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Customers to 3PLs: Be Green, But Cost is King
Posted on Apr 28 2010 By Adrian Gonzalez
Last Thursday, in commemoration of Earth Day, Penske Logistics, Dr.
Robert C. Lieb, Professor of Supply Chain Management at Northeastern University,
and Dr. Kristin J. Lieb, Assistant Professor of Marketing Communication, Emerson
College, issued the “Third Party Logistics Sustainability Report.” The
information is based on the 2008 and 2009 annual survey of forty 3PL CEOs
conducted by Lieb and Lieb.[...]
3PLs are making investments in “green” initiatives; they are seeing positive results from these investments; existing and prospective customers are interested in 3PL sustainability efforts, but it is not an important factor in their selection process.
3PLS are investing and taking action is a wide variety of sustainability-related
initiatives, which the authors categorized into four groups: administrative
(e.g., setting sustainability goals for operating units), analytical (e.g., investing in evaluation software, developing environmental KPIs), transportation-related, and “other” (e.g., promote use of LEED warehouses). Based on the detail provided in the report, it appears that 3PLs are most active in transportation-related initiatives, including:
•Experimenting with
alternative fuels
•Purchasing more fuel efficient vehicles
•Reducing
vehicle mileage operated
•Participating in government-sponsored programs
such as the EPA’s SmartWay program in the trucking industry
•Promoting
freight consolidation initiatives within the company
•Shifting freight to
more fuel efficient modes
•Limiting the speeds at which company equipment is
operated
•Sharing vehicles across multiple customers
•Reducing vehicle
idling time
3PL CEOs in the 2008 survey reported that about 21 percent of
existing customers and about 20 percent of prospective customers raised
sustainability issues in their discussions with the 3PLs. Customers are
interested in a 3PL’s ability to:
•Support customer efforts to reduce
their carbon footprints
•Enhance existing return logistics programs
•Reduce fuel, water and electricity consumption
•Help customers comply
with various industry certification programs
•Dispose of hazardous materials
•Develop recycling programs
•Improve the performance of customer vehicle
fleets
•Develop renewable energy sources, especially at customer facilities
These findings underscore a point that we have raised in previous postings:
sustainability opens the door to new business opportunities for 3PLs (see
“Ryder’s Answers to Carbon Disclosure Project” and “A New Business Intelligence
Solution…from a 3PL!”).
But as the authors noted, “While the 2008 survey results clearly demonstrated that there was considerable customer interest in discussing sustainability issues with major 3PLs, those issues were not yet playing a major role in either the 3PL selection or retention process, and they were not being significantly reflected in 3PL contracts.”
Based on our research, cost is by far the most important factor in a 3PL selection process (see chart below), a point that was also reflected in the report. The 3PL CEOs ranked “balancing sustainability efforts with customer expectations for
low-priced 3PL services” as the most important short-term sustainability
challenge they faced.
