Remember when “Amazon” was a rain forest or a river, and a “tweet” was the sound a bird made? Just as the digital world has changed beyond recognition in the last 20 years, so too has third-party logistics (3PL).
Over the past several years, the 3PL industry has greatly expanded its global footprint. That trend is expected to grow. Why? More than 80% of all Fortune 500 companies currently use warehousing, distribution, software services, and domestic and international transportation management. And these services form the crux of the 3PL landscape.
A research report from Global Markets Insight indicates that third-party logistics will be well over a $1 billion industry by 2022. That’s an annual increase of 4.4%.
These kinds of increases require continual evolution and adaptation. Let’s take a look at some of the major trends in 3PL’s:
In the Clouds
3PL providers are increasingly utilizing extensive cloud-based technologies. These systems enable businesses to store a massive influx of data. But they also allow clients to easily access their systems, and they improve the overall effectiveness of a company’s logistics.
In addition, the emergence of “big data” analytics, smart technology, and data sharing continues to help 3PL’s evolve. For example, increased data sharing is expected to help improve tracking services across the supply chain. And experts predict that the amount of big data will grow from 3.2 to 40 zettabytes by the year 2020. (See sidebar, “How Much Is a Zettabyte?”)
Also, with the increased use of mobile apps, customers will be able to track the details of their shipments and process freight shipments from anywhere. This will further fuel the industry trends.
The business landscape of 3PL industry will grow increasingly complex as supply chain operations expand massively worldwide. So 3PL market players will need to stay on top of the game. They’ll have to understand international legal implications and regulatory compliance if they want to maintain their position.
The emergence of new markets, currency exchange, and international trade will serve as growth indicators for the 3PL’s of the future.
Experts expect that heavy deployment of automation will push 3PL industry size over the next few years. For one thing, automated warehouses use up about 40% less floor space than traditional warehouses. Increasingly, warehouse 3PL’s are relying on automated lifts and robotics to reduce the amount of space needed for storage. (See related article, “Warehouse Automation: How Far Should You Go?“)
On-road automation is another area where expansion is expected. Self-driving trucks are already undergoing extensive testing on U.S. roads. For instance, one San Francisco-based company (Otto) has been developing these trucks and testing them on California roadways since January 2016. Uber acquired the company in August 2016 for $680 million, and testing continues today:
Keeping It Green
Green logistics is increasing being adopted by prominent 3PL providers to address growing environmental concerns. High-impact partners like 3PL’s have found that they can make their clients feel good by doing good.
For instance, new innovations are making it more possible to limit the carbon impact of the carrier route. Amazon’s Prime Air is a case in point. The service’s drones could provide an energy-efficient alternative for those nooks and crannies that electric vehicles can’t reach. (See related article, “Delivery Drones: Coming Soon to a Warehouse Near You.”)
Route and load optimization and efficient packaging are some other measures undertaken as a part of the green logistics initiative.
The global growth of online retail is expected to generate lucrative avenue for 3PL’s. Did you know that Amazon has increased its distribution space by an astounding 1000% in the last 10 years?
In fact, retail giants such as Amazon are likely to transform into full-fledged 3PL providers. By the same token, companies operating in the core transportation sector are also expected to penetrate the global 3PL market. Which means current 3PL key players will need to brace themselves for additional challenges and continue to develop technologically advanced and upgraded services in order to sustain their business position.