Findings from an annual survey of CEOs from the world's largest third party logistics providers were presented at the recent 2007 CSCMP (Council of Supply Chain Management Professionals) Annual Conference in Philadelphia. Sponsored by Penske Logistics, the research study has been conducted annually since 1994 by Dr. Robert C. Lieb, Professor of Supply Chain Management at Northeastern University, and looks at trends across three regions: North America, Europe and Asia-Pacific. The data was presented at the meeting by Dr. Lieb, and Vince Hartnett, President of Penske Logistics.
Forty CEOs -- 21 from North America, nine from Europe and 10 from Asia-Pacific --responded to the survey, providing their insights into the opportunities and challenges facing 3PL providers. Over the years, several themes have continued to materialize as significant to 3PL CEOs:
Optimism About Revenue Growth
CEOs are optimistic about growth prospects -- 87% of them exceeded or met revenue growth projections last year. The CEOs shared their one-year industry revenue growth projections, averaging 11.1% for North America, 7.5% for Europe, and 12.9% for Asia-Pacific. Additionally, three-year projections were 11.4% for North America, 9.7% for Europe and 12.6% for Asia-Pacific.
A dominant theme throughout the CSCMP conference, CEOs identified global expansion as one of the key challenges, as well as opportunities, facing the industry. In all three regions where the survey was conducted, these CEOs indicated that various forms of international expansion were the most important opportunities in their market. Large 3PLs are finding these opportunities in emerging regions, specifically Mexico, Eastern Europe, Russia, China and India. Additionally, these companies are facing increasing customer demands for logistics providers with a true global reach.
For example, CEOs anticipate strong demand for logistics services in Asia, where manufacturing is inexpensive and the market has traditionally been dominated by local providers. Consequently, Asia-based 3PLs are finding it increasingly difficult to remain competitive with the emergence of large foreign-based competitors.
Procurement is more involved in the logistics provider selection process than before, according to 87% of survey respondents. This shift has been met with mixed results across the industry. Some CEOs reported that procurement's involvement has caused the process to become too cost-oriented and lengthened the sales cycle, while others reported that procurement's involvement has brought more attention to the selection of the 3PL.
Downward Pricing Pressures
Combined with increased customer demands for more service for less, pricing pressures continue to afflict the industry, and 87% of the CEOs surveyed indicated that their companies have taken steps during the past year to address those pressures. These steps include increasing emphasis in value-selling, focusing on cost reduction as a means of improving margins, being more selective about what customers to work with, and developing more specific service menus which emphasize integrated solutions and high-margin value-added services.
It comes as no surprise that talent shortage was identified by CEOs as one of the top issues logistics companies face. According to the survey, in North America in particular, CEOs indicated they are implementing new recruitment, training and retention programs in order to remain competitive and attract new talent.