What Shippers Look For In 3PL Partnerships
Third-party logistics (3PL) providers are navigating particularly challenging times. The industry has experienced a decline in revenues, and the growth in demand for 3PL services has slowed compared to previous years. Additionally, issues like inflation, high taxes, and government regulations are driving up costs for 3PLs.
These insights are drawn from the 2024 Inbound Logistics 3PL Perspectives report. In our 19th annual report, we've gathered and analyzed data from both 3PLs and shippers to examine the current services offered by 3PLs, identify what shippers seek in their 3PL partners, and explore the common challenges they face.
Top Issues Shippers Face:
The percentage of shippers citing transportation cost reduction as a top challenge has increased from 37% in 2023 to 41% in 2024. Concerns about business process improvement, customer service, and supply chain visibility have also risen significantly.
Image: Top Challenges Shippers Face. Source: 2024 Inbound Logistics Perspectives 3PL Market Research Report.
Top Reason for a Failed 3PL Partnership, According to Shippers:
Poor customer service remains the leading cause of failed 3PL partnerships, though it has decreased from 60% in 2023 to 36% in 2024.
Conversely, the issue of broken promises has increased, with 29% of shippers citing it as the top reason for partnership failure, up from 17% in 2023. Cost concerns have also risen, with 21% identifying it as a primary reason for partnership failure, compared to 11% in 2023.
Image: Top reason for a failed 3PL Partnership. Source: 2024 Inbound Logistics Perspectives 3PL Market Research Report.
Price or Service: Which Is More Important to Shippers?
While shippers are mindful of costs, they still prioritize good service over price.
- 74% of shippers indicate that service is more important than price in 2024, down from 81% in 2023.
- Companies recognize that superior service from a 3PL can lead to long-term cost efficiencies.
This shift is understandable given the rising costs of goods and services, yet many logistics executives believe that superior service can ultimately reduce costs through more efficient supply chain management.
Image: Is price or service more important? Source: 2024 Inbound Logistics Perspectives 3PL Market Research Report.
Should Shippers Partner with One or More 3PLs?
The decision to partner with one or multiple 3PLs depends on individual circumstances. This year, 39% of respondents believe there is no single best approach. However, 33% recommend partnering with a single 3PL, up from 23% in 2023, while 28% advocate for working with multiple 3PLs.
Image: Should Shippers Partner With One or More 3PLs? Source: 2024 Inbound Logistics Perspectives 3PL Market Research Report.