In today’s increasingly interconnected world, a successful supply chain management (SCM) strategy heavily relies on the performance of Third-Party Logistics (3PL) providers. 3PLs play a vital role in integrating different supply chain elements. Information and Communications Technology (ICT) has become a critical factor in the competitiveness of 3PLs, enabling higher levels of supply chain integration.
While the impact of ICT on large 3PLs has been extensively studied, there is a lack of research focusing on small 3PLs and their adoption of ICT. This is particularly concerning given that the majority of transport and logistics companies in the European Union are small.
This blog post will explore the role of ICT in small 3PLs, drawing on findings from a research paper focused on the Italian 3PL market.
The Italian 3PL Market: A Landscape of Small Players
The Italian 3PL market is characterized by a large number of small companies. In 2004, there were an estimated 145,000 3PLs in Italy. Around 50% of these providers employ less than 50 people, and 35% employ less than 9. This high fragmentation has made it easier for large, international logistics groups to enter the market, acquiring many of the larger and more experienced Italian providers.
ICT Adoption in Small Italian 3PLs: An Overview
A survey of 153 small Italian 3PLs revealed that the adoption of ICT is relatively low, particularly for advanced technologies. The most commonly used ICT tools were basic communication technologies like telephone, fax, mobile phones, internet, and email.
- While over half of the basic and advanced logistics providers used Electronic Data Interchange (EDI) and Local Area Networks (LAN), the usage was significantly lower among full haulage providers.
- The adoption of more sophisticated technologies like Wireless LAN, Radio Frequency Identification (RFID), Enterprise Resource Planning (ERP), and Customer Relationship Management (CRM) was low across all provider types, although slightly higher among advanced logistics providers.
- Overall, the degree of information system (IS) integration in the supply chain was low, with most providers having no integration with other supply chain participants. However, advanced logistics providers demonstrated a significantly higher degree of IS integration compared to basic logistics and full haulage providers.
The Use of ICT for Service Customization
Despite the potential of ICT to support service customization, the survey results suggest that small Italian 3PLs are not effectively utilizing these tools.
- Websites, a crucial tool for cost reduction and customer service improvement, were not widely adopted. Only 68.6% of the surveyed companies had a website. Among those who did, the website functionality was primarily limited to electronic service catalogs, company presentations, and advertising channels. The reasons cited for not adopting websites included the belief that websites were unnecessary, that customers did not require internet services, and high start-up costs.
- While 90.2% of the companies used business software, the focus was on transport management, warehouse management, import-export processes, sales, and quality management. Software with the highest potential for service customization and customer interaction, such as CRM and ERP, were not widely used.
- The majority of the respondents (60.8%) did not offer tracking and tracing (T&T) services, indicating a low level of capability in providing customized services. However, advanced logistics providers were significantly more likely to offer T&T services compared to basic logistics and full haulage providers.
Factors Influencing ICT Adoption
The survey identified several factors that stimulated and inhibited ICT adoption among small Italian 3PLs.
Factors Stimulating ICT Usage:
- Advanced logistics providers placed greater importance on improving information exchange with supply chain participants (customers and other logistics providers) compared to basic logistics and full haulage companies.
- They also attributed higher importance to improving customer satisfaction and expanding the customer base.
- Future investment plans revealed that advanced logistics providers were more focused on error reduction, improving the quality system, and enhancing customer and logistics provider integration.
These findings suggest that advanced logistics providers have a stronger customer service orientation and a more strategic view of ICT.
Factors Inhibiting ICT Adoption:
- Across all provider types, the primary barriers to ICT adoption were financial, with high investment and implementation costs, as well as running costs, being the most significant concerns.
- Human resource-related factors, particularly the need to upgrade staff technological skills, also played a significant role.
- The lack of technological standards presented a further challenge, indicating difficulties in the supply of ICT products and services.
It’s important to note the interconnected nature of these inhibiting factors. A lack of knowledge about ICT can lead to concerns about financial implications and the need for staff training.
Conclusion
The Italian 3PL market is dominated by small providers with varying levels of ICT adoption. While advanced logistics providers exhibit a more strategic approach to ICT and a stronger customer service focus, the overall adoption of advanced technologies remains low.
Financial constraints, human resource limitations, and concerns about the ICT supply chain are key barriers to wider adoption. To overcome these challenges, organizations like business consortia and trade associations can play a critical role in promoting technological knowledge, assessing future trends, and developing tailored ICT applications.
By facilitating a shift from a short-term, functional perspective to a more strategic view of ICT, small 3PLs can leverage the power of technology to enhance their competitiveness in the evolving supply chain landscape.
Reference
Evangelista, P., & Sweeney, E. (2006). Technology usage in the supply chain: The case of small 3PLs. International Journal of Logistics Management, 17(1), 55–74.