strategies to
reap the rewards while minimizing dependency. Strategies
from focus interviews and ASE participants include:
Ongoing customer measurement of 3PL performance
and meaningful dialogue between customers and
3PLs to identify ways to improve service and enhance
value. Transparency of cost and pricing for services
facilitates a more open dialogue between 3PL and
customer, allowing both parties to see issues and op-
portunities more clearly.

Figure 13: average nuMBer oF inTegraTed LogiSTicS Service ProviderS uSed

By 3PL uSerS
revenue category all
regions
north
america
europe asia
Pacifc
Latin
america
All Revenue Categories 3.4 3.4 3.9 3.3 2.3
High US $25 billion or more (15 billion
or more)
5.2 4.5 5.5 6.0 2.6
Medium-
High
US $1 billion less than US $25
billion (700 million less than
e15 billion)
3.5 3.6 4.0 3.1 1.6
Medium US $500 million less than US $1
billion (350 million less than
e700 million)
3.0 2.3 4.4 2.6 2.7
Low Less than US$500 million (less than
350 million)
2.7 3.3 2.3 3.0 2.2

.!
Contracting with a single 3PL when appropriate, but
also considering the potential benefts of working
with multiple 3PLs. According to Swisscoms Hess,
the dual-supplier concept provides opportunities
for potential benchmarking against each other and the
larger market.
Judicious use of rebidding 3PL business to address
evolving business needs, while ensuring that contract
lengths are suffcient to allow for effective operating
relationships between 3PLs and customers. Profes-
sor Wolfgang Stlze, Chair of Logistics Management
at Switzerlands University of St. Gallen, suggests
the use of reduced-length contracts to avoid compla-
cency.
Retaining internal expertise needed to effectively
manage relationships with 3PLs, and designing 3PL-
customer relationships that take advantage of the IT
competencies of both organizations.

Integrated Logistics: The Takeaways

Three-quarters of 3PL users prefer to rely upon their 3PL
providers for systems and services integration, particularly
those with more mature, complex supply chains. Easing
the burden of internal management, gaining effciencies,
lowering costs, and improving overall effectiveness are
highly valued benefts. But asking 3PLs to provide needed
integration of systems and services may not be a ft for every
situation. Loss of control, visibility, internal competency,
and perhaps most of all, fear of dependency make potential
users hesitate. These factors also may help to explain
why some customers limit outsourcing contracts to more
routine, commoditized services, rather than to ask for more
innovative, strategic services. 3PL users should take steps
to avoid excessive dependency and structure contracts that
balance the costs and risks. Certainly, careful consideration
is a must when assigning responsibility for the integration of
systems and services.
..
Green Supply Chain
Its Not Whether to Act, its How
Supply chains are going green. The pressure to operate supply
chains in a more earth-friendly way and the importance
of being able to tout those accomplishments to customers
and trading partners is growing by the day. Early adopters
such as New Hampshire dairy manufacturer Stonyfeld Farm
are grabbing headlines and raising expectations with a long
list of green accomplishments. Clearly, survey respondents
are feeling the heat: A substantial 86% agree that a green
supply chain is somewhat or very important today
particularly large companies and those in Latin America.
Respondents agree almost unanimously (98%) that green
supply chain initiatives are somewhat or very important to
their companies futures. (Figure 14)
But uncertainty abounds about what green really means,
how to measure it, how to attain it, and particularly, whether
green practices will result in extra costs or additional savings.
Just over half of 3PL users responding believe green supply
chain initiatives will deliver a positive return on investment,
while 35% are undecided and 14% believe ROI will not be
positive. One approach that may help companies fnd their
way is to think in terms of environmental sustainability, or
processes that support themselves over time, suggests John
Davies, Director of Research, Greener World Media.
Right now, there are few mandates pushing companies to
move to greener practices. But ASE workshop and focus
interview participants feel strongly that doing nothing is
not an option, because eventually a company that does not
act will be penalized in the marketplace or by government
regulations, while those who move aggressively may enjoy
a competitive advantage. Many are wondering: How do we
start, and how can 3PLs help?
Building a Green Action Plan
Three steps are required to begin to act on green, according
to ASE workshop participants:
Become educated
Measure the environmental impact of a companys
supply chain and identify change levers
Embark on business case-supported initiatives
Education: Most companies appear to be at the fact-fnding
stage. Tasks include identifying reliable sources of information,
learning to employ green metrics such as carbon footprint
the carbon dioxide emitted across the supply chain for a single
unit of product and gleaning as much as possible about
others experiences, including any return on investment. Along
the way, companies must separate green hype from fact.
Experts warn that green is not always intuitive, and
greenwashing is rampant. What appears to be a greener
practice may in reality be a more resource-intensive one. A
study, Comparative Energy and Greenhouse Gas Emissions
of New Zealands and the UKs Dairy Industry, conducted
by Professor Caroline Saunders at New Zealands Lincoln
University, found, for example, that the total greenhouse
emissions released in the production and transport of dairy
and lamb shipped to Britain from New Zealand are lower than
the emissions generated by the production of dairy and lamb
in Britain even with the carbon output of transportation
thrown in. Learning to use green metrics will help identify
which process improvements truly deliver on goals.
ASE participants agree that a green maturity model would
be invaluable in helping to guide companies through their

.
Green Supply Chain
Its Not Whether to Act, its How
green initiatives. Another tool is the ISO 14000 family of
standards, which provide organizations with a comprehensive
framework for environment management, including tools to
assess their environmental impact, improve their
environmental performance, and implement processes for
setting and achieving performance improvement targets.
Self-Measurement and Change Levers: Armed with
education, companies can set out to measure their own
operations and understand whats driving their carbon
footprints, and then act on what they learn. Setting a bar
encourages a more concerted effort to clear it.
One question raised by ASE participants is: What are the
practical, defning limits of ones supply chain, and therefore
of ones carbon footprint? Shifting processes upstream does
not exclude a company from responsibility for actions made
on its behalf. ASE participants suggest that companies start
the measurement process with internal operations and their
tier one suppliers.
An important step in the self-discovery process is in sharing
the results. We are in the early days of learning and its
important for companies to be open and honest about what
they are doing currently, no matter what it is, says Nigel
Topping, Head of the Supply Chain Project for the Carbon
Disclosure Project, a non-proft organization focused on the
implications of climate change for corporations and their
shareholders.
Building a Business Case: Each green project must be based
on a sound business case including return on investment,
expected costs and savings, and intangibles such as the impact
on corporate image and relationship to corporate citizenship
goals. One ASE participant dubs this calculation the carbon
ROI the amount of carbon emission reduction per euro/
dollar spent.
Some points to consider in creating a business case, according
to ASE participants:
Given a portfolio of possible initiatives, aim to lever-
age the savings generated from short-term, tactical
efforts to fund longer-term, strategic initiatives.
Each project should be measured against a baseline of
taking no action.
While there is a high correlation between energy cost
savings and reducing greenhouse emissions, certain
green supply chain initiatives may help the environ-

