Is your 3PL fulfillment team facing intense competition, high technology expectations, ever-changing consumer demands, and global challenges that are difficult to manage?
Third-party logistics (3PL) is one of the most complex and fastest-changing sectors. The right tools can remedy these growing pains and establish a platform for growth very quickly.
What trends contribute to your future with 3PL fulfillment and what are the solutions being used to help 3PL businesses simplify challenges, accelerate value, and adapt to change?
#1: More 3PLs are outsourcing freight and international transportation
Freight forwarding saw a remarkable year-over-year increase in 2023. According to the 27th annual 2023 3PL Study by NTT Data and Penske, outsourcing of freight soared to 60% of survey respondents from the previous year’s 44%. Similarly, international transportation expanded to 52% of respondents, up from 44%.
This surge can be attributed to the increasing demand for global trade and the need to transport goods efficiently across borders.
For facilities optimized around domestic volumes and consumer direct fulfillment, many 3PLs will find their teams dropping in productivity and throughput without immediate investment in 3PL software and process improvements
#2: 3PLs must become their customers’ IT department
With the rise of ecommerce and complex supply chains, shippers have high expectations of 3PL providers to become their customers’ IT departments. In fact, the percentages of shippers indicating specific technologies as “must-haves” have increased for 14 of the 19 IT capabilities listed in a recent study.
Shippers need advanced 3PL warehouse management system technologies that provide real-time visibility into optimized supply chain operations and drive efficiency. Just as importantly, those technologies must also be seamless to implement and support. Not just the initial WMS platform, but all the customized integrations and ongoing updates necessary from an IT resources perspective.
#3: Expectations for innovative 3PL fulfillment solutions
65% of shippers have expressed that their expectations have been growing concerning 3PL fulfillment capabilities. Notably, 78% of 3PLs believe that shipper expectations have increased.
87% of 3PLs have noticed shippers placing greater emphasis on technology solutions during their evaluation and selection process.
If you’re a 3PL, there’s a strong case for 3PL WMS solutions. 👈In this guide, you’ll see that nearly all clients value strong IT capabilities as their number-one priority in a 3PL partner. Yet, only 55% are satisfied with their 3PL’s current IT abilities!
Best-in-breed 3PL fulfillment software should include 24/7 expert support and consistent guidance – not just through implementation, but as you stumble across each new challenge.
A solid 3PL fulfillment provider ensures that someone is constantly asking tough questions and suggesting calculated answers specific to your business process. Their solution goes beyond the basic WMS with prescriptives that take the IT “sting” out of adding on to your platform to support growth.
For example,
- When you need to fulfill goods from multiple locations or channels to improve speed, savings, or on-hand inventory usage
- Integrate clients into a custom portal to share real-time billing and order-tracking data or to improve traceability
- Bring on third-party partners such as MHEs or marketplaces
#4: Labor shortages solved by 3PL automation
The logistics industry has been grappling with labor shortages, affecting both 3PLs and shippers. Among respondents, 56% of 3PLs and a staggering 78% of shippers reported that labor shortages have impacted their supply chain operations.
To offset this talent shortage, both shippers and 3PLs are turning to automation and new technology solutions. Approximately 83% of 3PLs and 70% of shippers are actively implementing or researching automation to bolster their supply chain capabilities.
Most 3PLs have accepted this as a permanent change. It must be addressed with investment in both warehouse automation and worker efficiency. After ITB Fulfillment did this, they started shipping 9X more packages with the same-size staff.
#5: Teams must become more collaborative amid workforce challenges
The prevailing workforce challenges in the logistics industry have opened up new opportunities for collaboration.
73% of 3PLs and 46% of shippers have observed companies seeking 3PL partners to offset labor shortages. This trend indicates that businesses are actively seeking external support to navigate through labor constraints and ensure uninterrupted operations.
Doing this requires a system that can provide 100% visibility and collaboration within a client portal, custom reporting and dashboards, and a rapid onboarding process for new staff.
Leading nimble firms like Drive Fulfillment pivot to strategies in their control:
- Avoid taking on additional labor-costly tasks: repacking returns management
- Focus on labor management: track activities, generate KPIs, work into billing
- Increased automation: pick/bin systems, AMRs, conveyance
#6: Inventory levels and supply are getting rebalanced
In response to dynamic market conditions, a majority of shippers (80%) are taking action to rebalance inventory levels. Among them, 71% have already initiated efforts, while 9% plan to do so soon.
Additionally, 69% of shippers are also reevaluating and rebalancing their sources of supply to ensure greater supply chain resilience and flexibility in the supply chain.
Additional focus is being placed on direct-to-consumer and reducing re-touches. Traditional supply chains involve moving products from OEM to retail with 3-4 touches in between.
Omnichannel is expanding upstream and allowing for direct fulfillment. The sooner a product leaves the supply chain, the more labor is freed up and retasked.
#7: Consolidation of 3PLs
Despite growing reliance on technology-driven solutions, shippers are increasingly consolidating the 3PLs they work with. As reported by 71% of shippers, this marks a significant change from the 57% reported in last year’s study. This indicates a return to core strengths and a preference for fewer, but more reliable logistics partners.
This benefits both parties in the relationship. The shipper reduces the number of relationships: contacts, contracts, reports, QBRs, etc. The 3PL streamlines their operations as they can focus on a more homogenous SKU profile increasing efficiency and predictability. A 3PL fulfillment solution keeps it all straight and up to date at all times.
Ready to improve 3PL fulfillment?
From the rise in freight forwarding and international transportation to the growing importance of 3PL fulfillment and automation, the logistics sector is experiencing a transformative period.
Shippers and 3PLs are increasingly turning to advanced 3PL fulfillment technology to optimize their supply chain operations. These solutions create massive opportunities for collaboration, value-pumping services, operational efficiencies, and lasting partnerships.
How can they help you?