Major logistics companies in the market are building their operations in such a way that it makes them flexible to plan the service capacity according to the requirement. They are increasingly outsourcing their fleets through third-party logistics providers (3PLs). 3PLs are more efficient and have their service networks very well organized. With optimal utilization, they can deliver the goods on-time while keeping their costs unchanged. They can manage the operations better with the changing demand and the fluctuations in orders.
The Fragmented Industry
The logistics industry as a whole is in the process to streamline the most multifaceted processes. It is achieved by eradicating routine and repetitive tasks to create a more effective service ecosystem while satisfying the needs of their customers. The world’s top four players in 3PLs comprise of less than fifteen percent of the market. The biggest company has only a over six percent share of the market. As an industry, third-party logistics are fragmented and ripe for disruption.
Supply chain and logistics providers increasingly understand the need for relationships between shipper and 3PLs. They have more chances to increase the margins by treating 3PLs as strategic partners instead of considering them as unavoidable market factor. Suppliers can ensure the adherence to customer expectations and delivering on such expectation through 3PLs.
Logistics companies offer unique services such as invoice auditing, better rates on dimensional pricing and automated freight classification. Even last-mile delivery services are now becoming common as large companies like Amazon. They are developing systems to ensure the delivery to distant and difficult to reach places which are less populated.
The Need for 3PLs
The modern supply chain has become increasingly complex and automated. More companies are turning to 3PLs instead of directly dealing with transport agencies. This ensures that things reach at the merchandising stores or the customer’s location on right time and at minimum cost.
Many retailers realize that the online marketplace is booming but they can’t afford to develop their own supply chain. If a company can’t validate running a warehouse and organizing shipping at the moment but they plan to grow the business in the coming years, they should associate with 3PLs.
Third-party logistics is ideal for companies that don’t want to invest in their own logistics solutions. Keeping stocks in a warehouse and building out the IT infrastructure to manage stock control or staffing the solution. With the fast pace of transformation in logistics with technology doesn’t make sense for smaller businesses to keep up with changes. The specialty logistics companies usually invest heavily in IT infrastructure to ensure compatibility across the supply chain or in storage facilities to cope with seasonal variations in demand.
How 3PL Enhances Value
Third-party logistics enhances the value of the business by offering services on a large scale that individual companies cannot invest in. Therefore, two-thirds of shippers are outsourcing some or all of their logistics services. It simply makes good business sense as 3PLs can keep their warehousing costs generally lower. They operate on large scale which gives them the buying power to negotiate much better freight prices from transporters. Given that today’s consumers expect lower and flat rates for shipping, it’s important for online retailers to offer the best shipping prices they can.
Companies can’t have enough staff for functions like physically unpacking containers, adding barcodes if needed, and placing the things on the warehouse shelves. There is an improvement seen in order fill rate and order accuracy. 3PL also wins at the cost of maintaining a warehouse space in a capital city with respect to the costs like electricity, IT systems, and people power. Logistics and supply chain management takes significant effort and outsourcing it let the executives focus on growing their business. 3PL is also perfectly positioned for seasonal variations.
Technology in Logistics
Companies maintain control of their inventories through wearable devices which help employees access and input data in real time. Through proper data collection and analysis, wearable technology allows them to stay in line with product demand. Warehouse managers can use wearable devices for accurately collect the inventory data and keeping track of the manufactured, stored and distributed products.
The software-as-a-service model along with the rise of cloud computing is gaining popularity in supply chain technologies and logistics management. SaaS has the convenience of safety and security and companies can use only the services they need on a pay-per-use basis. SaaS based systems help companies to avoid the fixed costs system maintenance, and infrastructure-related costs.
Informative and Visible Supply Chains
Supply chain visibility gives insight from the events that are happening at each point of the process. The analysis of supply chain data and business intelligence can significantly improve forecasting and decision making for the business. The information available helps to optimize the use of resources involved in inventory management, storage of goods and transport mechanisms. It’s tremendously significant for the proficiency of the entire supply chain process, including procurement, manufacturing, transport, and delivery.
Improved chain visibility makes it practice real-time inventory management. It involves the use of mobile point-of-sale systems and sensors and takes inventory management to a whole new level. People can get charged for the goods on their cards automatically and it allows the things to be substituted as they are consumed through prompt supply.
Broader Perspectives on Logistics
Logistics is moving forward along with the advancements in use of third-party logistics. The evolution of the 3PL is far from over and yet to take a long journey ahead. As the industry starts to handle the increased demand, the pressure to manage returns, fill more orders and adhere to the latest regulations. Emerging business trends will affect differently the shipper that can differ from those affecting third-party logistics providers, procurement professionals, and freight shipping.
Consumers nowadays are accustomed to friendly services from e-commerce companies like the vast base of available products, instant deliveries, complete accuracy in order and all time customer service. These changes in consumer behavior have caused similar change in expectations from the logistics companies. Hence the specialized and technology driven third party logistics companies are the future of logistics industry.