Figure 14: hoW iMPorTanT are green SuPPLy chain iniTiaTiveS To your coMPany?
Level of importance all regions north america europe asia Pacifc Latin america
Today in The
Future
Today in The
Future
Today in The
Future
Today in The
Future
Today in The
Future
Very Important 34% 73% 31% 66% 29% 74% 36% 79% 51% 77%
Somewhat Important 52 25 55 32 55 24 52 19 36 18
Not Important 14 2 14 2 16 2 12 2 13 5

.~
Early adopters are finding that green projects
can generate savings, and even better,
produce revenues while reducing the impact
on the envionment.
.
ment but may cost more than the calculated economic
benefts. Realistically, companies should expect
perhaps 80% of initiatives to create cost savings and
20% to result in a cost increase, but should aim for a
net overall savings.
Though more diffcult to quantify, calculations should
include the marketing benefts available from green
projects. Awards are emerging to recognize environ-
mental excellence, such as The Green Cross Millen-
nium Award for Corporate Environmental Leader-
ship, from Global Green USA and Green Cross
International. Public perception of green can be
particularly valuable and infuential for non-differen-
tiated products, says Matthew Payne, Manager at the
EPA SmartWay Project. As one ASE participant sug-
gests, a locally grown cucumber may be perceived
as more earth-friendly because it travels less distance,
or organic cotton might be seen as greener than
conventionally grown crops.
Companies that outsource to 3PLs must factor in the role of
these partners in attaining green goals. As seen in Figure
15, its far from clear whether the 3PL or the customer
should foot the bill in cases where the costs of achieving
green goals outstrip the fnancial benefts. Overall sentiment
says green supply chain initiatives should not involve any
(net) additional costs, but when they do, the most equitable
approach is for the two parties to split them. ASE participants
comment that as green practices become more widespread,
3PLs may be expected to provide basic green services at
no extra cost, but special initiatives would likely be split
equitably between customer and 3PL.

