3PL customer satisfaction levels drop by 7%, says annual report
More than 80% of shippers would describe their 3PL relationship as “successful,” down from 90% in 2022, according to the "2023 Third-Party Logistics Study."
Traditionally, third-party logistics providers (3PLs) and their customers have enjoyed close relationships and high satisfaction levels. But the supply chain disruptions and economic volatility of the last year have put a strain on even the tightest partnerships.
The “2023 Third-Party Logistics Study,” which was released today at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE conference, found that shippers’ satisfaction with their 3PL relationship has declined by 7% from last year. While the vast majority of shipper respondents (83%) still view their 3PL relationship as “successful,” that percentage has historically hovered at 90% or more, according to the report.
According to one of the report’s authors, Sylvie Thompson of NTT Data Services, this drop occurs at the same time that demand for third-party logistics services has increased significantly and that many 3PLs have more work than they can handle. Part of the change in satisfaction level may be a reflection of this shift in power dynamics and that 3PLs may be differentiating their customer service levels, she said in an interview.
“There’s also been a macroeconomic shift, particularly in terms of wages,” added Andy Moses, senior vice president of sales and solutions for Penske Logistics, a sponsor of the study. “3PLs can’t insulate their customers from these macroeconomic shifts, and there may be some tension there.”
The report was founded 27 years ago by John Langley, currently the Clinical Professor of Supply Chain Management at Penn State University to provide an in-depth look at the trends and developments in 3PL market. This year’s report—which is now also authored by NTT Data Services and sponsored by Penske Logistics—details a market that has had to deal with unexpected challenges at the same time that customer expectations have grown.
In spite of the slip in overall satisfaction level, the report indicated that 71% of shippers believe that their 3PL has contributed to improving customer service, and 71% have also found that 3PLs provide new and innovative ways to improve logistics effectiveness. It is perhaps not surprising then, that slightly more than half of all shippers (55%) are increasing their use of outsourced logistics services. However, 71% are considering consolidating the number of 3PLs used.
In addition to reviewing the current state of the market, this year’s study also delved deep into three key themes: the talent crisis, reverse logistics, and seven basic principles that the researchers believe are essential to supply chain success.
The scramble for talent
The report paints a picture of a supply chain sector feeling the effects of the current labor shortages. According to survey results, 56% of 3PLs and 78% of shippers said labor shortages have impacted their supply chain operations, with many respondents seeing the labor shortages as a long-term crisis.
According to survey respondents, the hardest positions to fill are certified licensed hourly workers, such as truck drivers and equipment operators, as well as pickers and packers. Interestingly the study found that 3PLs are better able to fill hourly worker positions than shippers. According to the report, 49% of 3PLs say they take less than a month to fill an hourly position, compared to 32% of shippers. Perhaps in acknowledgement of this fact, 73% of 3PLs and 46% of shippers report that companies are seeking out 3PL partners to offset labor shortages.
“This is an area of fanatic focus for 3PLs that they have no choice but to navigate,” said Penske’s Moses. “It’s one of the reasons why shippers choose to outsource to a 3PL, because they can’t have the same fanatic focus.”
Going in reverse
Another trend in the logistics field is the growing importance of reverse logistics, particularly as e-commerce sales increase.
To take a closer look at this segment of the supply chain, the report divided shippers into two groups: those that accept both consumer and business returns and those that only accept business returns. A significant majority (61%) of consumer-facing shippers expect their returns volume to grow in the next three years, while only 43% of business-exclusive shippers expect them to grow. However, high percentages of both groups (65% for consumer-facing shippers and 60% of business-exclusive shippers) said that their customers’ expectations for the returns process is growing.
In spite of this growth, the majority of shippers are handling reverse logistics operations in house as opposed to outsourcing to a 3PL. Furthermore, only about a third expect to outsource a greater portion of their reverse logistics operations over the next three years. According to Thompson, many 3PLs struggle to provide shippers with a viable reverse logistics solution given the fact that the focus of reverse logistics often involves reducing losses as opposed to adding value. Additionally reverse logistics and returns management processes are often highly category-specific making it difficult to provide a single solution.
7 success principles
Finally, the report authors highlight what they call the “Seven Immutable Laws of Supply Chain Success,” which include
Customer focus
Supply chain relationships
Data and analytics
Innovation and transformation
Survivability and sustainability
Talent, and
End-to-end supply chain
The authors felt that this “back to basics” section serves as good reminder to both 3PLs and shippers on the building blocks of a good supply chain partnership. The report did find that there are some difference among 3PLs and shippers on which of these principles are perceived to be the top priority and how mature the companies are in each area. Shippers, for example, rank data and analysis as most important, while 3PL rated innovation and transformation is as the top principle.
The study and past versions are available for download at www.3PLStudy.com.
Companies in every sector are converting assets from fossil fuel to electric power in their push to reach net-zero energy targets and to reduce costs along the way, but to truly accelerate those efforts, they also need to improve electric energy efficiency, according to a study from technology consulting firm ABI Research.
In fact, boosting that efficiency could contribute fully 25% of the emissions reductions needed to reach net zero. And the pursuit of that goal will drive aggregated global investments in energy efficiency technologies to grow from $106 Billion in 2024 to $153 Billion in 2030, ABI said today in a report titled “The Role of Energy Efficiency in Reaching Net Zero Targets for Enterprises and Industries.”
