Ready or not, a new decade is here, and with it comes a renewed sense of optimism for the supply chain and logistics industry. While the past few years have offered many challenges for logistics professionals, such as increased shipping rates and trade agreement uncertainty, 2020 is predicted to offer balance to a growing supply chain ecosystem.
In this dynamic environment, ecommerce and omnichannel strategies have become a must-have for expanding logistics businesses. With 86% of American shoppers using a minimum of two channels and spending up to 11 hours a day engaging with electronic media, having a strategy to target this flourishing market is crucial for growth. Additionally, in the United States alone, ecommerce grew 14.2% in 2018, reaching $517.36 billion—making the U.S. the third largest and most advanced ecommerce marketplace in the world. Third-party logistics professionals looking to take advantage of these developing channels will need a partner to help provide the ultimate customer experience, shipping needs, reporting metrics, and more.
Who better to help with these challenges than 3PL warehouses? As one of the oldest businesses in the supply chain ecosystem, 3PLs have been honing their skills since the 19th century — meeting customer expectations, implementing new technologies, keeping up with software innovations, and navigating shipping trends—making them the best and most effective partner.
B2B organizations who do not embrace the latest digital technology could lose almost half of all future revenue over the next 3–4 years.
For this year’s annual report, we will focus on the year of the 3PL warehouse and how they can utilize best practices to overcome challenges and create growth opportunities. As we enter a new decade, many 3PLs will find themselves facing momentous technological changes impacting everything - from the competitors they face to customer expectations their ability to streamline and automate operations, and more.
According to Supply Chain Executive Magazine, “The days of third-party logistics companies competing on prices are over. The successful ones now use another factor to gain an edge: analytics.”
Forward-thinking 3PLs should see the vast amount of information flowing through their fulfillment chains as a potential goldmine. When properly harnessed, it can enable warehouses to deliver significant value to both their customers and partners. It’s no wonder that predictive analytics ranked as the top technology to be implemented in third-party logistics warehouses in 2019.
3PL warehouses should start by implementing warehouse management software (WMS) that offers business intelligence and analytics. This will help satisfy customers who not only demand a high level of quality delivery but also predictive analytics in how their business is performing as well. These tools will enable these 3PLs to do the following:
In addition to helping their customers and operations, the ability to view and analyze the data flowing through a warehouse’s supply chain, especially in real-time, can help 3PLs save significant amounts of money.
While the logistics industry has many challenges, it is still an exciting time to operate a 3PL warehouse. Our industry has been one of the primary beneficiaries of the ongoing boom in ecommerce and omnichannel sales. The online shopping sector continues to grow—posting an additional 15% growth during 2018, as consumers spent over $517 billion in the U.S. alone.
This growth has been heavily supported by 3PLs, enabling our industry to expand at an unprecedented rate in recent years. In fact, 3PLs saw a 21.6% revenue increase between 2016 and 2018.
All of this soaring growth, of course, has led to a huge increase in the total number of orders that must be fulfilled. According to Forbes, the number of ecommerce packages sent has increased by more than 20% over the past few years—to a total of 165 billion packages shipped in 2018.
Automating operations and adding “paperless” functionality can greatly improve a 3PL’s ability to increase output and shipping, reduce manual errors, and limit training requirements for warehouse staff. In 2019, 3PL Central introduced the 3PL Intelligence Initiative, a comprehensive program based on over 250 hours of extensive research with 3PL warehouses dedicated to delivering best practices to third-party logistics professionals. This research identified the need to move traditional paper-based tasks to modern paperless workflows that deliver complete visibility into operations for management and customers as a high priority.
Integrated picking, packing, and shipping software from within their warehouse management platform will help 3PLs increase their fulfillment speed—while reducing their costs and eliminating the lost time and inevitable errors that are inherent with manual input.
It is no surprise that Amazon is the top online retailer.
According to the United States’ respected Journal of Commerce,“Amazon is reshaping logistics as we know it.”
They continue to expand their presence across the entire supply chain and logistics ecosystem, exerting what has been called “The Amazon Effect” on almost every aspect of the 3PL industry.
