To survive in this volatile business environment, third-party logistics providers and their customers must work together to build up their digital capabilities and talents while also focusing on meeting the end customer’s needs.
C. John Langley Jr., Ph.D. (jlangley@psu.edu) is Professor of Supply Chain Management at Penn State University’s Smeal College of Business and the Department of Supply Chain and Information Systems, and Founder of the “Annual Third-Party Logistics Study.”
Sylvie Thompson is a supply chain executive focused on driving revenue, margin, and profitable results by combining emerging technologies with traditional supply chain best practices. She has co-led the Annual Third Party Logistics Study for the past three years.
Effectively matching supply and demand has always been challenging, but the current volatility in many supply chains has made it even harder, creating new and unique problems. Companies desperately need innovative and improved solutions to deal with supply chain complexity and create agility and responsiveness.
One key facilitator of success will be the ability of supply chain partners to be well-aligned and to optimize the capabilities of each partner within the network. Now in its 27th year, our “Annual Third-Party Logistics Study” has time and again shown the benefits of working with logistics service providers to navigate market uncertainties and achieve overall success for the supply chain.
High-level research results from this year’s study indicate three key focus areas for strengthening relationships between third-party logistics providers (3PLs) and their customers: 1) the ability to collaborate in the interest of creating value for customers and consumers, 2) the ability to create insight through digitization and analytics, and 3) the critical need for talent. (A broader and more detailed summary of the research will be presented at the CSCMP EDGE Conference in Nashville, Tennessee, on September 19.)
Creating value for the end customer
For 3PLs and shippers to have a successful relationship, both parties need to understand the overall supply chain goals and use this knowledge to create effective working relationships.
As the primary flows of products and services in supply chains are downstream toward the eventual consumers and business customers, the supply chain’s most important priorities should be related to satisfying demand and creating value for these parties.
Ideally, then, all participating supply chain organizations, including 3PLs, should have some understanding of demand patterns at the customer/consumer level that are driving requirements for the overall supply chain. One way to achieve this is by sharing available forecast and demand planning information relating to the needs of customers and consumers.
The best results are achieved when both 3PLs and their customers are working with accurate information and are well-aligned on goals, objectives, and working relationships. 3PLs and customers must also be aware of factors that may impact the ability of supply chains to meet these overall objectives. Partners should be willing to share information on potential problems and issues—these could range from a shortage of transportation capacity to unexpected volatility in the availability of needed materials and supplies.
Digitization and analytics
For many years, our “Annual Third-Party Logistics Study” has documented that shippers view IT capabilities as an essential element of their 3PLs’ expertise. That sense has intensified over the past year as 74% of customers participating in this year’s study noted that technology plays a greater role in their 3PL partnership than it did just three years ago.
Furthermore, what customers are looking for in terms of that expertise has evolved and become more sophisticated. One question for shippers that is asked in each of our yearly studies is, “Which technologies, systems, or tools are ‘must haves’ for a 3PL to successfully serve a customer in your industry?” Figure 1 compares the results from this year’s study to those of the prior year. This figure also indicates the percentages of participating 3PLs that indicate those capabilities are currently available.
[Figure 1] Importance of IT capabilities in shipper-3PL relationships Enlarge this image
While more traditional execution and transactional software—such as transportation management systems and warehouse management systems—continue to rank highly, there was a growing importance expressed for the availability of digital and analytical technologies. (In the interest of clarity, digitization refers to the conversion of information to a digital format, and analytics refers to the use of mathematical and statistical approaches to help solve problems intelligently using digital data.) A related finding from last year’s study is that 64% of customers noted that they were investing in intelligent data analytics. While there are some variations in year-over-year data, Figure 1 indicates there is a continued or growing interest in advanced analytics and data mining, warehouse automation, and global trade management solutions.
Findings from this year’s study indicate that this shift in focus toward digitization and analytics will continue to be of great importance for 3PLs as well. Referring to Figure 1, 54% of 3PLs reported having capabilities in the areas of advanced analytics and data mining tools. However, gaps are noted in the areas of automation and global trade management solutions.
We believe that to deal successfully with future supply chain challenges, 3PLs and their customers will require significant dedication to digitization and the use of analytics. Coupled with wisdom and experience, these analytical tools will facilitate the development of complex solutions to problems faced both individually by 3PLs and their customers, as well as those problems they face in collaboration.
Talent
The need for and availability of talent in supply chains have become critical issues for many organizations. This includes both shippers and 3PLs. Almost 80% of shippers stated that labor shortages have impacted their supply chain operations, and 56% of 3PLs stated that labor shortages have impacted their ability to meet customer service-level agreements (SLAs). In particular, roughly two-thirds of all respondents to the “27th Annual Third-Party Logistics Study” survey noted that recruiting and retaining both hourly and certified/licensed/skilled hourly workers is an area that they are struggling with and believe they will continue to struggle with for some time.
But retention challenges are not limited to hourly employees. Bloomberg, in the spring of 2022, reported that supply chain managers have been quitting their jobs at the highest rate since at least 2016.1} This assertion was based on calculations performed by LinkedIn. Each month, the website analyzes the number of people who left their job in the past month and then compares that number to a baseline average from 2016. The average “separation rate” for 2020–2021 for supply chain managers was 28%, the highest in the five years since the company started tracking this data. According to the article, factors for these turnovers include burnout, desire for increased compensation, and demand for experienced supply chain managers to solve supply chain problems at nontraditional supply chain organizations.
