If we’ve seen anything in the last few years, the future is coming much sooner than expected. Science fiction is working its way into traditionally dull parts of our business and having immediate, quantifiable impacts on how 3PLs operate.
It’s a crucial inflection point. The knee-jerk tendency to ignore game-changing technologies like AI, robotics, and automation, and let others be the beta testers, is no longer a winning strategy. The rapid rate of change makes it imperative to adapt now, or risk falling behind.
The combination of the time required to adopt and become proficient at AI, and the rapid rate of change, means that a delay could result in your 3PL business falling irreparably behind.
68% of customers are interested in how AI fits into their future plans. What do supply chains need from AI and where are they investing?
Predictions for 3PLs
Over the next two years, there are three critical areas to consider now to prepare your 3PL for future dominance:
- AI
- Security
- Agility
Real Intelligence is here
Forget “Artificial” — real intelligence is here. While we were awed by the rapid advancement in generative AI, the quiet advance of assistive and supply chain automation algorithms are the real needle movers for third-party logistics companies. We’re finally starting to see the release of solutions aimed at improving how operations teams do their jobs.
- Copilots: We’re seeing the first generation of assistive technologies on the rise. These are in customer service on both the business and the client side. The computer is running more and more process orchestration; the efficiency gains are immediately apparent. There are better responses based on policies to alert users as issues emerge actively.
- Rules Adjustment: Smart WMS software is rapidly fixing previous generations’ ‘set-and-forget’ problem. Active review of transactional data makes it possible to identify rules-based bottlenecks in the supply chain and suggest changes or, in advanced setups, automatically relax the rules to flow goods quicker.
- Automated Responses: Analytics was “describe, predict, then prescribe.” We’re seeing a lot of exception management systems being proposed – or rolled out – that can address the issue from root cause analysis to response and correction. This means the next-best analytics is ‘self-resolving;’ it’s supply chain intelligence to make strategic business decisions. In most use cases, the need for a human to do anything beyond validating the response and reinforcing the training will become obsolete. The time between notification and response is just too high to continue without it.
These are just the things available to you today or in the near future. Think about what’s coming in the first half of next year and then the second half. By the end of 2025, you will see an existential crisis within the next five years if you don’t have AI integrated into everything. The time to act is now.
Fulfillment IQ outlines the business case for smart investments in 2024 supply chains.
Security risks increase
We don’t talk much about security, but the prevalence of SaaS and the rate at which security breaches are occurring make it a high priority. The risks are increasing, and we need to be more vigilant than ever.
This was already becoming a significant consideration, both in terms of real immediate impact and brand erosion. Now, with AI tools becoming more helpful, criminals are adopting them alongside companies—often faster.
- Bad Generative AI: You laughed at how bad phishing emails were before. What happens when a robocall spoofs your boss’s number and synthesizes their voice? People were already dealing with “their bank” calling them. Imagine that at scale; somehow, it’s also cheaper for the crooks!
- Social Engineering: One of the foundational components of generative AI is rapidly distilling information on the Internet. It’s increasingly easy to compile a ‘digital dossier’ on you from all your social media and web presence.
We’re entering a new era of social engineering challenges, with AI-driven attacks becoming smarter. Cybersecurity needs to be a top priority. This must be combined with aggressive education at all levels of the organization regularly. Attack methods will evolve constantly. Awareness is your first defense.
Does your technology partner have the expertise and time?
Agility and the new normal of customer expectations
In this fast-paced market, adaptability is key to meeting customer expectations.
You’ve heard it for years, and it isn’t changing—customer expectations have not been relaxed.
We can’t call it the Amazon Effect anymore; this is the market now. Exceptional is the expectation. If you were waiting to move on to the following features, you’ve probably already seen customers falling off. That trend isn’t going to be reversed.
- Faster: Many customers still expect quick fulfillment even if they don’t need it. While we have seen the analysis that 85% of consumers do not open their packages for several days after receiving them, it’s hard to convince the consumer of that. Shippers must serve it and actively keep consumers updated during the ordering process.
- Cheaper: But they aren’t willing to pay for it. One (cursed) legacy of Amazon will be people thinking logistics is free. Prices have been steadily rising alongside inflation. The sheer amount of shipping and handling that has to be hidden elsewhere in the transaction is daunting. If you aren’t addressing this with continuous improvement, it will quickly get away from you and take you from black to red.
- Reliable: Customers expect flawless execution every time. Most brands get one error – maybe two – before a customer permanently walks away. Digital brands have never been easier to stand up. Everyone is willing to hop in and offer products cheaper and faster to hook a new customer. Reliable 3PL services are how you keep the customer; failing that is how you lose them.
- Proactive: Continuously re-evaluating your 3PL’s cost structure and actively monitoring supply chain KPIs are essential. If you don’t have a BI solution, ideally one with AI backing it up, fix that immediately.
Shore up any weakness in the above and do it quickly. If you haven’t got a program focused on active, continuous improvement, get moving on it. The rate of change means that manual, annual reviews won’t cut it anymore when it comes to winning and keeping customers.
My advice: adapt and overcome
Act today. Waiting is no longer the strategy.
While you still need to deploy diligence in who you partner with for 3PL solutions, you have to partner with someone. No single firm can address all of these issues; one that tries to will just be mediocre at everything.
Build a strong composable supply chain tech stack. Consider the real people in the building who need to work with it. That will dictate how well you navigate this inflection point where we find ourselves.
The single, one-size-fits-all solution is this: you must do something; doing nothing is conceding your place in the 3PL market, likely permanently. The third-party logistics firms that are most flexible and adaptive will be the winners in the next business cycle.