TRADITIONALISTS OR INNOVATORS?
GAINING A COMPETITIVE EDGE THROUGH VAS
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The ever-shifting consumer market is changing the way contract suppliers and brands collaborate to bring products to market. In order to stay ahead of the market curve, brands are increasingly turning to external suppliers for their expertise and breadth of services.
In turn, third-party logistics (3PL) providers are increasingly offering value added services (VAS) in order to position themselves as competitive, strategic suppliers. Much of the 3PL VAS landscape, however, lies uncharted: How are 3PLs leveraging value added services to win new business? Which value added services offer the greatest growth opportunities?
Adelante SCM, in a study commissioned by Nulogy, surveyed executives from more than 30 leading 3PLs to answer these questions, while exploring the strategic importance of value added services within the 3PL industry.
Here are the highlights of the survey's results.
TABLE OF CONTENTS
KEY FINDINGS
Key insights to help 3PLs leverage value-added services as a competitive differentiator
• Introduction
• Key Findings
01. VAS is a Key Driver for Business Growth
02. VAS Helps 3PLs Stand Out From The Competition
03. Quality is Crucial to Gaining New Business
04. Production Visibility Drives Better Business Performance
05. Co-Pack Software Can Help 3PLs Pull Ahead
• Recommendations
We wanted to know if 3PL respondents viewed their companies as ahead or behind the technological curve. We asked respondents to place themselves on a descriptive scale, from Laggards to Innovators.
The respondent pool split itself equally amongst two camps: 50% characterized themselves as Innovators or Early Adopters, with the remaining half identifying as Early Majority, Late Majority, or Laggards.
For the purposes of this summary, we have labeled these two camps Innovators and Traditionalists.
Presented by Adelante SCM and Nulogy
RECOMMENDATIONS
Compete through superior customer service
Competitive pricing is important, but when it comes to acquiring and retaining co-packing/VAS clients, pricing ranked fourth in importance behind providing consistent and reliable quality, quick turnaround time, and on-time in-full—all factors that are directly linked to delivering an enhanced customer experience.
How important are value added services for 3PL business growth? Quite important: over 80% of 3PL respondents described their VAS offerings as an "important" or "very important" part of their overall growth strategy.
We also found that 75% of Innovator respondents believe co-packing/VAS revenues will grow at a CAGR (compound annual growth rate) of at least 7% over the next three years—a more aggressive view on VAS growth than their Traditionalist counterparts.
It's becoming increasingly difficult for 3PLs to maintain competitiveness on basic transportation and warehousing solutions alone. The market is relatively crowded, and the business comes with significant margin pressure.
VAS HELPS 3PLs STAND OUT FROM THE COMPETITION
02.
03.
QUALITY IS CRUCIAL TO GAINING NEW BUSINESS
04.
PRODUCTION VISIBILITY DRIVES BETTER BUSINESS PERFORMANCE
05.
MORE INNOVATOR 3PLs CHOOSE CO-PACK SOFTWARE
When it comes to keeping and gaining new clients, providing high quality customer service is key for 3PLs. In fact, 94% of all survey respondents agreed!
These results correspond to what we found in a research study we conducted in 2018: when it comes to what’s driving supply chain innovation today, cost reduction is taking a backseat to “delivering an enhanced customer experience” for companies that are innovators or early adopters of technology.
What's the most important factor for driving better performance in co-packing/value added services? For the majority of respondents, it was better visibility into production efficiency and bottlenecks.
The survey results also suggest that Innovators spend more time focusing on external efforts such as improving the flow of data and information with their customers. In other words, they are thinking beyond their four walls. On the other hand, Traditionalist companies are still focused inside the four walls—working to better integrate their internal systems and processes.
How are 3PLs managing their value added services? Warehouse management systems (WMS) was the most cited response (78%), followed by Excel spreadsheets and homegrown solutions.
