Recently I have read report published by Eyerfortransport which has been researching through various aspects of the relations between shippers and forwarders. As the link to the report download is not working anymore, I take the liberty to provide link for downloading the report here.
I would like to focus here at only one of the graphics – The Key Reasons Why Shippers do not renew Existing 3PL contracts.
Below please find a table which I have extracted from the diagram which is provided at page 15 of the report, which you can download from here.
| Reasons | Shipper | 3PL | |
| 1 | Cost creep | 1 | 8 |
| 2 | Poor Service | 2 | 2 |
| 3 | Alternative 3PL provides better service | 3 | 5 |
| 4 | Hidden cost | 4 | 9 |
| 5 | Alternative 3PL provides lower cost | 5 | 1 |
| 6 | Relationships management issues | 6 | 3 |
| 7 | Inefficient management by 3PL | 7 | 4 |
| 8 | Loss of logistics innovation capacity | 8 | 10 |
| 9 | Clashing firm cultures | 9 | 11 |
| 10 | Unrealistics expectations of 3PL from customer | 10 | 6 |
| 11 | Too high dependence from 3PL | 11 | 12 |
| 12 | Problems at evaluating the 3PL performance | 12 | 7 |
| 13 | Loss of control over 3PL | 13 | 13 |
| 14 | Latent Information assymetry | 14 | 14 |
What impressed me most is the gap in perception for reasons for the shippers and forwarders.
In the first row we see that for the shipper the main reason for discontinuing 3PL contract is the Cost creep, where for the forwarders this is of less importance and they have rated this at 8th place. Strange isn’t it. Regretably the report does not deepens in how the shippers see cost creep. Sometimes they see the increase of the fuel surcharge and BAF and involvement of Peak Season Surcharges as something which is done with only idea to have the shipper’s money staken without understanding the reasons for the increase – often being correct that there is no reason at all.
The other big gap is how shippers and forwarders see the Hidden costs. Shippers put it 4 place where for forwarders it goes on 9 place which is not a surprise knowing how many forwarders still practice this “techniques” especially from China to Europe. I am personally have lost many deals because it has been difficult form me to explain to customers why the transparent prices are much better and at the end more effective as they give you clear picture on the transportation cost related to the “lower” hidden costs which you never know how much they are. I am sick of this practice, and as I see the shippers are sick as well. Why forwarders do not understand this – I do not know – do you ?!
Third big difference between the customers and forwarders is my favorite. The price issue. It appeared that from forwarers prospective customers are looking for nothing else but lower and lower prices. And here come some players that start pushing market down covering behind the slogan of – “agressive selling rates”. I hate this. It is strange how we forwarders detiriorate our own market and this is without push from the customers, because for them the price issue is graded at just 5th place.
Please look at the table and think on what is behind the figures. May this will help us to understand our customers better. Any comments are welcome.