3PLs Help Shippers Weather Supply Chain Challenges
Market forces, shifts in demand, labor challenges and port congestion continue to stress the supply chain, but those within the logistics industry are working to clear backlogs and keep products moving.
"Supply chains are something that most of our citizens never think twice about until something goes wrong.
And during this pandemic, we've seen delays and backlogs of goods from automobiles to electronics, from shoes to furniture," said President Joe Biden while speaking at the G20 summit.
Warehousing space fell to record lows in the third quarter. The real-estate firm CBRE Group, Inc. reported that demand for industrial real estate exceeded supply by 41 million square feet. The vacancy rate dropped to 3.6%, down from 4.3% in the same quarter of 2020. It is the lowest level in data going back to 2002.
Trucking capacity also remains tight. Bob Costello, chief economist for American Trucking Associations (ATA), said retail sales, single-family housing starts and manufacturing output are all increasing. However, the number of available for-hire power units is down due to an inability to add drivers, leased-on independent contractors moving to the spot market, and carriers that are selling parked trucks.
Costello said the driver shortage has risen to 80,000, which is an all-time high for the industry. "Since we last released an estimate of the shortage, there has been tremendous pressure on the driver pool," Costello said. "Increased demand for freight, pandemic-related challenges from early retirements, closed driving schools and DMVs, and other pressures are really pushing up demand for drivers and subsequently the shortage."
Despite the challenge, those within the supply chain are working hard to overcome obstacles.
In the 2022 Annual Third-Party Logistics Study, Kevin Smith, CEO of Sustainable Supply Chain Consulting, said supply chains are adapting and changing every day, and the current challenges have made it even more important to have agile supply chain partners.
"When things go crazy, 3PLs become important because of their scale," Smith said in the study. "It is about creating resilience. Individual companies have a hard time creating the capacity, the resilience and the buffering that 3PLs can because 3PLs have access to carriers, real estate and networks that an individual company wouldn't have otherwise."
As part of the study, which is sponsored by Penske Logistics, 3PLs indicated they were prepared to face a major disruption, whatever its cause. More than half of 3PLs — 55% — reported that they were somewhat prepared with a level of readiness plan in place prior to COVID-19, and 25% said they were prepared with a readiness plan in place, compared to 43% of shippers who said they were somewhat prepared and 18% who said they were prepared.
Shippers and 3PLs have taken the lessons learned from COVID-19 disruptions, and both groups — 100% of shippers and 96% of 3PLs—said they are enhancing their readiness and continuity planning.
"I think one thing COVID taught us is we need agility," said Steve Banker, vice president, supply chain management for ARC Advisory Group.
Banker, who contributed to the Annual Third-Party Logistics Study, said agility is different from resilience. "Agility is a function of your supply chain and how it is designed. Resilience is a function of your business strategy and financial reserves," he said within the study.
There are several ways Penske Logistics helps shippers minimize supply chain challenges.
Supply Chain Optimization
Increasing efficiency to take miles out of a network can free up capacity. Penske approaches efficiency in several ways, including routing and overall network design. Penske's engineers can work with shippers to evaluate the overall network, including where inventory is located, so shippers aren't adding miles.
Increased Visibility
High-level and granular visibility is advantageous in highly complex and time-sensitive areas of the supply chain. Penske's ClearChain® technology suite increases visibility and, as a result, agility. The platform provides part-level, end-to-end, deep visibility into the various components and nodes of a customer's supply chain. That allows shippers to make data-driven decisions and helps Penske get ahead of any disruptions.
Backhaul Opportunities
Taking advantage of backhaul opportunities can add capacity to the existing network, but it is critical to find the right match. Penske has created applications within ClearChain that facilitate backhaul load processing. These applications show lanes with available capacity as well as the status and specifications of vehicles within those lanes. Once the backhaul load is locked in, this visibility provides constant insight into any availability changes.
A Network of Carriers
Having access to a broad network of carriers can help shippers find capacity. Penske's freight brokerage solutions can help shippers handle seasonal needs, capacity surges and challenging lanes. Penske Logistics also offers dedicated contract carriage, and Penske Truck Leasing can provide equipment for those wanting to ramp up capacity.