ABI’s report divided the range of energy-efficiency-enhancing technologies and equipment into three industrial categories:
Commercial Buildings – Network Lighting Control (NLC) and occupancy sensing for automated lighting and heating; Artificial Intelligence (AI)-based energy management; heat-pumps and energy-efficient HVAC equipment; insulation technologies
Manufacturing Plants – Energy digital twins, factory automation, manufacturing process design and optimization software (PLM, MES, simulation); Electric Arc Furnaces (EAFs); energy efficient electric motors (compressors, fans, pumps)
“Both the International Energy Agency (IEA) and the United Nations Climate Change Conference (COP) continue to insist on the importance of energy efficiency,” Dominique Bonte, VP of End Markets and Verticals at ABI Research, said in a release. “At COP 29 in Dubai, it was agreed to commit to collectively double the global average annual rate of energy efficiency improvements from around 2% to over 4% every year until 2030, following recommendations from the IEA. This complements the EU’s Energy Efficiency First (EE1) Framework and the U.S. 2022 Inflation Reduction Act in which US$86 billion was earmarked for energy efficiency actions.”
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
"After several years of mitigating inflation, disruption, supply shocks, conflicts, and uncertainty, we are currently in a relative period of calm," John Paitek, vice president, GEP, said in a release. "But it is very much the calm before the coming storm. This report provides procurement and supply chain leaders with a prescriptive guide to weathering the gale force headwinds of protectionism, tariffs, trade wars, regulatory pressures, uncertainty, and the AI revolution that we will face in 2025."
A report from the company released today offers predictions and strategies for the upcoming year, organized into six major predictions in GEP’s “Outlook 2025: Procurement & Supply Chain.”
Advanced AI agents will play a key role in demand forecasting, risk monitoring, and supply chain optimization, shifting procurement's mandate from tactical to strategic. Companies should invest in the technology now to to streamline processes and enhance decision-making.
Expanded value metrics will drive decisions, as success will be measured by resilience, sustainability, and compliance… not just cost efficiency. Companies should communicate value beyond cost savings to stakeholders, and develop new KPIs.
Increasing regulatory demands will necessitate heightened supply chain transparency and accountability. So companies should strengthen supplier audits, adopt ESG tracking tools, and integrate compliance into strategic procurement decisions.
Widening tariffs and trade restrictions will force companies to reassess total cost of ownership (TCO) metrics to include geopolitical and environmental risks, as nearshoring and friendshoring attempt to balance resilience with cost.
Rising energy costs and regulatory demands will accelerate the shift to sustainable operations, pushing companies to invest in renewable energy and redesign supply chains to align with ESG commitments.
New tariffs could drive prices higher, just as inflation has come under control and interest rates are returning to near-zero levels. That means companies must continue to secure cost savings as their primary responsibility.
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
Freight transportation providers and maritime port operators are bracing for rough business impacts if the incoming Trump Administration follows through on its pledge to impose a 25% tariff on Mexico and Canada and an additional 10% tariff on China, analysts say.
Industry contacts say they fear that such heavy fees could prompt importers to “pull forward” a massive surge of goods before the new administration is seated on January 20, and then quickly cut back again once the hefty new fees are instituted, according to a report from TD Cowen.
As a measure of the potential economic impact of that uncertain scenario, transport company stocks were mostly trading down yesterday following Donald Trump’s social media post on Monday night announcing the proposed new policy, TD Cowen said in a note to investors.
But an alternative impact of the tariff jump could be that it doesn’t happen at all, but is merely a threat intended to force other nations to the table to strike new deals on trade, immigration, or drug smuggling. “Trump is perfectly comfortable being a policy paradox and pushing competing policies (and people); this ‘chaos premium’ only increases his leverage in negotiations,” the firm said.
However, if that truly is the new administration’s strategy, it could backfire by sparking a tit-for-tat trade war that includes retaliatory tariffs by other countries on U.S. exports, other analysts said. “The additional tariffs on China that the incoming US administration plans to impose will add to restrictions on China-made products, driving up their prices and fueling an already-under-way surge in efforts to beat the tariffs by importing products before the inauguration,” Andrei Quinn-Barabanov, Senior Director – Supplier Risk Management solutions at Moody’s, said in a statement. “The Mexico and Canada tariffs may be an invitation to negotiations with the U.S. on immigration and other issues. If implemented, they would also be challenging to maintain, because the two nations can threaten the U.S. with significant retaliation and because of a likely pressure from the American business community that would be greatly affected by the costs and supply chain obstacles resulting from the tariffs.”
New tariffs could also damage sensitive supply chains by triggering unintended consequences, according to a report by Matt Lekstutis, Director at Efficio, a global procurement and supply chain procurement consultancy. “While ultimate tariff policy will likely be implemented to achieve specific US re-industrialization and other political objectives, the responses of various nations, companies and trading partners is not easily predicted and companies that even have little or no exposure to Mexico, China or Canada could be impacted. New tariffs may disrupt supply chains dependent on just in time deliveries as they adjust to new trade flows. This could affect all industries dependent on distribution and logistics providers and result in supply shortages,” Lekstutis said.