When the housing market collapsed in 2008, the US and global economies went into a tailspin. Stocks plunged, layoffs became normal, and shippers scaled back operations in favor of surviving the collapse. Although 3PL Logistics Companies or 3PLs were around before the recession, companies realized the short-term savings of outsourcing logistics, transportation, and freight management to 3PLs quickly, and the age of the rise of the logistics provider was born. However, the economy is on the mend, and the need for immediate cost savings and lean solutions is starting to take the backburner to how 3PL Logistics Companies could benefit shippers through long-term relationships.
Client Needs of 3PL Logistics Companies
The needs of yesteryear-clients were quite simple: get costs under control quickly. However, the needs of the modern client and end-user are starting to reflect desires in a healthy economy. These needs include the following:
- Access to new markets, which demands area-specific expertise and drayage management.
- Predictive analytics, which identify the intrinsic inefficiencies in simple processes that did not warrant in-depth review in response to the Great Recession.
- Effective dashboarding capabilities, which allow shippers to gain a comprehensive view into small and large processes. For example, the Cerasis Rater enables rapid reporting, tracking of KPIs, and review of asset-allocation quickly and easily.
- Better use of asset-based and non-asset-based resources, such as dimensional pricing, forecasting, storage, kitting, less-than-truckload (LTL) and truckload usage in freight consolidation.
Although each of these needs has always been present, many shippers were able to achieve these feats through in-house solutions. However, a growing omnichannel, e-commerce market share is making shippers look to squeeze every drop from data-rich environments to leverage capabilities and services to reduce costs to the end-user. Consequently, 3PL Logistics Companies must expand their services.
3PL Logistics Companies Expand Services
Modern 3PL Logistics Companies offer much more than traditional 3PLs. Through the use of data-driven technologies and better allocation of assets, resources, and value-added services, according to Joseph O’Reilly of Inbound Logistics, 3PLs have seen an uptick in contracts, and 72 percent of shipper’s report plans to increase outsourcing of services to 3PLs. As a result, some specific services have emerged from the shadows.
In the 2015 3PL perspectives guide from Inbound Logistics, the following graphs show us the state of 3PL Logistics Companies giving us perspective on both the greatest challenges facings shippers and 3PLs. According to Inbound Logistics’ Report:
For shippers, cutting transport costs is the top-rated challenge, according to 47 percent of respondents (see Figure 2). Business process improvement (26 percent), better customer service (23 percent), and supply chain visibility (17 percent) follow respectively.
Considering the challenges confronting shippers in today’s market, it’s still back to basics. Sixty-five percent of surveyed 3PL Logistics Companies identify capacity as their customers’ biggest concern (see Figure 1), followed by technology investment (58 percent), recruiting and retaining labor (57 percent), and regulations (47 percent).
Small Package Auditing, Consulting, and Contract Negotiation
Small packages have always proven to be more difficult in managing during order fulfillment. They get lost or misplaced. They get damaged. They get forgotten. They get less care than the bulky, oversized items with the “Handle with Care” marking. However, every purchase, and therefore, every order is valuable, especially as social media grows in dominance to prove the customer is always at the forefront of any business.
Small package auditing, consulting, and contract negotiation enable shippers to ensure greater compliance with shipping concerns, better fulfillment, and tracking of packages, enhanced dimensional-weight pricing models to give small packages a fair-share of the focus in transport, and better rates when negotiating prices with the top carriers. In more ways than one, a 3PL is becoming more of a consulting firm, and shippers are looking to 3PL Logistics Companies as experts in the field.
Warehousing and E-Fulfillment
The demands of rapid deployment of omnichannel solutions and greater access to products through e-commerce is generating the need for entirely new era of warehousing. E-fulfillment is becoming a priority as many modern businesses do not exist in brick-and-mortar locations, and the stress of this expansion is being directed into the existing supply chain. As a result, 3PL Logistics Companies are being forced to create new warehouses, move manufacturing and order fulfillment operations closer to consumers, which may include the construction of foreign and domestic warehouses, and focus on ensuring all returns or claims are processed timely, accurately, and with a focus on customer service, not cost savings.
Drayage management is becoming a similar concern for the omnichannel supply chain as more products are cross more borders, faster, and under greater scrutiny. However, the demand for lower prices and better compliance is driving 3PL Logistics Companies Small to refocus efforts to ensure products are moved short distances by the parties who will benefit the most. In other words, a 3PL who owns drayage operations or who collaborates with other shippers will be able to ensure drayage processes are audited, tracked, and linked across the entire journey. Therefore, accuracy, accountability, and timely delivery of packages will become easier.
International Shipping Optimization
International shipping modes are also becoming a focus on 3PL Logistics Companies. As more companies demand lower rates and 100-percent accuracy in compliance, without accounting for changes in order requirements due to political or cultural differences, 3PLs are working to ensure all international shipping methods use the latest technology, follow best practices, and avoid delays. Furthermore, the push towards international shipping optimization is proving to work best with long-term contracts where the documented trustworthiness and credibility of a company can help shipments move towards fast lanes and avoid the pitfalls of inspections, certifications, and randomized audits.
The push towards a global economy is helping to reduce post-Great Recession fears, and the US economy is clearly on the rebound. Although many organizations found solace in the use of outsourcing services in the immediate aftermath of the Great Recession, shippers are turning their attention back to 3PL Logistics Companies as the health of the world’s economies continues to improve. Instead of focusing solely on short-term, actionable ways to improve efficiency, the role of the 3PL is morphing into the development of strategic partnerships to focus on long-term sustainability, compliance, and growth. As a result, logistics providers must expand their services and capabilities to adapt to their new roles.