Karl Feilder, CEO of carbon consultancy The Neutral Group,

contends that green or carbon-reducing measures always
cover their cost. Often, it is a question of payback period,
Feilder says. The question should be raised: Who should
accrue the benefts?
Though green for greens sake attracts public admiration,
most companies will embark on green projects that deliver
on both fnancial and earth-saving fronts. At Wal-Mart,
for instance, projects are now viewed through the lens of
sustainability, which means the initiatives must be acceptable
fnancially, environmentally, and socially.
The biggest challenge and opportunity, Green World Medias
Davies says, is in determining how to channel green initiatives
into driving more revenue.
Joint Customer-3PL Initiatives: A Green
Solutions Catalog
As green becomes a greater factor in operating a supply chain
and managing logistics services, companies outsourcing these
functions will inevitably rely on 3PLs to help satisfy green
goals. But respondents report uncertainty about how much
to weigh green capabilities when choosing 3PL partners,
perhaps due to fears that a commitment to green may be
more costly, at least in the short term. The effect of supply
chain operations on the environment is a factor in selecting a
3PL for 46% of respondents, and is especially important for
high-revenue companies. North American companies are
the least likely to rate this as a factor (39%).
Solutions to Consider:
Improve Transportation Effciency
More than three-quarters of 3PL users rate consolidation,
routing, and mode selection as the top services 3PLs can
contribute to green strategies (Figure 16). Because a 3PL
may manage transportation for multiple shippers, it is
well positioned to leverage transportation optimization
opportunities. However, just 31% indicate that their 3PLs
currently offer these services. Just under half feel 3PLs can
help by improving transportation and/or dock scheduling to
reduce the carbon emissions associated with demurrage. IT,
especially transportation management systems, has a key role
to play in helping optimize transportation.
Figure 15: iF coST oF achieving green exceedS
BeneFiTS, Who ShouLd Be reSPonSiBLe For
addiTionaL coST?
respondent opinion as to Who Should be responsible overall
The 3PL should pay the additional cost 4%
The customer should pay the additional cost 12
The 3PL and the customer should share the additional cost 36
Implementing a green supply chain should never involve extra cost 30
Not sure 18
.o
Shift Modes
Both green and cost concerns are prompting interest in
mode shifts, such as from air to ocean, or over-the-road to
intermodal and rail transportation. Just over half of 3PL
users agree that green goals may lead them to change the
transportation modes they use. According to an EPA fact sheet,
A Glance at Clean Freight Strategies: Shipping Strategies, for
distances over 1,000 miles, rail intermodal can cut fuel use and
greenhouse gas emissions by 65%, compared with truck-only
moves. However, capacity, visibility, and delivery times can be
issues with rail.
Retrain Drivers
Instructing drivers on fuel-saving practices such as no idling,
reducing speed, and avoiding heavy braking and accelerating
helps lower both fuel costs and emissions. Implementing
incentive programs and using fuel-monitoring devices are
effective in reinforcing these new habits. One 3PL reports
that these steps helped increase its fuel effciency by 10%.
Improve Equipment
Options available to increase vehicle fuel effciency range
from small to very large. Many options can be pursued now.
Teardrop-shaped trailers have added 10% cargo volume
for some carriers while delivering a 10% increase in fuel
effciency. Double-deck trailer bulkhead defectors can result
in up to 3% more fuel effciency. The US EPAs SmartWay
program, a public-private partnership to reduce transportation-
related emissions, includes specifcations for equipment
that signifcantly reduces fuel use and greenhouse gases.
Some shippers now require their cargo to be transported by
SmartWay-certifed carriers.
Change Packaging
Packaging changes can lower raw material use, reduce size
and weight for more effcient transportation, and allow
recycling, among other benefts. You might have a higher
up-front cost for bio-friendly packaging, but the recycling
revenue created by that material can oftentimes lead to lower
overall costs, says Matt Kistler, Senior Vice President of
Sustainability at Wal-Mart. Incremental cost in one area
can be mitigated in another.
Sams Club is adopting a new, streamlined milk package
that allows 50% more storage per cubic foot, replaces crates
with recyclable materials, and reduces store deliveries
from four to fve per week to two. Fifty-three percent of
respondents say its important for 3PLs to help reduce the
use of non-recyclable packaging materials. For otherwise
wasted materials, 46% of respondents see value in 3PLs
facilitating reverse logistics processes.
Optimize the Network
Nearly two-thirds (62%) of respondents agree that their
concern for the environment and green supply chain may
cause them to explore ways to reduce their overall need for
transportation, such as redesigning the distribution network
to reduce average length of haul. A distribution network can
also be designed to incorporate pool points and break bulk
centers, thereby improving load utilization and reducing the
carbon footprint. Do we need 50 warehouses? asks Feilder
of The Neutral Group. Often the customer realizes that his
supply chain is suboptimal and overly confused. Carbon
abatement can provide an excellent catalyst for operating
cost reduction and margin improvement.
Figure 16: iMPorTanT WayS a 3PL couLd heLP cuSToMerS
WiTh green SuPPLy chain iniTiaTiveS
Solution area
overall
Most
important
My 3PL
currently
Performs
Improving transportation effciency, and
thereby reducing carbon emissions, through
effective shipment consolidation, routing,
and mode selection
77% 31%
Reducing the use of non-recyclable
packaging materials
53 15
Managing energy effcient distribution
centers
50 15
Improving transportation and/or dock
scheduling to reduce the carbon emissions
associated with demurrage
49 22
Providing consultative advice with regards to
implementing a green supply chain
48 8
Using alternative fuels, such as liquefed
petroleum gas or compressed natural gas, to
reduce greenhouse gas emissions
47 8
Facilitating reverse logistics processes to
recover otherwise wasted materials
46 19
Providing effective inventory management
that reduces the need for small-sized
expedited shipments
43 15
Use of hybrid electric vehicles (internal
combustion engine / electric motor powered
by a rechargeable battery)
40 8
.
ASE participants posit that the concept of economic order
quantity (EOQ) may need to be modifed to consider green
implications. A green EOQ would be useful for companies
considering changes to their supply networks. Logically,
this calculation may skew toward less frequent deliveries
and holding more inventory to minimize the greenhouse
emissions associated with more frequent, smaller deliveries.
But the opposite could be true in some instances where
excess inventory means there was too much production to
begin with, which in itself could result in a higher carbon
footprint.
Move toward Greener Buildings
Half of the respondents feel managing energy-effcient
distribution centers is an important way for 3PLs to help
customers, though just 15% say their 3PLs currently do so.
There are myriad ways, from the small to the radical, to make
facilities more effcient. Using solar or wind power to offset
or meet electricity consumption, replacing air conditioning
with massive fans, and placing occupancy sensors on lights
reduce costs and carbon output. The US Green Building
Councils Leadership in Energy and Environmental
Design (LEED) Green Building Rating System promotes
a whole-building approach to sustainability by recognizing
performance in fve key areas: sustainable site development,
water savings, energy effciency, materials selection, and
indoor environmental quality.
3PL users want to work with their 3PLs on these projects;
nearly half (48%) of 3PL users believe 3PLs could provide
consultative advice on green issues. Currently, just 8% say
their 3PLs actually provide such counseling, revealing an
opportunity for these providers to step up their services.
A theme found consistently across focus interviews and
the ASE workshop is that the time to start is now. Dont
wait for more fuel-effcient vehicles, customer requests,
or mandates. Take advantage of low-hanging fruit to kick-
start green thinking, and evangelize the results of early wins
internally and with partners. A measured, but purposeful,
approach is best.
The debate is over as to whether climate change is real and
we humans are causing it, says Neutral Groups Feilder.
We are now moving into a new phase where early
adopters can gain signifcant market advantage. There will
be some surprising winners and losers.
Green Supply Chain: The Takeaways
Most 3PL users feel that a green supply chain is important
and growing more so. Survey responses regarding ROI, green
as a factor in selecting 3PLs, and changing transportation
modes show some optimism for taking action and reaping
benefts (around 50% agreeing), but also indicate some
hesitancy, with the rest of the population split between
no or not sure. Focus interview and ASE participants
feel strongly, though, that doing nothing is not an option.
They see transforming to a green supply chain as requiring
three steps: becoming educated, measuring current company
conditions and identifying change levers, and embarking on
business case-supported initiatives.
As green becomes a factor in operating a supply chain,
those outsourcing these functions will inevitably rely on
3PLs to help satisfy green goals. The options for greening of
supply chain operations range from small process changes to
substantial capital investments. Generally, 3PL users would
prefer that green supply chain management not incur extra
costs, but feel those costs should be shared if they arise.
Early adopters are fnding that green projects can generate
savings, and even better, produce revenues while reducing
the impact on the environment. The bottom line on green? Do
something, now.

