To succeed today, third-party logistics companies will need to respond to three trends: the rising importance of omnichannel fulfillment, warehouse space constraints, and the drive toward digitalization.
Rachel Trindade is the chief marketing officer at Extensiv (formerly known as 3PL Central), which delivers connected commerce omnichannel solutions that integrate systems for warehouse, inventory, and order management.
AFTER YEARS OF DISRUPTION AND UNCERTAINTY, warehousing and third-party logistics providers (3PLs) ended 2022 on several positive notes as the market stabilized. 3PLs reported continued confidence due to new customer acquisition, e-commerce growth, and significant upticks in profitability, according to Extensiv’s annual “2023 State of the Third-Party Logistics (3PL) Industry Report” and its recent “3PL Warehouse Benchmark Report.”
These reports explore the state of the 3PL and warehousing industries, identifying the innovative approaches businesses are undertaking to adapt to the new normal. The reports found that even amid concerns over inflation, a recession, labor shortages, and global uncertainty, 3PLs outperformed in terms of order volumes versus the preceding years. More than 90% of 3PLs reported increased order volumes in 2022, up from 2021 when 85% reported increased volumes and 2020 when 79% reported increased volumes. New customer acquisition is the most significant driver of order volume growth, with 81% of respondents citing it as a primary reason, followed by diversifying fulfillment types (42%) and increases in e-commerce ordering (31%).
3PLs also saw higher revenues as many leveraged increased market demand to boost profitability. When surveyed about their financial performance over the past year, 81% reported improvement, with 38% reporting a significant growth of more than 25% in profitability. Meanwhile, 31% indicated moderate growth in profitability ranging from 10% to 24%.
Amidst these positive developments, the 3PL industry also faces challenges. Top among them (perhaps unsurprisingly due to upward pressure on warehousing rents and a tight labor market): managing costs, finding and retaining workers, and operational efficiency.
Three key trends reveal how 3PLs must embrace the opportunities presented by these market changes to help their customers optimize their supply chains: omnichannel fulfillment, space constraints, and digital automation.
1. Omnichannel fulfillment
Customers today expect to have a unified shopping experience across all of a company’s retail channels, whether it's online, in a physical store, or any combination of the two, such as “buy online pickup in store” (BOPIS) or curbside and locker pickup. To support their clients’ sales channels, 3PLs need to embrace an omnichannel fulfillment strategy. Extensiv’s survey showed that 3PLs supporting omnichannel fulfillment saw 13% more growth than those offering more limited fulfillment. Furthermore, 18% of 3PLs performing omnichannel fulfillment saw a 50% increase in profitability over the prior year, which is 33% higher than the 17% average increase for 3PLs that do not offer omnichannel fulfillment.
A successful omnichannel fulfillment strategy requires:
● Real-time channel performance monitoring that provides visibility and evaluation of key performance indicators (KPIs).
● A single platform to manage cross-channel fulfillment, which increases efficiency and consistency across all channels.
● Streamlined returnsmanagement or reverse logistics capabilities. Prioritizing reverse logistics in an omnichannel strategy is a realistic goal that aligns with a greater mission to remove friction from whatever parts of the fulfillment process matter most to consumers.
There are many benefits to having a robust omnichannel fulfillment strategy. First, having cross-channel fulfillment can help streamline and improve order management across all channels, simplifying the process from warehousing to packing to delivery. It also improves customer and consumer satisfaction. Omnichannel fulfillment meets the disparate needs of consumers through their preferred channels, while making brands look good and creating a loyal consumer base.
2. Space constraints
A significant challenge that may limit 3PL growth is the current scarcity of warehouse space due to low vacancies and high rents. Over a third (35%) of 3PLs who responded to our survey think finding available warehouse space will be one of their biggest challenges. Currently, 20% of 3PLs report operating beyond 100% capacity (a 33% increase from 2021), while almost 40% report capacity of 90% to 99%. (See Figure 1.) Nearly 2 out of 5 (39%) 3PLs report that adding warehouses in new locations is one of the most significant opportunities in the coming year. These challenges are exacerbated by the fact that brands are asking 3PLs to warehouse slow-moving inventory surpluses.
3PLs are undertaking a variety of approaches to tackle space constraints, including:
● Pricing long-term storage at a higher rate to persuade customers to reduce the stock of slow-moving inventory and preserve valuable warehouse space.
● Using “micro-warehouse” space in densely populated urban areas. Micro-warehousing helps 3PLs expand available square footage by adding smaller warehouses to their real estate portfolio. This strategy also allows them to get inventory closer to consumers, significantly decreasing delivery times and costs.
3. Digital automation
Digital automation is the foundation for establishing continued effective and efficient processes within the supply chain. Businesses are leaning into it: 93% of shippers reported that data-driven decision-making, made possible by digital automation, is critical to the success of supply chain management.
Although there’s widespread recognition that automation can streamline operations and boost productivity, technology implementation and integration continue to vex 3PLs. In 2021, 42% said technology implementation was their most pressing business challenge. The 2022 survey showed effectively no improvement in this area, as that number only dropped by 1%, down to 41%. Implementing the right technology stack—one that aligns easily with target industries and creates flexible and scalable workflows—is at the heart of this task. It requires a holistic approach that doesn’t rely on a sole piece of software, like a warehouse management system (WMS), to solve the problem single-handedly. A holistic approach instead builds an entire digital ecosystem that is primed to cut hard and soft costs, increase visibility, and improve the consumer experience.
The technologies with the highest current implementation are WMS, with 87% of 3PLs having implemented it; order management systems (52%); mobile barcode scanning (51%); and electronic data interchange (44%). For 2023 and beyond, 3PLs plan to focus on technologies that support increased profitability and operational efficiency. The top three planned implementations are billing and invoicing (32%), mobile barcode scanning (27%), and reporting and analytics (27%).
To retain happy customers and consumers, 3PLs need to evaluate technologies to build a long-lasting digital foundation. Many tools that have already been implemented haven’t been fully used or optimized. Many 3PLs would benefit from training employees to get the most out of those automation investments. Only when technology and teams complement each other do businesses see increased productivity and revenue growth.
Moving forward
Mid-2023 finds 3PLs looking to optimize their omnichannel fulfillment processes, leverage digital automation, and create innovative warehousing strategies to respond to capacity constraints. Continued proactive management and leaning into automation will mitigate these challenges while positioning 3PLs to weather other market impacts, including labor shortages, inflation, and a potential recession.
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”