“Ch-Ch-Ch-Ch-Changes”: 3rd Party Logistics CEOs Priming for a Sustainable Future, Retooling to Compete

3 Oct

Last week in San Diego (my second hometown), the Council of Supply Chain Management Professionals (CSCMP) held their Annual Global Conference.  Over 3,100 supply chain professionals from 41 countries attended sessions from over 20 tracks.

At the Conference, the 17th Annual Survey of Third-Party Logistics Providers was presented by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings analyzed responses from 31 third-party logistics company CEOs across North America, Europe and Asia-Pacific.  The study was pretty comprehensive in its findings but me being the sustainability focused guy that I am, poured through the document in search of green stats. And as expected they were there.

With 87 percent of the companies reported to be rebuilding their workforces in 2009, CEOs revealed that green practices are still a major priority in the 3PL market.  Further, more than 80 percent of the companies surveyed now have formal sustainability groups within their companies. Even in the wake of the recession, most of the companies surveyed these are still heavily committed to environmental sustainability issues.  Take note of these numbers according to the survey:

  1. Fourteen of the 31 companies began new green initiatives during the year.
  2. Eighteen of the companies expanded existing sustainability programs.
  3. Twenty-five of the companies now have formal sustainability groups within their companies.
  4. Twelve of the 31 CEOs believe that their sustainability capabilities differentiate them from their competitors.
  5. Ranking second and third respectively in North America were opportunities related to potential differentiation based upon the companies’ environmental sustainability capabilities and opportunities related to expansion of service offerings.

Also, 27 of the 31 CEOs noted that some of their manufacturing customers have begun to move toward “near-shoring” options during the past year.  This type of “reversal of fortune” for U.S. manufacturing has been driven by quality control issues, fuel costs for transoceanic shipping and (wishful thinking perhaps) a desire to stand by corporate commitment to curtail carbon emissions associated with reduced fuel usage.

Additionally the report cited several business practice trends, related to risk management/risk sharing; business continuity planning; performance based contracts; and enhanced vendor qualifications.  Each of these growth areas fit well into the sustainable sourcing, accountability and risk management picture that I have spoken about in this space as essential elements of a green supply chain.

While the survey results are impressive, there is clearly room for improvement in terms of implementing actual “boots on the ground” solutions.  There are increasing examples everyday where 3PLs have demonstrably improved operations efficiency while lowering fuel use, energy use, air emissions and indirectly related resource consumption and waste generation. But at the same time, these efforts must be able to strike a balance between cost and benefit that CEO’s can understand, appreciate and rally around.  The stat about CEO’s belief in how sustainability can differentiate their companies (only 38% are on board) tells me that much still needs to be done to make a business case for greening of supply chains.

In another recent reportthis past spring by the Economist Intelligence Unit (EIU) of the Economist Magazine,   supply chains are in a massive state of flux.  Individual supply chains “have shrunk at the margins and the network has become denser”, according to the report. The report concluded that many companies are forced to choose between having supply chains that are simple and compact, or those that are complex, redundant and dispersed.  Efficiency versus resiliency, in effect.   But the report found it possible to increase both efficiency and resilience.

The EIU report cited that a more efficient supply chain enhances two drivers of value: operating margin and asset efficiency.  What was notable to me was a note in the report that said “efficiency also has the beneficial side effect of shrinking the carbon footprint”.  The report cited companies like Coca-Cola, that are looking at ways to move to central distribution, cutting back on empty loads (bringing back post-consumer recycled cans  for instance) as ways to ‘own’ its supply chain and drive efficiency (without losing resiliency).

Issues such as supply chain resiliency and agility are two criteria that should be evaluated as 3PL’s move down the sustainability path and create a business case for operational changes.  I am fairly certain, based on the Penske sponsored 3PL report that CEO’s and other top managers will be asking the tough questions, so be prepared to come to the table with some compelling ideas and numbers to back it up.

3 Responses to ““Ch-Ch-Ch-Ch-Changes”: 3rd Party Logistics CEOs Priming for a Sustainable Future, Retooling to Compete”

  1. Erik April 16, 2012 at 9:26 pm #

    Very interesting read. I was very pleased to see that 25 of 31 companies have a sustainability group setup formally

  2. jfsalcedo September 14, 2012 at 3:39 pm #

    The implications sustainable and renewable energy will definitely affect many 3PL companies in regards to transportation in this century. I wonder how it will affect those with transoceanic services. Thanks for the article!

  3. Susan December 10, 2012 at 10:49 pm #

    It is good to see that that green practices are still a major priority in the 3PL market.

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