And nowhere is this impact stronger than ecommerce. Amazon saw 30% growth in 2018 sales, giving it a shocking 50% of the $500 billion+ U.S. ecommerce market. That makes them a formidable competitor for every one of your 3PL’s ecommerce clients.
Amazon continues to disrupt the supply chain and logistics industry—not just ecommerce. In a regulatory filing in 2019, Amazon listed “transportation and logistics services” companies as competitors.
Additional sectors include the following:
For many 3PLs, the biggest threat Amazon imposes may still be their Fulfillment By Amazon services, introduced over a decade ago in 2006. The company continues to expand its own 3PL service offerings to merchants through a series of partnerships, acquisitions, and technological applications, according to firm Armstrong & Associates, Inc.
The firm has predicted that "Amazon’s growth—in the form of third-party sales, international expansion, and new product categories—will cause Amazon to present increasing competition to 3PLs."
“Alongside life, liberty and the pursuit of happiness, you can now add another inalienable right: two-day shipping on practically everything.” — The Wall Street Journal
Welcome or not, Amazon’s dominance of ecommerce has almost single-handedly upgraded expectations of all online shoppers. This has placed substantial pressure on 3PLs, their delivery partners, and the ecommerce retailers they serve.
On the positive side, "The Amazon Effect" has helped many ecommerce retailers realize how critically important 3PLs are to their success, as online stores are largely fueled by their customers’ offline experiences.
For example, a negative shipping experience can have an irreparable impact on a customer relationship. 84% of consumers say that they won’t return to a brand after just one poor delivery experience. Furthermore, 89% of younger consumers are likely to promote a brand as a result of a positive customer experience.
Average ecommerce shoppers now expect the following:
Of course, this is what your “average” ecommerce shopper wants. But those expectations are about to rise even further with the arrival of a whole new wave of consumers known as “Gen Z.”
Born after 1995, this new block of shoppers will constitute nearly 40% of all consumers by 2020. Growing up with unprecedented access to technology, they have even higher levels of expectations when it comes to ecommerce.
As ecommerce continues to mature, third-party logistics providers will soon be facing a host of other rising demands from both consumers and governments. From activist consumers looking for ethical ecommerce practices, growing pressures to demonstrate environmental sustainability, or the long-avoided burden of merchant and customer sales taxation, warehouses need to be prepared to service a multitude of consumers.
Today’s third-party logistics warehouses sit at the epicenter of the modern global supply and fulfillment chain. As of 2018, according to Armstrong & Associates, 86% of domestic Fortune 500 companies use 3PLs for logistics and supply chain functions.
As the only partner directly connected to every player along that chain, 3PLs must ensure that the terabytes of data processed on a daily basis flow through without any flaws or disconnections.
This will require 3PLs to create protected, comprehensive, and transparent connections throughout the entire length of their supply and fulfillment chains that integrate with a wide range of systems prior to a sale, such as:
Customer ecommerce websites 3PLs must also be capable of building flawless connections that will ensure proper fulfillment after a sale that may include:
3PL Central has been working with partners for over a decade, and continues its tradition of evolving warehouse ecosystems. In fact, 3PL Central has nearly one thousand access credentials connecting more than 7,000 different endpoints and continues to expand, offering comprehensive solutions used by over 10,000 logistics professionals daily.
This new decade brings a wealth of opportunities for third-party logistics warehouses, their partners, and their customers. Those looking to take advantage and succeed in the evolving supply chain and logistics industry will need to embrace advanced technologies, initiate compelling partnerships, and implement best practices to ensure efficient operations and growth opportunities.
Third-party logistics professionals, operators, and staff are squarely at the center of this expanding market. They have the power to change how they meet customer expectations, implement and support new innovations and technology, and define key logistics trends by streamlining and automating best practices across the industry—and not just in the warehouse.
3PL Central is dedicated to helping these 3PLs connect their entire supply chain ecosystem by leveraging the power of a centralized WMS platform to strengthen customer connections, help warehouses operate more efficiently, and quickly deliver value.
Interested in learning how 3PL Central can help your warehouse implement a comprehensive WMS platform and share our expertise in building best practices across your warehouse in 2020?