Laundry detergent Shrinks in Size and grows in
Supply chain Sustainability
The days of full-size laundry detergent are numbered. As of
May, 2008, Wal-Mart sells only concentrated liquid laundry
detergent, a project that triggered the transformation of the
entire liquid laundry detergent category across the US retail
industry, according to a Wal-Mart Fact Sheet, Wal-Mart
Concentrated Liquid Laundry Detergent, updated May, 2008.
Both Wal-Mart and Procter & Gamble (P&G) regard the move
as key to their commitment to sustainability, according to
public documents. As reported by P&G, 2X concentrated
detergents produce many green benefts, including
reducing greenhouse gases and CO
2
emissions, saving
water, reducing packaging, and lowering supply chain and
transportation expenses. Each year, P&G projects theyll use:
50,000 fewer cases of product
1,000,000 fewer unit loads,
60,000 fewer trucks
Over 40% less diesel fuel (over 5 million gallons of diesel
fuel per year)
Supply chain activities reduced across DCs and stores
1,200,000 reduced labor hours
17,500 reduced DC pallet storage slots/positions
.c
Supply Chain Security
Concerns Rise as Regulations, Risks Mount
Theft dominates 3PL users thinking when it comes to
supply chain security. Companies of all sizes, regions, and
industries rank theft of material goods as their top security
concern by a wide margin, according to survey respondents.
They rate physical security for goods as among the most
effective security measures 3PLs can provide, and the one
their 3PLs are most able to deliver. Perhaps because of
this, many are relatively satisfed with their 3PLs level
of security.
But there is far more to supply chain security than preventing
theft. A growing cadre of government regulations would
suggest that terrorism is a signifcant threat to supply chains,
while companies themselves appear more likely to look at
the damaging effects of recent port strikes, natural disasters,
border closings, or food contamination scares as disruptions
theyre keen to avoid. In fact, in the area of global trade,
some companies appear to be more concerned with
regulatory compliance and penalties than with the underlying
security issue.
The need for security varies by industry and material
though even a commodity such as corn, which would seem
to need little protection from, say, theft or tampering, is
at growing risk as its market value rises and its potential
as a vehicle for terrorist acts becomes evident. Awareness
of vulnerability is growing, particularly as supply chains
become longer and more complex. However, there is
widespread hesitance to spend on what is perceived as a cost
center with little potential for payback. Fortunately, supply
chain innovators are demonstrating that there are collateral
benefts to supply chain security projects that contribute to a
solid business case.
What 3PL Users Think
3PL Security Level: As stated, many 3PL users are relatively
satisfed with the security provided by their 3PLs 16%
rate them as very secure, followed by 60% calling their
3PLs secure and 22% somewhat secure (Figure 17). 3PLs
are rated very secure or secure by 81% of the life sciences
and pharmaceutical industry respondents, perhaps due to
regulations such as the e-pedigree laws in the US and EU (see
glossary, page 31). Just 66% of those in the manufacturing
industry rate their 3PLs as very secure or secure, which may
result from the less evolved state of security regulations in
that vertical.
The top fve industries in which 3PLs are most in need
of enhanced security, rated as somewhat secure by
respondents, are manufacturing (32%), telecommunications
(27%), chemicals (26%), retail (21%), and high tech (20%).
Top Security Worries: Theft dominates 3PL users supply
chain security concerns 74% select it as important in the
survey. A third of respondents cite natural disasters, followed
closely by tampering with material goods (Figure 18). Their
fears may well be warranted. In two of many recent examples,
falsifed products were introduced somewhere along the
supply chain: In once case, 2GB branded USB sticks were
replaced with 1GB but appeared as 2GB to users. Another
case involved falsifed Italian airplane parts that were later
rumored to have contributed to accidents.
Level of
Security
all
regions
automo-
tive
chemical consumer
Products
Food &
Beverage
high Tech Manufac-
turing
Life
Sciences
retail Telco
Very secure 16% 16% 18% 23% 16% 19% 13% 10% 15% 23%
Secure 60 63 54 55 62 60 53 71 64 50
Somewhat
secure
22 19 26 21 19 20 32 18 21 27
Not secure 2 2 2 1 3 1 2 1 0 0
Figure 17: hoW WouLd you raTe The LeveL oF SecuriTy Provided By your 3PL?
.
Supply Chain Security
Concerns Rise as Regulations, Risks Mount
Supply chain innovators are demonstrating
that there are collateral benefits to supply chain
security projects.

