Logistics Supply Chain Risk: Are 3PLs Taking on Risk Management for Shippers?

In the procurement sector, most business process outsourcing (BPO) firms aren’t doing very much in the area of supply risk (or broader supply chain risk) compared to more typical indirect procurement management, category management, tactical buying, and related initiatives focused almost entirely on operational and transactional efficiency and/or purchase cost reduction. Granted, supplier management BPO specialists such as Achilles are absolutely working in this space in outsourcing. But for the most part, supply risk is not something that most procurement and supply chain organizations have opted to outsource.

In the logistics area, however, BPOs (i.e., 3PLs) could be taking on an increasing role in monitoring risk. But they’re not necessarily ready for it, a recent Supply Chain Digest article suggests. In framing the topic, the authors note that “Evidence is mounting that shippers are asking their 3PLs to take on more supply chain risks contractually, a potentially major inflection point in logistics outsourcing … From risks associated with inventory management to potential vendor chargebacks from retailers, shippers are asking and/or requiring 3PLs to assume increasingly high levels of performance risk - and both sides need to well manage this changing dynamic.”

One of the challenges the article observes is that “shippers sometimes either lack the knowledge themselves about how to provide the right risk information to their 3PLs so it can be appropriately quantified – or think they can get some advantage from hiding risk-related information from 3PL candidates during the selection and contracting steps, hoping to shift risk responsibility at a low-ball price.”

Within the broader procurement and supply chain outsourcing sector, Spend Matters observes that it is rare to see buying organizations purposely attempt to hide important details from potential BPO partners during the sourcing and selection process. Yet perhaps the trend SCD highlights in logistics will slowly work its way into other aspects of procurement and supply chain BPO.

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