Further complicating the recruitment and retention challenges is the fact that supply chain roles are evolving quickly, and the skills and talents needed today are different than they were just a few years ago. For example, supply chains are increasingly becoming data-driven, and the need for real-time visibility continues to grow. As a result, skills related to data analytics and digital technologies are vital and in high demand.
Meeting the rising challenge
The success of 3PL–customer relationships always boils down to their ability to create value for their customers and their businesses, as well as for consumers and end customers. But as disruption and complexity increase, effectively meeting those needs has become even harder.
In response, 3PLs and their customers will need to work together to enhance their agility and responsiveness. Technology, data, and analytics certainly will help supply chain practitioners meet these shifting needs and implement new and innovative supply chain strategies. In addition, both 3PLs and their customers will need to ensure that they have the right people with the right skills and talents. 3PLs and customers will need to work together to establish technology and talent-acquisitions strategies that complement each other, as they work to create more resilient and effective supply chains.
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
As U.S. businesses count down the days until the expiration of the Trump Administration’s monthlong pause of tariffs on Canada and Mexico, a report from Uber Freight says the tariffs will likely be avoided through an extended agreement, since the potential for damaging consequences would be so severe for all parties.
If the tariffs occurred, they could push U.S. inflation higher, adding $1,000 to $1,200 to the average person's cost of living. And relief from interest rates would likely not come to the rescue, since inflation is already above the Fed's target, delaying further rate cuts.
A potential impact of the tariffs in the long run might be to boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of these tariffs means we likely won't see such benefits for a while, and the immediate damage will be more significant in the meantime, Uber Freight said in its “2025 Q1 Market update & outlook.”
That market volatility comes even as tough times continue in the freight market. In the U.S. full truckload sector, the cost per loaded mile currently exceeds spot rates significantly, which will likely push rate increases.
However, in the first quarter of 2025, spot rates are now falling, as they usually do in February following the winter peak. According to Uber Freight, this situation arose after truck operating costs rose 2 cents/mile in 2023 despite a 9-cent diesel price decline, thanks to increases in insurance (+13%), truck and trailer costs (+9%), and driver wages (+8%). Costs then fell 2 cents/mile in 2024, resulting in stable costs over the past two years.
Fortunately, Uber Freight predicts that the freight cycle could soon begin to turn, as signs of a recovery are emerging despite weak current demand. A measure of manufacturing growth called the ISM PMI edged up to 50.9 in December, surpassing the expansion threshold for the first time in 26 months.
Accordingly, new orders and production increased while employment stabilized. That means the U.S. manufacturing economy appears to be expanding after a prolonged period of contraction, signaling a positive outlook for freight demand, Uber Freight said.
The surge comes as the U.S. imposed a new 10% tariff on Chinese goods as of February 4, while pausing a more aggressive 25% tariffs on imports from Mexico and Canada until March, Descartes said in its “February Global Shipping Report.”
So far, ports are handling the surge well, with overall port transit time delays not significantly lengthening at the top 10 U.S. ports, despite elevated volumes for a seventh consecutive month. But the future may look more cloudy; businesses with global supply chains are coping with heightened uncertainty as they eye the new U.S. tariffs on China, continuing trade policy tensions, and ongoing geopolitical instability in the Middle East, Descartes said.
“The impact of new and potential tariffs, coupled with a late Chinese Lunar New Year (January 29 – February 12), may have contributed to higher U.S. container imports in January,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “These trade policy developments add significant uncertainty to global supply chains, increasing concerns about rising import costs and supply chain disruptions. As trade tensions escalate, businesses and consumers alike may face the risk of higher prices and prolonged market volatility.”
New York-based Cofactr will now integrate Factor.io’s capabilities into its unified platform, a supply chain and logistics management tool that streamlines production, processes, and policies for critical hardware manufacturers. The combined platform will give users complete visibility into the status of every part in their Bill of Materials (BOM), across the end-to-end direct material management process, the firm said.
Those capabilities are particularly crucial for Cofactr’s core customer base, which include manufacturers in high-compliance, highly regulated sectors such as defense, aerospace, robotics, and medtech.
“Whether an organization is supplying U.S. government agencies with critical hardware or working to meet ambitious product goals in an emerging space, they’re all looking for new ways to optimize old processes that stand between them and their need to iterate at breakneck speeds,” Matthew Haber, CEO and Co-founder of Cofactr, said in a release. “Through this acquisition, we’re giving them another way to do that with acute visibility into their full bill of materials across the many suppliers they work with, directly through our platform.”
“Poor data quality in the supply chain has always been a root cause of delays that create unnecessary costs and interfere with an organization’s speed to market. For manufacturers, especially those in regulated industries, manually cross-checking hundreds of supplier communications against ERP information while navigating other complex processes and policies is a recipe for disaster,” Shultz said. “With Cofactr, we’re now working with the best in the industry to scale our ability to eliminate time-consuming tasks and increase process efficiencies so manufacturers can instead focus on building their products.”