Means for Maintaining or enhancing Supply chain Security

all regions
Most
important
My 3PL
currently
Performs
gaP
Provide physical security for materials goods (e.g., locks, trailer seals, fences,
cameras, etc.)
57% 49% 8%
Develop security procedures in collaboration with the customer 57 42 15
Provide proactive reports and alerts when shipments deviate from planned route
or schedule
54 27 27
Scan shipments at key points (origin, destination, intermediate point) to facilitate
in-transit visibility
50 40 10
Possess a security-related certifcation, such as AEO or C-TPAT 48 36 12
Provide alternative routing for shipments in response to supply chain disruptions 47 30 17
Provide information security (e.g., secure electronic documents exchanged by
trading partners)
42 25 17
Perform physical inspection of goods at key points within the supply chain 41 30 11
Provide GPS-enabled tracking of shipments to enhance in-transit visibility 40 23 17
Monitor environmental conditions associated with shipments (e.g., temperature,
humidity, etc.)
34 20 14
Provide RFID tracking of shipments to enhance in-transit visibility 32 9 23
Perform x-ray or other non-intrusive inspection of goods at key points within the
supply chain
20 8 12
Figure 19: MoST eFFecTive MeanS For 3PLS To MainTain or enhance SuPPLy chain SecuriTy
Information
reduces the
impact of a
security breach.
Security concerns all regions north
america
europe asia
Pacifc
Latin
america
Theft of material goods 74% 67% 78% 79% 74%
Natural disaster disrupt-
ing supply chain activities
33 39 27 29 37
Tampering with material
goods
32 36 20 41 41
Theft of intellectual
capital
26 24 27 32 19
Other materials smuggled
with your shipments
19 21 19 15 23
Terrorist attack disrupting
supply chain activities
17 24 13 16 12
Vandalism of supply chain
assets
12 10 14 9 24
Spoilage of food products
creating a health risk
11 10 11 8 17
Figure 18: iMPorTanT SuPPLy chain SecuriTy concernS For your coMPany
Specifc security concerns vary by industry. Food and
beverage companies rate spoilage of food products creating
a health risk (58%) as their number two concern, while
tampering is the second biggest threat (45%) for life sciences
and pharmaceutical companies. 3PL users with medium-
high and high revenues are much more troubled by theft of
intellectual capital and terrorist attacks than were small and
midsize companies.
Compliance: Complying with a rising tide of government
anti-terror regulations is becoming increasingly onerous for
companies. For example, this year the US Department of
Homeland Security has proposed a new security screening
rule, commonly called 10+2, that will require shippers and
carriers to capture 12 more data elements for shipments
being imported into the US. 10+2 will require importers to
provide signifcantly more data within a 24-hour shipment
window, but few importers and carriers have systems or
processes that can capture and disseminate this information,
according to C. Dwight Klappich, Research Vice President
for ERP and Supply Chain Management at Gartner, in a
Gartner research note, U.S. Customs 10 + 2 Legislation Will
Drive Further IT Spending for Importers.
Many companies perceive the required investment as greatly
exceeding the risk or the payback. Focus interview and
ASE participants express doubts about the ability to enact
measures such as scanning every container, verifying worker
identity daily, researching every delivery address, or even
determining how to report a security breach to authorities.
Fear of violating mandates and thus incurring penalties
and delaying shipments appears to loom more largely to
companies than the terror acts theyre intended to dissuade.
Focus interview participant Dr. Thorsten Blecker, Professor
at the Hamburg University of Technology, points to one
automotive industry executive who observes that mounting
US security rules could effectively eliminate just-in-time
deliveries into the US, a staggering concept.
Reviews are mixed regarding the adoption of the government-
and industry-based certifcation programs designed to make
supply chains more secure. Focus interview participants
see some success in the USs C-TPAT program, which is
currently under review to determine certifcation criteria
for expansion to 3PLs. Adoption of the international AEO
designation, however, has been disappointing. EVO thinks
that is due to the fact that a lot of rules and procedures are
not yet 100% clear, says Danielle Gevers Deynoot, Security
Advisor for EVO, the Dutch Shippers Council. Shippers
are not sure that once they have AEO status, it then would
be acknowledged by the USA, since C-TPAT and AEO are
not fully aligned. Lack of perceived benefts and country-to-
country differences in AEO also hamper enthusiasm.
But even fully compliant is not the same as fully secure.
C-TPAT and AEO can be clearly characterized as
counterterrorism programs, notes Dr. Wolfgang Partsch,
Senior Vice President of Global Supply Chain Services,
Europe, for Tompkins International. To be very frank:
These programs defnitely wont be able to avoid a planned
terrorist attack. They are certainly deterrence measures, but
they cant bring total security.
How to Enhance Security
With more government regulations expected, Partsch predicts
increased outsourcing of supply chain security functions to
3PLs.
In 3PL users view, the top three measures 3PLs can use to
maintain or enhance supply chain security are providing
physical security for material goods (57%), developing
security procedures in collaboration with customers (57%),
and providing proactive reports and alerts when shipments
deviate from planned routes or schedules (54%) (Figure
19). Scanning at key points, possessing certifcations such as
C-TPAT or AEO, and providing alternate routing are
measures cited by about half of 3PL users.
Security glossary
10+2 - Mandated by the SAFE Port Act of 2006, the U.S.
Department of Homeland Security has proposed a new secu-
rity screening rule, commonly called 10+2, that will require
shippers and carriers to capture 12 more data elements for
shipments being imported into the U.S.
AEO - Authorized Economic Operator: An internationally
recognized quality mark indicating a company is a secure
trader and a reliable trading partner.
C-TPAT - Customs-Trade Partnership Against Terrorism: A
voluntary US program in which participants invest in certain
security measures in exchange for benefts including reduced
inspections and expedited border processing.
E-Pedigree A collection of US state regulations and a pro-
posed US national requirement to ensure a chain-of-custody
record in the pharmaceutical supply chain using RFID. Similar
EU regulations require development of a comprehensive
system of traceability within the food and feed businesses.
ISO/PAS 28000:2005: An International Organization for
Standardization (ISO) standard, also called Specifcation for
security management systems for the supply chain, which
specifes the requirements for a security management system,
including end-to-end security assurance.
!
Information
reduces the
impact of a
security breach.
But just as noted with information technology, there is a
gap between what users feel is needed and what 3PLs are
currently able to provide. As noted, many feel 3PLs are able
to meet the physical security needs to prevent theft. But
3PL users are asking for more visibility, meaning proactive
reports and alerts when shipments deviate from their planned
route or schedule. Focus experts and ASE participants view
more effective processes and IT-enabled transparency, such
as what RFID can provide, as tools to close this gap.
Information reduces the impact of a security breach,
explains Rosalyn Wilson, Supply Chain Consultant and
co-author of the book, Securing Global Transportation
Networks. In order to have visibility you need access to real-
time information, being able to give answers and make correct
decisions in response to a security breach or delays.
Minimizing touches throughout processes is essential. If I
want to ship a product from Munich to the US, I already
have an average of 14 possible break points. If I want to ship
to Asia, I may have more than 50. Imagine that number, and
at each of those break points, something may go wrong,
says Tompkins Partsch. Add in several different providers
and IT systems, and the risks multiply.
IT is an enabler to closing holes in security. IT plays a
signifcant and central role, because supply chain visibility
needs to be created with the respective IT tools and
processes frst, Partsch continues. However, its important
to keep in mind that IT always is no more than a tool, not
the solution.
Focus interview experts recommended steps include:
Jointly assessing the current levels and locations of
risk and the capabilities of the 3PL and its customer.

Setting up the right processes. Companies tend to

think in terms of technology, but processes are what
matter.
Assigning responsibility. Smaller companies are
adding security to supply chain management job
descriptions, while larger ones are creating dedicated
positions and even boardroom-level accountability.
Learning to better analyze and act on data, such as
dynamic re-routing.
Exploiting technologies such as global positioning
systems, RFID and container seals.
Being proactive with security, rather than waiting for
regulations.
Adopting of ISO/PAS 28000:2005, an international
security standard that takes an end-to-end perspective.
Increasing collaboration, including setting up
standards of excellence.
Overall, about one-ffth of respondents (21%) are already
collaborating with their 3PLs on security to a large extent
(Figure 20). Another 18% feel such collaboration isnt
necessary, that their 3PLs already provide adequate security
without their help. But the majority (61%) could potentially
benefit from increased collaboration with their 3PLs,
acknowledging a need to start collaborating or characterizing
current collaboration efforts as only limited. The higher the
companys revenue, the more likely they are collaborating
with 3PLs on security, perhaps because they possess the
resources to do so.
Industries differ in the percentage of companies collaborating
with their 3PLs on security to a large extent. High tech
appears to collaborate the most with 3PLs, followed by life
sciences and consumer products, and then retail.

