2017 will not be a bed of roses for third party logistics service providers, nor will the coming year be filled with thorns in the sides of major supply chain entities. By understanding how the industry will evolve throughout 2017, you can prepare your organization for the challenges and opportunities that will come. Take a moment to think about how these remaining six trends will impact the shipping and freight industry as a new administration takes control.
1. Government Pressures Will Catalyze Major Decisions.
The Trump administration could be a redeeming feature for the logistics industry, but some of his recent promises could come at a great price. He has threatened to unwind major trade agreements, penalize logistics companies that move operations overseas, including manufacturing and warehousing services, and stifle companies’ plans for growth in emerging markets.
President Trump’s plans will likely stimulate short-term growth, reports Patrick Burnson of Supply Chain 24/7. But, the risks from arising Asian markets, banking problems in the Eurozone and conflict among the Middle East and Africa will keep U.S. GDP below 3 percent. This means any shakeup in existing regulations will breed instability and could result in industry losses. However, only time will tell if Trump keeps or abandons his promises to hold the shipping and logistics industry accountable for outsourcing and reshoring efforts.
2. Omni-Channel Solutions Will Become Fundamental Logistics Services.
If you want it, Walmart can get it. If you want it, Amazon has it. If you want it, it can be here tomorrow.
These are not empty promises. The major retail giants, Amazon and Walmart, have dramatically changed how consumers view product accessibility. If it is on a Walmart shelf today, you could pick up your order without even leaving your car, or you can peruse the shelves, wait in line and fight with cashiers over price tags. Yet, Amazon is on the verge of launching stores like Walmart, Amazon Go, without the lines, cashiers and overhead costs.
Both companies are branching out of their traditional service offerings to create a more diverse, omni-channel shopping experience, and third party logistics service providers must be capable of meeting these changing degrees of purchase flexibility, explains Direct Drive Logistics.
3. Third Party Logistics Service Providers Will Push the Boundaries of Digitization.
Retailers without an online purchasing option face stiff disadvantages when compared to Amazon and Big Box retailers. Online sales grew 12 percent in 2016, and growth is forecasted for 2017, reports Ludger Schuh of the Inventory and Supply Chain Blog. Thus, management teams must have access to immediate freight and shipping rates and information, allowing better consolidation and optimization of incoming and outgoing shipments. Furthermore, Big Data will transform how companies view operations through a combination of internal and external metrics, merging all processes from procurement logistics with last-mile delivery.
4. Hyper-Local Demand Will Drive Last-Mile Freight Delivery and Optimization.
Remember the Amazon Barbell? The strong, hyper-local end will see better opportunities for growth as more logistics providers embrace the benefits and capabilities in transportation management systems (TMSs). Moreover, internal use of a TMS will shift as TMS-as-a-Service (TMSaaS) will encourage more companies to upload their processes into the cloud, further adding to the capacity and insights gained from Big Data and predictive analytics.
5. Retailers Will Push Company-Exclusive Offers or Benefits.
From Pinterest to Walmart, the ability to trade online has grown exponentially. Small businesses can compete with the Big Box retailers and Amazon alike, and the demand on third party logistics service providers has never been greater. Some blame Amazon for creating near-impossible delivery schedules and rate offers, but it all goes back to gaining and retaining a strong customer base.
Rather than allowing customers to abandon ship at the first sign of price increases, more companies are creating company-exclusive offers. People can already get money back from Walmart with a simple scan after purchase, and Amazon has launched 13-minute delivery through Prime Air. As more companies promise more in favor of customer loyalty, logistics providers will need to lower costs wherever possible. Essentially, companies will start evaluating providers across the board.
6. Companies Will Evaluate Logistics Providers For Efficiency and Value.
Overhead costs in logistics companies translate into higher freight shipping rates. But, cutting the number of people working in the company could dramatically lower shipping rates. Now, this might sound counterproductive with the driver shortage and increased demand. But, more logistics companies are automating as many processes as possible.
This includes picking completed by robots, automated billing, auditing and freight pricing and even driverless trucks. Per Karl Siebrecht of Flexe Blog, 15 percent of warehouse executives cite implementing autonomous robots as a top priority between 2017 and 2020. This will help settle fears of rising costs in shipping, encouraging more shippers to work with carriers and logistics providers to find the best deals and steals possible. Ultimately, these evaluations will redefine contract negotiation and service-level bids among third-party logistics (3PLs) and in-house providers as well.
What Does It Mean?
The challenges of 2016 should not be forgotten, and 2017 will welcome a host of unique challenges to third party logistics service providers. Trade agreements could change, and the financial risk of outsourcing operations overseas could severely impede your company’s growth. Your organization must strike a delicate balance between opportunity and threats as government pressures mount and business-to-business partnerships fall under greater scrutiny. But, growth is possible if you take steps to prepare for these trends today.