This post will dive into some of the most essential 3PL industry trends coming on the horizon. Keep them in mind as you set a course for 2023 and beyond.
Diversification of Verticals and Workflows
The eCommerce sector has grown 33% to $792 billion. This represents 14% of total retail sales and means an increased demand for logistics services. Because of this explosive growth, one of the most important trends that will impact the Third-Party Logistics industry is vertical diversification.
Some companies must expand their reach into new markets and industries such as healthcare or medical supplies to meet demand. Likewise, 3PL companies are branching into new services such as reverse logistics or after-sales support.
We can also expect to see more providers trying to specialize in specific areas such as last-mile as a service (LMaaS), supply chain management as a service, returns management, order fulfillment, and transportation management.
At the same time, we’re seeing a shift in how work is done. There is more demand for customized and integrated solutions. That means companies are starting to look for third-party service providers who can offer them end-to-end solutions.
To stay competitive, providers need to have a well-rounded offering that can meet the needs of their customers. They also need to offer these services quickly and efficiently to keep up with the ever-changing demands of the market.
Shortage of Labor Making It Hard to Find Workers
The adage, “good help is hard to find,” has never been more accurate than it is now. The labor shortage will be a big challenge for many industries in 2023, especially the logistics sector.
The industry continues to see the number of workers decreasing while the demand for logistics services increases.
Specifically, there’s a shortage of workers who know logistics operations such as warehouse fulfillment, delivery management, and similar experience.
Therefore, finding workers in the logistics industry will continue to be challenging. This problem will likely become even more acute as demand for warehousing services increases over time due to eCommerce growth.
Businesses Will Use More Robotics to Deal With Labor Shortages
One of the ways that companies are trying to deal with labor shortages is by using more robotics. There has been a big push for automated warehouses and robots on manufacturing lines.
While this might still be in the early stages right now, it will only grow over time as the technology continues to develop.
Robotics is also being used in other logistics operations such as delivery or fulfillment centers.
We’re even seeing it on the road in driverless vehicles that can carry cargo from one place to another without human intervention.
For example, Starship Technologies developed autonomous ground drones that deliver small parcels within a few minutes of ordering.
To meet these challenges, you can expect to see 3PLs invest in technology such as robotics, wearables, and high-tech handling equipment.
You may also start seeing automated pickers, palletizers, and even forklifts.
Transportation Capacity Limitations Make It a Challenge to Grow
Transportation capacity limitations will continue to be an issue in 2023. There is a growing demand for logistics services as more and more businesses go online.
Unfortunately, there are only so many trucks or ships available. That means one of two things (or maybe both):
- Capacity constraints leading to delays in shipping
- Hiked up prices to match inflation and the demand curve
The lack of truck drivers is a big part of this problem. It will only worsen as the population ages and more people retire from the workforce.
To combat these issues, companies are turning towards technology solutions such as predictive analytics or machine learning algorithms that can help them optimize their transportation networks.
Increasing Space Constraints
Another issue is that there isn’t enough warehouse space to meet the growing demand.
A lack of space means companies must rent out smaller facilities at great expense. Others have no choice but to leave goods on pallets outside their warehouses, where they’re subject to theft or weather damage.
Some businesses will solve this problem by building new warehouses, while others look at alternative solutions like tech innovations.
For example, some companies are now investing in technology that allows them to store more goods in the same amount of space by utilizing vertical storage systems or robotic picking technologies.
We expect space constraints to continue to limit the ability to grow, but it has also presented more opportunities to build 4PL networks and improve the bottom line of existing organizations.
More Technology Integrations to Scale Better
Another trend we’re seeing is an increased number of technology integrations. This means that companies are looking for third-party service providers who can offer them end-to-end solutions.
These include cloud-based shipping platforms, transportation management systems (TMS), warehouse management software (WMS), and more.
These solutions allow businesses to integrate their process flows across departments or locations, which helps them scale without unnecessary complexity.
For example, they may integrate their ERP and WMS systems so that data flows seamlessly between departments or locations without having too many people managing things by hand.
This helps improve efficiency and removes manual data entry, often leading to errors.
Customer Expectations On Timely Order Fulfillment Continue to Grow
Customers’ tolerance for long delivery lead times has been trending down for some time now. Nowadays, customers expect their orders to be delivered within 24 hours or less if possible.
That’s why we see more companies offering same-day delivery services like Walmart and Amazon Prime Now, which offer one-hour delivery windows on select products from its stores near you.
As these services continue growing in popularity, it will put even more pressure on logistics providers who need to either match or reframe these expectations.
Companies will need better technology solutions like predictive analytics or machine learning algorithms that can help them optimize their transportation networks, so they don’t run out of capacity when demand spikes unexpectedly.
Analytics Are a Must As Customers Expect Insights and Efficiency
Analytics are must-have tools in the modern world of logistics. Every company needs to know how their supply chain is performing and where they can improve it, which means they need data on everything from transportation costs to warehouse inventory levels at any given time.
This information allows them to make better decisions about their business processes, such as deciding when or where to invest more money into their supply chain infrastructure.