Figure 20: exTenT To Which cuSToMerS are coLLaBoraTiveLy PLanning and coordinaTing
SecuriTy ProceSSeS WiTh 3PLS
extent of collaboration all
industries
auto-
motive
chemical consumer Food &
Beverage
high Tech Manufac-
turing
Life
Sciences
retail
Not at all. Our 3PL already provides
adequate security without our help.
18% 25% 19% 16% 15% 18% 24% 14% 17%
Not at all. However, we need to start
collaborating with our 3PL to drive
security improvements.
13 14 17 12 22 12 21 10 6
To a limited extent. We collaborate
with our 3PL to achieve selected
security improvements.
48 45 50 47 48 41 45 51 57
To a large extent. Most of our security
process improvements are developed
collaboratively with our 3PL.
21 16 14 25 15 29 10 25 20

.

In the food supply chain, the impact of joint collaboration

on security has particular resonance: Insecure food handling
practices, for example, can have dire effects, notes EVOs
Gevers Deynoot. Regulations also affect collaboration: To
maintain AEO status, for example, a company must prove
its suppliers are safe including its 3PLs.
Determining optimal security strategies is frustrating for some
3PL users. One international shipper expresses the array of
supply chain security solutions this way: In general we have
so many things to do, and 80% are not really effective. We
want to invest our time in pinpointed activities that really work.
Making Security Investments Pay
Perhaps the biggest impediment to secure supply chains is
the widely held belief that spending will not be recouped in
tangible benefts.
A secure supply chain always is an effcient one as well,
says Tompkins Partsch. A chain that does not break simply
is more cost effective than one that breaks.
Studies of collateral benefits to supply chain security
investments have shown increases in visibility, effciency,
customer satisfaction, and inventory management, as well as
reduced cycle time, shipping time and costs. A secure work
environment encourages employee retention, and could
lead to lower insurance premiums, notes Wilson. 3PLs with
supply chain security capabilities and certifcations will be
at a competitive advantage. For instance, companies may
prefer to do business with 3PLs that are C-TPAT certifed.

Security: The Takeaways
While theft is top-of-mind for 3PL users when it comes to
security, ensuring a safe supply chain requires assessment of
myriad additional threats, from natural disasters to product
tampering. Users are generally satisfed with 3PLs security
performance to date, but growing awareness of other potential
supply chain disruptors reveals a gap between expectations
and capabilities. Physical security, collaboration, and alerts
top 3PL users lists of the most effective means for 3PLs
to provide security. Users appear more concerned with
the fnancial and operational effects of meeting anti-terror
compliance mandates than the terror acts theyre intended
to prevent. Fortunately, there are a number of concrete steps
companies and their 3PLs can take to begin to assess and
address security gaps, with attaining visibility topping the
list. Even better, innovators have proved that these steps also
yield considerable collateral benefts that help recoup costs
and create a more robust and fexible supply chain.
~
Strategic Assessment
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But not every aspect of the industry has continued to grow
as it did in its more formative years. Although customers
will continue to be drawn to providers that invest in their
ability to integrate services and systems, many often
exhibit a reluctance to move beyond the purchase and use
of operational and commoditized services into the realm of
more innovative, customer-facing, and strategic services.
For users willing to step outside their comfort levels a
bit, however, there is evidence to suggest there are more
benefts to exploit from 3PL partners. For example, when
pain management specialist Endo Pharmaceuticals formed
in 1997, the company chose to outsource the bulk of its
supply chain operation rather than build internal capabilities,
engaging in a 4PL relationship. Earlier this year, the close
integration of Endo with its 4PL enabled them to launch
and begin distribution of two new products within 17
days of acquiring the products or attaining their regulatory
approvals. We achieve a scalability that most theoretical
strategists talk about, but few achieve, says Daniel Carbery,
Senior Vice President of Operations and Generics for Endo.
For those willing to advance current 3PL-customer
relationships beyond todays sticking points, the reward
may well be enhanced supply chain effciencies that deliver
competitive advantage and customer satisfaction.
Integrated Logistics
Entrusting integration of supply chain systems and services to
a 3PL is a decision to be made with much care. Our research
into the issues behind integrated logistics struck a similar
chord as last years assessment of supply chain collaboration:
An initial willingness to cooperate with 3PLs sometimes
diminishes as a company confronts the realities of opening
up their books, providing details about current practices and
improvement needs, developing joint solutions, and sharing
the benefts. The sad news is that, at the end of the day, some
customers still regard the 3PL as a vendor rather than as a
supply chain partner.
The benefts of supply chain collaboration and logistics
integration can be huge, but may only be reaped if a company is
really convinced that this will deliver greater benefts than doing
it themselves or by engaging in traditional customer-supplier
behavior that may be more adversarial than collaborative.
Additional effort is also required of 3PLs that want to be
successful in this arena. Customers will be drawn to providers
that invest in their integrated services offerings. This is
among the payoffs of working to close the IT expectation/
performance gap that has persisted among 3PLs and
their customers. Integration-enabling, open standards-based
technology will help to increase agility, lower costs, and deliver
stronger relationships. Customers that use technology to drive
cross-enterprise processes with 3PLs can get the benefts
of integration without creating an unnecessary level of
dependence upon the provider.
Last year, our strategic assessment asserted that collaboration
is a productive way to deliver value beyond simple cost
savings, with that value derived by mitigating complexity
and enabling a sharing of resources and capabilities. A
successful integrated logistics relationship is actually an
excellent example of collaboration at work when both
partners are truly committed to the effort, there is signifcant
reward to be had for both.

