Supply chain disruptions are expected to continue as demand remains strong, but should ease by mid-2022, according to a recent report on the state of third-party logistics.
the 3PL headquarters The report shows that the ports of Los Angeles and Long Beach, which handle 40% of shipping containers entering the United States, operated non-stop to eliminate bottlenecks in the supply chain. Meanwhile, third-party logistics companies have faced significant challenges to meet demand, including bottlenecks at ports, labor shortages in warehousing and transport, and consumer expectations for faster deliveries — often dubbed the Amazon Effect.
“In 2021, supply chain disruptions will cost the world an average of $184 million, with the United States leading the list with an average of $228 million,” the report shows.
According to insurance company Euler Hermes, logistics bottlenecks affect 25% of global trade volume. However, according to 3PL Central’s report, problems are expected to improve by mid-2022 as stock levels return to pre-COVID levels, consumers begin to shift towards sustainable consumption and shipping capacities begin to increase.
The report shows that more than 41% of companies that experienced supply chain disruptions received customer complaints and over 36% suffered lost sales.
According to the report, outside logistics companies looking to increase profits must consider multi-channel distribution to remain competitive. Omnichannel fulfillment is a strategy for taking a unified approach to inventory management and order fulfillment across a variety of sales channels.
Before the pandemic, third-party logistics warehouses were focused on diversifying fulfillment for e-commerce, particularly for business-to-business providers who wanted to participate in the rise of online shopping. This increase is expected to continue into 2022, with retail e-commerce revenue growing to $502.5 billion.
However, the report found that many outside logistics companies have been slow to adopt a full omnichannel approach. Business-to-business fulfillment remained the largest fulfillment type for third-party logistics companies at 72%, followed by e-commerce at 68% and business-to-consumer fulfillment at 56%. But 22% of companies named omnichannel as a fulfillment type. Still, 92% of companies that offered omnichannel fulfillment increased their order volume in 2021.
The report also revealed that many department stores have ramped up their e-commerce efforts, which is important for omnichannel distribution.
According to a McKinsey & Co. survey, consumers care about delivery costs, speed, control over delivery and returns. Also, 85% of consumers prefer interacting with omnichannel brands that have digital and physical channels.
According to 3PL Central, a third-party logistics warehouse will be the number one asset for companies looking to implement or enhance an omnichannel fulfillment strategy. Third-party logistics companies can support omnichannel fulfillment customers with delivery options, technology, and reverse logistics.
By 2027, same-day delivery is projected to reach $20.36 billion, 3PL Central’s report shows. Third-party logistics companies can prepare for this by offering a variety of delivery options, including online purchase, store pickup; dropshipping; and buy in store with delivery from the warehouse.
According to the report, third-party logistics customers are looking to their warehouse for help with electronic data exchange for compliance issues and chargebacks, inventory management tracking and order management systems, shopping cart integrations, warehouse management system software, and technology to automate processes and workflows.
Third-party logistics companies that offer full omnichannel fulfillment must have smooth reverse logistics processes in place to support the return of items, regardless of how a customer received them, the report shows.
The rise of e-commerce has prompted companies to outsource their logistics operations, and according to the report, users of third-party logistics said that 40% of their total logistics costs could be attributed to outsourcing in 2021. The global logistics market is expected to grow by Third-party sellers valued at $1.1 trillion as online sales continue to grow. According to the report, this is an opportunity for expansion for the 20,605 outside logistics companies in the United States.
As their customers grow and demand increases, companies may look to third-party logistics, i.e. networks that offer their customers transparency throughout the logistics journey. Fourth-party logistics may offer many of the same services as third-party logistics, but is often the single point of contact for customers, can provide additional insight into data analysis across the supply chain, work directly with manufacturers or suppliers, and manage larger distribution networks, the shows Report.
Many third-party logistics companies are looking to collaborate with other warehouses to integrate operations and build a third-party logistics network, the report said. This may involve the use of multiple warehouses or alternative carriers and transport networks that offer integrated technologies for deeper insights into day-to-day activities and greater opportunities for growth. Third-party logistics companies are looking for partnerships, and according to an Inbound Logistics report, 54% of companies cited partnerships with third-party logistics companies or leading logistics providers as a strategic initiative.
Still, third-party logistics networks are new territory for growing third-party logistics companies looking to expand, according to the 3PL Central report. However, many warehouses are operating at full capacity, with a US vacancy rate of less than 3.6%, and are struggling with staffing issues.
Third-party logistics companies may use third-party logistics networks to support customers in their relationships and ensure supply chain resiliency. The report shows that 98% of third-party logistics companies said they have successful relationships with carriers, which report they have 90% successful relationships with the companies. According to the report, effective relationships can result in reduced costs, improved service and additional data that contribute to long-term customer goals.
The report shows that companies that have a network that offers additional space for inventory, fulfillment centers near customer “hot spots,” or access to additional supply chain analytics can help minimize supply chain disruptions. This can help the businesses to grow or try new marketplaces.
According to the report, 84% of companies have implemented warehouse management system software as the most widely implemented technology for the companies. They stated that it was installed to provide real-time inventory tracking and management. The report shows that the warehouse management systems market is expected to reach US$8.1 billion by 2028, up from US$3 billion in 2021. Consumer demand and e-commerce are contributing to the rise of the systems.
According to Gartner, by 2025, 80% of all business-to-business sales will be digital as e-commerce moves beyond business-to-consumer sales.
3PL Central also emphasized the importance of the Internet of Things (IoT), which refers to any technology from mobile scanners to warehouse management systems connected to the internet. The top three reasons third-party logistics companies invested in IoT were to increase workforce productivity, improve real-time decision-making, and create a competitive advantage.
“Technology is a prerequisite to offer intelligent data analysis and automation – especially for (third-party logistics companies) who want to create intelligent warehouses to address the ongoing labor shortage,” the report shows.
According to DHL, “5G is expected to revolutionize supply chains around the world as the industry shifts to a data-driven mindset.” It is also expected to be able to monitor transactions in real-time, including the location and status of shipments.
According to 3PL Central’s report, the technology can help third-party logistics companies meet demand, scale operations at lower costs, and share the benefits of partnership with customers. The report also shows that 73% of third-party logistics users said the companies offer new and innovative ways to improve logistics efficiency. And 64% of users said the companies reduced overall logistics costs.
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