Analytics powered by machine learning algorithms are handy because they can provide insights that wouldn’t be possible with traditional analytics tools.
Namely, we can expect increasing demand for real-time data and insights at every stage of the inventory management lifecycle.
This means that companies need to access their logistics information as soon as possible to respond quickly if there are any problems in the supply chain network.
Further, more data leads to better decisions about their business processes, such as deciding when or where to invest more money into their infrastructure.
There is a growing need for automation in analytics, especially as companies continue collecting more and more customer data.
Shippers Will Work With Digital Supply Chain Twins
This one may raise a few eyebrows. We’re starting to see forward-thinking logistics companies working with “digital supply chain twins.”
The process involves using technology like blockchain or RFID tags to create a virtual replica of their physical supply chain, which they use for data analysis and process improvements.
(It’s a bit like simulating the effect of variable changes in virtual reality before rolling it out in real life.)
This technology will allow them to gain insight into potential problems with new solutions while saving time. They won’t have to test things out on an actual production line until everything is perfect.
Last-mile Deliveries Are Crucial to Customer Happiness and Loyalty
Last-mile delivery is the most critical part of the supply chain because customers expect their orders to be delivered as soon as possible.
This means that companies need better technology solutions like predictive analytics or machine learning algorithms to help them optimize their transportation networks. This way, they don’t run out of capacity when demand spikes unexpectedly.
Other solutions include using drones or autonomous vehicles for last-mile delivery, which can help reduce delivery times significantly.
However, these solutions are still in their early stages and need more development before they’re ready for mass adoption.
The trend is moving towards more automation in logistics. We can expect this to continue over the next few years as companies realize how much money they could save if they automated specific processes.
This means that we can expect to see a lot of consolidation in the third-party logistics industry over the next few years as providers try to stay afloat and keep up with the ever-changing demands of their customers.
Urban Order Fulfillment is Increasing in Demand
As the world becomes more and more urban, there’s an increased need for fulfillment centers near city centers.
Proximation to the city is especially relevant for eCommerce companies trying to keep up with Amazon Prime’s two-day delivery promise.
One solution is building fulfillment centers close to major cities so that it takes less time for them to deliver goods from distribution centers or third-party logistics providers.
New technologies that will help companies improve their operations and keep up with demand include:
- Cloud computing
- Big data analytics
- Machine learning algorithms
- IoT devices such as sensors embedded in trucks or containers
Cold Chain Capacity is Expected to Increase
The pandemic has caused a surge in demand for cold storage and transportation services as more people work from home and order food online. As such, 70% of shippers and 52% of 3PL companies plan to increase their cold chain capacity after the COVID-19 pandemic ends.
This means that companies will need to increase their capacity to handle demand or face losing customers who want fast delivery times but aren’t willing to wait around while their food gets delivered.
The increased demand also puts pressure on companies to build new warehouses and distribution centers closer to major cities where they can store perishable goods without having them spoil before they get delivered.
This trend will positively impact the cold chain industry as more people keep ordering their groceries online, so we expect this trend to continue even after the pandemic ends and people go out more.
Green Supply Chains Become More Important As Consumers Demand Eco-friendly Businesses
As companies look for ways to reduce their carbon footprint, we can expect more of them to adopt green logistics practices like using electric vehicles instead of diesel trucks or solar panels to power warehouses.
This is an important trend to watch out for because as the world becomes more environmentally conscious, consumers will start expecting businesses to do their part in reducing greenhouse gas emissions.
For example, people may choose to buy products from companies with greener supply chains instead of those whose operations aren’t as eco-friendly.
In fact, a recent study found that in the past five years, 85% of people globally have shifted their purchase behavior towards being more sustainable.
This environmental stewardship is especially prevalent among Millennials and Gen Z consumers who tend to choose the more sustainable alternative when it’s available.
Operating Costs Are Going Up to Mitigate Risks
The cost of doing business in the logistics industry is increasing due to rising fuel prices and labor shortages, but other factors can increase costs.
For example, companies need new technology or equipment like sensors embedded into containers to know where their goods are at all times (this also helps prevent theft).
Another reason why costs are going up is the increasing number of natural disasters affecting businesses in recent years.
This has led to companies spending more money on risk management and insurance premiums because they want to be prepared for these events.
There is also a need for more security measures at warehouses. Several high-profile robberies have occurred in recent years, forcing companies to invest in more resources to protect their goods from theft or damage while stored onsite.
The costs of doing business in this industry are going up due to several factors, but companies can mitigate some of these risks by investing more money into security measures and insurance premiums.
Let SkuVault Help You With Inventory Management
The third-party logistics industry is changing rapidly, and it can be challenging to keep up with the latest trends. If you’re finding it difficult to keep up with them, then SkuVault can help.
We provide automated warehouse management features and functionality that help 3PL businesses fulfill every order with speed, get the most from your workforce, and build transparent, profitable relationships with the brands who depend on you.
To learn more about how we service 3PLs, visit our website to learn about the 3PL Bundle by SkuVault and get signed up today.