Procurement is Influencing 3Pls and Logistics Decisions More than Ever Before

Supply and Demand Chain Executive recently featured some of the highlights of a joint study carried out by Northeastern University and Penske Logistics which examined the world outlook for 40 CEOs from large third-party logistics providers. The results are fascinating -- I would encourage you to read the entire above-linked article summarizing the report -- because 3PLs and logistics companies are truly on the frontlines of global sourcing. But on a different note, one of the findings of the study that I found most curious was how the CEOs of these organizations are concerned about the "increased involvement from procurement during the selection process" which puts them "under pressure to lower prices while increasing service offerings."

In fact, 87% of the survey participants suggested that procurement is "more involved in the logistics provider selection process than before." This is not only contributing to less profitable deals, but also leading to longer sales cycles. According to the story, "Eighty-seven percent of the companies have taken steps ... including: increased emphasis in value-selling ... 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." So let's all give ourselves a round of applause for getting the attention of CEOs in the logistics area whose sales organizations must now face our deft total cost and negotiating hand. But we should also pay equal credence to the counter-sourcing approaches that 3PLs and logistics companies will increasingly use to capture back margin points in the coming years.

Jason Busch

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