In addition, the number of Innovator 3PL respondents choosing contract packaging software was greater than the number of Traditionalist 3PL respondents choosing the same solution.
This section of the survey highlighted a significant area of improvement for 3PLs. With the majority of respondents using WMSes or Excel-based solutions, there is a clear opportunity for more 3PLs to leverage contract packaging software solutions in order to streamline their processes and efficiency.
INTRODUCTION
Think beyond your four walls to become a strategic supplier
One key difference between Innovators and Traditionalists is that the former group is more focused on finding efficient ways to collaborate with customers and integrate with their systems. While integrating internal systems and processes are important, think beyond your four walls and improve the way you connect and share data and information with customers and other external trading partners.
Digitally enable your business to operate with agility
Simply put, it is very difficult to innovate when your IT systems are old and rigid, and it is very difficult to deliver the best customer experience if your systems and processes are built around Excel spreadsheets and operate in silos! A flexible, agile operational system will best position you for future growth and business opportunities.
Which solutions are you currently using to manage your co-pack/VAS services?
Warehouse management system (WMS)
Excel spreadsheets
Homegrown/custom-built solution
Contract packaging software
Enterprise resource planning (ERP)
Manufacturing execution system (MES)
13%
6%
% of Respondents Selecting
Other (please specify
0%
78%
44%
25%
16%
13%
6%
0%
80%
consider VAS “important” or “very important”
About Adelante SCM
Adelante SCM is a peer-to-peer learning, networking, and research community for supply chain and logistics professionals. Adelante’s services include Talking Logistics, an online video talk show and blog featuring thought leaders and newsmakers in the supply chain and logistics industry, and Indago, a market research service that brings together a community of supply chain and logistics practitioners who share practical knowledge and advice with each other while giving back to charitable causes.
About Nulogy
Nulogy is an award-winning software provider that enables supply chain agility within late-stage customization for contract suppliers and brands. Nulogy powers the contract packaging operations of leading global 3PLs, helping them leverage their value-added services to become agile and strategic suppliers for their brand customers.
Nulogy’s solution helps suppliers digitize and standardize VAS operations for greater ease and efficiency, while reducing waste and costs. Many of the world’s leading third-party logistics providers and consumer brands choose Nulogy to enable agility in their supply chain operations.
Do you agree or disagree with the following statement: “Over the next three years, co-pack/value-added services will become a greater competitive differentiator in our industry”?
Our survey found that 3PLs—especially Innovator respondents—are looking for new ways to differentiate from the competition. The majority believe that value added services present a great opportunity to stand out from the pack.
More than 90% of 3PL respondents agreed that “over the next three years, co-packing/value added services will become a greater competitive differentiator” in the third-party logistics industry.
How important are each of the following factors in acquiring and retaining co-packing/value-added services clients?
Consistent and reliable quality
Quick turnaround time
On-time in-Full (OTIF)
Competitive pricing
75%
Provide accurate/timely visibility to orders. WIP
63%
Streamlined integration with customer systems
53%
Alignment of cultures
% of Respondents Saying Very or Extremely Important
94%
78%
75%
75%
75%
63%
53%
Rank in level of importance the following contributors to driving better performance in co-pack/VAS.
Better visibility into production efficiency and bottlenecks
Sum of “Most Important” and “2nd Most Important” Votes
67%
52%
42%
39%
Better integration between production floor and warehouse processes
More streamlined and efficient ways of collaborating with customers
Better visibility and coordination of materials and labor
Want to learn more about how you can enable agility in your value added services?
© 2021 Nulogy Corporation. All Rights Reserved.
How would you characterize your company’s culture with regard to technology adoption?
Providing value-added services within the DC helps streamline our operations by creating complete traceability along with the flexibility that our partners look for in a 3PL provider. Not only does it allow for transparency for our customers, it also plays a major role in lowering overall costs and increases productivity and speed to market.
-Director of Business Development for a global 3PL
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One survey respondent on value-added services: