3pl trends and evolution
DESCRIPTION
With a growth rate exceeding 3 times the rate of growth of the U.S. economy, the third party logistics industry is booming in the United States and around the world. 3PL growth is fueled by the improving U.S. economy and increased manufacturing levels, nearshoring of manufacturing to Mexico, new oil and gas operations in North America, new global opportunities and the need for new technologies and services. The third party logistics industry is undergoing consolidation due to an influx of private equity investment. Challenged by their need for technology and talent, third party logistics providers have begun to attract employees with degrees in supply chain management from major universities. 3PLs are evolving: freight brokers are adding value added services and many third party logistics providers have added freight brokerage to their list of services. With the increased stress on freight and transportation due to the federal regulations, shippers and 3PLs have reported increased supply chain collaboration has become the norm in order to improve logistics cost and services. Healthcare and automotive manufacturers have been spinning off internal logistics departments, distribution networks and dedicated fleets as freestanding 3PL businesses. In addition, manufacturers with unused warehouse space and logistics resources are starting 3PL businesses to maximize the use of their assets. Shippers report using more than one third party logistics provider and benchmarking their performance. To the majority of shippers, customer service is even more critical than cost. More than ever before, shippers are relying on 3PLs to fulfill their supply chain technology strategy and implementation needs. EDI, TMS and WMS are some of the top technology needed by shippers. Omni channel retailing and direct-to-consumer fulfillment are the two trends transforming the supply chain today, forcing the realignment of distribution pipelines. With more vertical centric third party logistics providers in operation, shippers typically use an average of 3PLs for logistics and supply chain functions.TRANSCRIPT
3PL Trends &
Evolution
By Laura Olson
3PL Industry is Consolidating1
• Prior to 2013, there was only one broker in North America with revenues exceeding $1 billion (C.H. Robinson). Today the total number of 3PLs is declining and several have exceeded the $1 billion revenue mark
• Trend is fueled by private equity fund investment. 3PLs and freight brokerages have loyal shippers and large numbers of contracted carriers and are excellent targets.
Forbes
2
• Evolving from smaller 3PLs focused on transportation and warehousing, now 3PLs are expanding their service offerings into full service supply chain management
• Larger 3PLs are attracting employees with degrees in supply chain management from major universities
Increasing Level of Sophistication
Forbes
3
Pure Brokers
Large 3PLs
Adding value added services
Adding brokerage
• Definitions of 3PL and brokers are blurring with less distinction between the two. Now seeing some crossover of services provided
Nature of 3PLs Is Changing
Forbes
4 Increased Collaboration
• Increased incidence of reported “gainsharing” between shippers and 3PLs
• Increased interest of shippers in collaborating with other companies, including competitors to improve logistics costs and services
Capgemini
5 Extension of the 3PL
Inbound Logistics Study
• 3PL partnerships are expanding well past the typical warehousing and transportation agreements
• Shippers want service providers that act as an extension of their enterprise
• 3PL extension requires greater information sharing
• 3PLs want a vested interest in customers’ supply chain performance
6 Non-Asset 3PL Growth
• 47% of Inbound Logistics survey respondents identified themselves as non-asset based service providers and 42% report operating as both asset and non-asset based providers
• Brokers use technology as a competitive differentiator
• Driver shortage increases the value of brokers
Inbound Logistics Study
7 Spin Offs
• Most notably automotive manufacturers and healthcare companies are spinning off internal logistics departments, distribution networks & dedicated fleets to enter the 3PL arena
• Manufacturers with unutilized warehouse space and transportation resources are also starting 3PL operations to maximize the use of their assets
Inbound Logistics Study
8 3PL Customer Service is Key
• Number one reason shippers cited for failed partnerships (50% of those surveyed): poor customer service
• 3PLs often specialize by function, vertical and mode. Common for shippers to use more than one 3PL and benchmark performance of multiple providers
• 64% of those shippers surveyed reported that they value customer service over cost when evaluating the value of a 3PL
Inbound Logistics Study
9 Increased Reliance on 3PLs for IT
• Increased number of shippers are counting on 3PLs to fill technology strategy and implementation needs
• 94% of 3PLs use EDI
Shippers
3PLs
Greatest challenge: cutting transport costs
84% of 3PLs use TMS93% OF 3PLs provide LTL
Inbound Logistics Study
10
Transformative Changes
• Biggest changes forcing retailers and wholesalers to re-align distribution pipelines:
• Omni channel retailing• Direct-to-consumer fulfillment
Inbound Logistics Study
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