CHATTANOOGA, Tenn.—Feb. 23, 2016 (James Street Media Services)—More than 80 percent of domestic Fortune 500 companies outsource their logistics operations and most expect to use third party logistics (3PL) providers more in the coming years, according to the University of Tennessee (UT) study sponsored by Kenco.
The study—Selecting and Managing a Third Party Logistics Provider—finds that companies are still struggling to optimize their use of 3PLs despite growth in every sector of the supply chain over the last quarter century.
“Today’s 3PL is not your grandfather’s 3PL,” says Paul Dittmann, executive director of the Global Supply Chain Institute (GSCI) at the University of Tennessee’s Haslam College of Business. “The scope of third party logistics has widely increased and expectations of them accelerated, but that does not mean firms are using 3PLs to their full advantage.”
Dittmann partnered with Kate Vitasek, author of “The Vested Way,” to find the best practices for creating competitive advantages through use of a 3PL. Their research resulted in the GSCI’s latest white paper.
More than 60 executives interviewed for the study said the biggest mistake they made was not doing a thorough needs assessment before hiring a 3PL. The report also found that many, if not most, bids for third party logistics providers contained unrealistic data on company operations. Omitting business leaders from the selection process was another common pitfall, leading to a lack of business-wide strategy for the partnership.
Selecting and Managing a Third Party Logistics Provider is the second in UT’s Innovations in Supply Chain Series. Kenco a Chattanooga-based provider of integrated logistics solutions and technology, sponsored the report.
“Communication is key to helping our clients succeed,” said David Caines, chief operating officer at Kenco. “The companies that connect us with the right people and have clear strategies in place are the ones we can help the most. This paper reflects that and gives insight into how 3PLs can be better partners as well.”
The study emphasizes clarity of expectations and a balance between accountability and independence for best management of 3PLs. The most successful 3PL partnerships employ elements of Vested methodologies, focusing on outcomes instead of processes, and implementing contracts that provide incentives for 3PLs.
About the Haslam College of Business
The Haslam College of Business at the University of Tennessee, Knoxville, founded in 1914, consists of approximately 5,500 undergraduate and graduate students. Its six departments, nine centers and institutes, three forums, and graduate and executive education programs reach across the for profit, not-for-profit and governmental sectors of business, with a heavy emphasis on practical research. The University of Tennessee, Knoxville, was founded in 1794 and was designated Tennessee’s land-grant institution in 1879.
Kenco is a third-party logistics provider with more than 65 years of experience serving customers throughout North America. By optimizing people, processes, and technology, Kenco supports peak supply chain performance with vertically integrated capabilities that include: value-added warehousing; distribution and fulfillment; comprehensive transportation management; material handling services; real estate management; and information technology—all engineered for operational excellence. Kenco is a privately owned and diversity-certified company that delivers common sense solutions for uncommon value. Learn more at www.kencogroup.com