The 3PL market is growing, and according to PRNewswire, the 3PL market will increase significantly throughout 2019, contributing to a total valuation of approximately $1.5 trillion by 2025. The astonishing growth is attributable to the expansion of e-commerce, the emergence of new markets in Asia and Europe, changes in ocean container shipping, the development of new technology and more. Shippers need to understand the growth of 3PL services and how they will affect operations and cost-effectiveness in the coming year.
3PL Use Expected to Continue Due to Uncertainty Over Government Funding
According to Hellenic Shipping News Worldwide, the government shutdown of December 2018, which persisted into 2019, will impact shipping decisions. Shippers facing the most significant uncertainty over federal services includes shippers that regularly use the significant parcel and LTL carriers that service government matters. Unfortunately, the effects of the shutdown continue to permeate the industry by delaying national reports relating to safety and legislation to refine trucking regulations. The Hours of Service regulations are some of the top issues that suffer from time lost due to the shutdown. As a result, more shippers will look for ways to avoid the uncertainty associated with the shutdown, expanding carrier networks and considering new contractors. In other words, these shippers will be more apt to leverage the services of a 3PL to safeguard against uncertainty.
Increased Globalization Will Enhance Growth of 3PL Services and Capabilities
Increased globalization will be a primary driving force of the growth of 3PL services and capabilities. Today’s 3PL’s are ready on track to offer more value-added services, such as small package logistics management and accounting benefits. With more companies and parties privy to logistics management conversations and collaboration through globalization, the importance of accuracy and accounting and the ability to handle all modes of shipping will increase.
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Shipper-Carrier Relationships Will Face More Strain Throughout 2019
As explained by Jeff Berman of Logistics Management, shipper and carrier relationships will be put to the test throughout 2019. Believe it or not, most trucks in the U.S. are not owned by the big three carriers. Instead, they are owned by smaller, private and local fleets, so increased competition in the global market will naturally lead to an increased risk of freight refusals and turndowns. Meanwhile, the increasing rates for full truckload and LTL will result in higher demand for freight consolidation services, which will naturally require deconsolidation services as well. These out of touch points will place an additional burden on shippers concerned about ensuring proper handling of products and timely delivery.
Information Sharing and Transparency Will Affect Shippers
Information sharing and transparency will be a significant concern throughout 2019 and will motivate more companies to embrace the use of a 3PL. Since 3PLs are independent, they have a reputation for honesty and ethical business practices. With the development of cloud-based software and the innovations expected to come out of more connective technology that uses APIs to integrate into a TMS, the use of information sharing and transparency will further drive more shippers to embrace 3PL’s wholeheartedly.
Automation of Workflows Will Contribute to More Outsourcing
Logistics automation will also drive the growth of 3PLs. Although robotics and automated systems are an excellent resource for strained labor departments, they can be a nightmare for shippers with limited experience using such technologies. Instead of trying to handle the maintenance and of aging, ineffective technology or assets, the job will naturally fall to third parties, including facilities management service providers and even 3PLs.
The Trucker Shortage Will Worsen in Accordance With the Talent Shortage
Two other factors remain. The trucker shortage will worsen as the talent shortage in manufacturing and logistics expands. At the same time, last-mile delivery options are changing. Consumers expect multiple delivery options, and they want to the freedom to choose options that are more convenient. This may range from buying online and pick up in-store (BOPIS) options to delivery to another location. According to McKinsey&Company, the real changes in the last mile leg of the journey may be even more profound. Robotics, drones and smart vehicles will help shippers access an even more full talent pool. In some locations, startups are developing processes that utilize employee vehicles to deliver goods to consumers. Imagine Walmart employees delivering products on the drive home. This type of disruptive thinking will be a defining factor and contribute to the growth of 3PL services throughout the coming year.
Sustainability Will Affect Consumers’ Decisions
As explained by Flash Global, modern generations, including millennials and generations Zers are some of the most eco-conscious people on the planet. Their decisions are rooted in effect on the environment and their fellow man. Companies that embrace sustainability cannot garner the attention of millennials and Generation Zers. Unfortunately, those that forgo sustainability and adherence with the latest ISO standards regarding the recycling will face the threat of bankruptcy.
The Big Picture
3PLs will continue to grow approximately 7.1 percent per year, but actual growth may occur much faster. It all depends on the speed and scale of expansion of e-commerce, namely Walmart, Target and Amazon. With the major retailers looking to expand their e-commerce capabilities, as well as take advantage of brick-and-mortar sales’ opportunities, the allure of outsourcing will become evident. Small and mid-sized businesses will turn to 3PLs to stay competitive, and those that recognize the value of an experienced, reputable 3PL can succeed in 2019.