Strategic Assessment
Green Supply Chain
Concern for the impact of human activities on the
environment has catapulted from a fringe issue to a
widely held public and therefore corporate concern,
seemingly overnight. Companies cant afford lukewarm
responses. They must begin to incorporate green thinking
into company and supply chain strategies and action plans
today. The greening of the supply chain will have
strong and increasing effects on the gamut of supply chain
concerns, from strategic issues such as balance sheet impact
to more tactical ones, including modal split, selection of
equipment, business processes and behaviors.
Companies should not be shy about seeking outside advice
regarding green supply chain initiatives. Proper assessment
of carbon footprint and calculating the effects of corrective
actions are not simple things to do, but taking these steps is
a must-do, and resources available to assist in this process
are proliferating. 3PLs have a signifcant opportunity to rise
to the occasion and provide expert advice to their customers
regarding green supply chain initiatives. In addition, a green
maturity model would be extremely valuable in helping
companies devise and evolve green supply chain strategies.
There is a wide array of steps companies can take now to
start addressing greenhouse gas emissions, such as improved
shipment consolidation, transportation optimization, and
driver retraining. As with consultative advice, these activities
also represent areas where 3PLs are poised to play a pivotal
role in helping their customers succeed in implementing
green supply chains.
Creativity will be an important tool in ensuring that green
supply chain efforts can help improve the environment in
a cost effective manner. A unique example is SkySails, a
company that attaches giant towing kites to cargo ships,
reducing a ships annual fuel costs, and related greenhouse
gas emissions, by 10% to 35% on average. Creativity can
also be applied to reworking concepts designed around
cost-savings to also consider carbon savings. For example,
the transportation marketplaces launched during the early
dot-com days were only marginally successful. However,
it is not hard to imagine a reemergence of transportation
marketplaces that enable shippers to merge their volume
with other shippers in an ecosystem that seeks not only to
reduce transportation costs but to reduce greenhouse gas
emissions as well. The concept of carbon ROI, previously
introduced in this report, is another example of merging
fnancial and environmental concepts.
The bottom line is, as trusted advisers on supply chain issues,
3PLs have a responsibility to help their customers, and an
opportunity to differentiate themselves, by becoming green-
savvy. Other resources, such as consultancies, associations,
and government organizations, are also available to help
companies move toward a greener supply chain.
Green is not a fad; it will soon become an important measuring
stick for the success of a supply chain. Companies need to
start their green efforts, now.

Supply Chain Security
The same act now imperative underlies our fnal topic, supply
chain security. As our focus interview experts and ASE
participants made clear, the business community is better off
being proactive with supply chain security solutions than by
waiting for government to impose additional requirements.
Such regulations may bring about a baseline of security
practices that represent the common denominator required
for safe commerce, but companies will likely have specifc
needs that require additional measures.

Government and business are not always focused on the same
threats. For example, government is increasingly focused on
the threat of terrorism, while business is more concerned
about theft and disruptions from natural disasters. If the
business community takes the lead, there is an opportunity to
implement supply chain security in a manner that addresses
both government and business concerns and has a positive
impact on balance sheets. However, if companies dont take
advantage of this opportunity, compliance costs associated
with new government regulations will likely outstrip
potential benefts from enhanced security.
Supply chain security is not just an industry issue. 3PLs and
their customers need to work together to mitigate the risks
inherent in individual supply chains. They must develop
plans to improve security and recover from disruptions
to the logistics network with alternate ways of meeting
customer needs.
Both 3PLs and customers must make
a concerted effort to truly collaborate.
o
The combination of a willing company and a
capable 3PL can result in outcomes far beyond what
are initially perceived as the benefits of outsourcing.
A useful tool is Total Security Management, the practice
of developing and implementing comprehensive risk
management and security practices for a frms entire
supply chain. According to one of our focus interview
experts, Rosalyn Wilson, the conditions that now exist in
transportation security are similar to the situation in place
when the now-revered Dr. W. Edwards Deming tried to
convince the business world in the 1960s that quality mattered
and that Total Quality Management could be used to create
value. Time will likely tell that addressing security also pays
dividends in benefts for the supply chain, including lower
cost, improved service, and increased fexibility.
Multiplying the Benefts
Savvy companies will see an opportunity to multiply their
benefts by seeking solutions that span integrated logistics,
green supply chain, and supply chain security. For example,
engaging a 3PL for integration of systems and services could
make security issues easier to address. Similarly, smart real-
time consolidation of shipments and route optimization,
achieved through implementation of transportation planning
and execution systems, could on the one hand reduce a
companys carbon footprint and on the other hand provide a
tool to reroute and reschedule quickly once there is a supply
chain disruption.

The most advanced 3PLs, those able to provide an integrated
service offering that spans traditional services such as
transportation and warehousing, as well as newer services
encompassing green supply chain and security, will have a true
competitive advantage.
Conclusion
The issues that challenge supply chain executives in 2008
are formidable. Rapidly rising fuel costs, the globalization
of the supply chain, new security threats, and pressure to be
both dynamic and environmentally and socially responsible
are forcing companies to be innovative and strategic in their
supply chain design and execution.

In this years study, we have examined three issues of great
interest to supply chain executives. Outsourcing of integrated
logistics can be considered an option. It can create powerful
benefts for some companies; however, it must be leveraged
cautiously because of the important issues and potential risks
outlined in this report.
Green supply chain and supply chain security cannot be
regarded as negotiable. These are areas where companies
must act, or put their supply chains at an unacceptable level
of risk, whether that risk comes from politics, policy or
public and customer opinions.

The issues addressed here represent only a few of the
challenges and choices executives must face to keep their
supply chains in tune with dynamic market conditions.
Across the thirteen years of this study, it has become clear
that the combination of a willing company and a capable
3PL can result in outcomes far beyond what are initially
perceived as the benefts of outsourcing. A well-run 3PL
brings a multi-company, cross-industry perspective and
array of skill sets and systems to the table, which can be
leveraged by customers with a collaborative mindset and
an understanding of how to best complement their own
capabilities with those of a 3PL.

The relationship that results enriches both partners ability
to tackle emerging issues such as heightened security
requirements and a green supply chain while positioning
both companies for the next, as-yet-unknown, supply chain
challenge.

Credits

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Focus interview experts
H. Earl Adams NCR
Professor Thorsten Blecker Hamburg University of Technology
(TUHH)
Daniel Carbery Endo Pharmaceuticals
Larry Clopp Capgemini
John Davies Greener World Media
Roeland de Koning Capgemini
Karl Feilder The Neutral Group
Danny Garst Philips Consumer Electronics
Georgia Tech EMIL Class of 2009 Georgia Institute of Technology
Danielle Gevers Deynoot EVO, Dutch Shippers Council
Donald Henry NCR
Jrg Hess Swisscom
Matt Kistler Wal-Mart
Olaf Kracker Infneon Technologies AG
Dr. Wolfgang Partsch Tompkins International
Matthew Payne EPA SmartWay Project
Professor Wolfgang Stlzle University of St. Gallen
Nigel Topping Carbon Disclosure Project
Vincent van Blitterswijk EVO, Dutch Shippers Council
Rosalyn Wilson R. Wilson Inc
aSe Berlin Participants
Jrg Baier DHL
Bjrn Beckmann Audi AG
Claude Fischer Georg Fischer Piping Systems
Otto Gretschmann Qimonda AG
Jim Hay Capgemini
Professor John Langley Georgia Institute of Technology
Jan Lindhaus Capgemini
John Love Oracle
Giovanni Lovo Oracle
Anders Lynne Elkem AS
Jim Morton Capgemini
Bernardo Nicoletti Management Consultant
Mikael Pehrsson ICA AB
Dominic Regan Oracle
Markus Scherrer Georg Fischer Piping Systems
Sundar Swaminathan Oracle
Lisa Terry Lisa Terry Editorial Services
The authors of the study would like to thank the Latin America Logistics Center
(LALC), the Shanghai Logistician Club (SHLC), EVO, the Dutch Shippers Council,
the European Logistics Users, Providers & Enablers Group (ELUPEG), Swiss
Shippers Council (SSC), Supply Chain Institute Ltd. (SCISCE) and the Hungarian
Association of Logistics for serving as supporting organizations for this 13th Annual
Third-Party Logistics Study. Under the guidance of Executive Director Maria F. Rey,
the LALC provided contact information for Latin American executives, and also
translated the entire survey into Spanish and Portuguese. The survey effort in China
was facilitated by the SHLC, with the assistance of Tony Xia (Emerson Electric
China) who is one of the founders of the SHLC. Michel Haenen of EVO, the Neth-
erlands, assisted by reaching out to the members of his organization and to his peers
at sister organizations of the ESC, leading to additional responses from Wirtschafts-
kammer sterreich (WKO) and OTM Belgium Shippers Council. The study team
expresses its appreciation to Jim Morton of Capgemini for his diligent and helpful
work as a member of the project team and coordinator of this years study.
Lead Writer: Lisa Terry
c
About the Sponsors
About Capgemini
Capgemini, one of the worlds foremost providers of
consulting, technology and outsourcing services, enables
its clients to transform and perform through technologies.
Capgemini provides its clients with insights and capabilities
that boost their freedom to achieve superior results through
a unique way of working the Collaborative Business
Experience and through a global delivery model called
Rightshore

, which aims to offer the right resources in the

right location at competitive cost. Present in 36 countries,
Capgemini reported 2007 global revenues of 8.7 billion and
employs over 86,000 people worldwide. More information
is available at www.capgemini.com.
Capgemini is committed to creating business value in
logistics outsourcing. Its Distribution practice serves 14 of
the top 20 global Logistics Service Providers (LSPs) and has
spent more than 30 years helping LSPs successfully navigate
a rapidly evolving business environment. Capgeminis
Supply Chain practice works with LSPs, their customers,
and other trading partners to create an end-to-end system
that supports supply chain visibility, transportation and
network optimization, and collaborative connectivity.
About The Georgia Institute of Technology
The Georgia Institute of Technology, located in Atlanta, is a
leader in logistics and supply chain and logistics education.
Through its School of Industrial and Systems Engineering
(ISyE) and the Supply Chain and Logistics Institute
(SCL), Georgia Tech is committed to serving logistics
educational needs through its degree programs and its
comprehensive professional education program. Georgia
Tech also conducts a fully accredited Executive Masters in
International Logistics (EMIL) program, a Supply Chain
Executive Forum and a Leaders in Logistics Research
Program. Global involvement is facilitated through The
Logistics Institute Asia Pacifc, a program in partnership
with the National University of Singapore.
For more information, please visit
www.isye.gatech.edu and www.scl.gatech.edu.

About the Sponsors

About Oracle
Oracle provides a complete set of capabilities that enable
leading, global LSPs to streamline business processes, develop
new offerings and keep customer service levels high.
In particular, Oracle

Transportation Management delivers

robust transportation planning and execution capabilities
to shippers and third party logistics providers. It integrates
and streamlines transportation planning, execution, freight
payment, and business process automation on a single
application across all modes of transportation, from full
truckload to complex multi-leg air, ocean, and rail shipments.
With Oracle Transportation Management, companies are
able to lower transportation costs, improve customer service
and asset utilization, and provide fexible, global fulfllment
options.
Oracle is the worlds largest enterprise software company.
For more information about Oracle, please visit our Web site
at http://www.oracle.com.
About DHL
DHL is the global market leader of the international
express and logistics industry, specializing in providing
innovative and customized solutions from a single source.
DHL offers expertise in express, air and ocean freight,
overland transport, contract logistic solutions as well as
international mail services, combined with worldwide
coverage and an in-depth understanding of local markets.
DHLs international network links more than 220 countries
and territories worldwide. Some 300,000 employees are
dedicated to providing fast and reliable services that exceed
customers expectations. DHL is a Deutsche Post World Net
brand. The group generated revenues of more than 63 billion
euros in 2007.
For more information, please visit www.dhl.com.
For additional copies of this publication or for more information
about the study, please contact any of the following:
c. john Langley jr., Ph.d.
Professor of Supply Chain Management
Georgia Institute of Technology
Atlanta, Georgia, USA
T: +1 404 894 6523
[email protected]
jim Morton
Senior Manager, Consulting Services
Capgemini U.S., LLC
Atlanta, Georgia, USA
T: +1 404 806 5057
[email protected]
dennis Wereldsma
Global Distribution Sector Leader
Capgemini Nederland B.V.
Utrecht, the Netherlands
T: +31 30 689 6076
[email protected]
Sundar Swaminathan
Senior Director,
Industry Marketing - Services, Transportation, and Construction
Oracle Corporation
Irving, Texas, USA
T: +1 972-501-3897
[email protected]

john Murphy
Senior Director, Logistics and Transportation
Oracle Corporation
King of Prussia, Pennsylvania, USA
T: +1 609-636-1329
[email protected]

Thomas a. deakins
Director
Industry Strategy - Logistics
Oracle Corporation
Farragut, Tennessee, USA
T: +1 865 966 1370
[email protected]
Sven hoemmken
Head of Global Business Intelligence
DHL Global Customer Solutions
Kelsterbach, Germany
T.: +49 610 775 1102
[email protected]
jrg M. Baier
Head of Knowledge Management
DHL Global Customer Solutions
Brussels, Belgium
T.: +32 2711 7153
[email protected]