Top 5 3PL Trends to Watch in 2022

Category:3PL

Many thought that 2021 would be the year that we finally poked our head out from the fog of the pandemic. The projections were that manufacturing would get back on track, cargo ships would be unloaded on time and efficiently, and carrier surcharges would subside— basically, we were anticipating some sense of normalcy. Boy were we wrong. 

3PLs and merchants had to manage many layers of supply chain issues while trying to keep up with unprecedented demand from consumers (yay ecommerce growth!). In the third quarter of 2021 ecommerce made up 13% of total retail sales in the US, which was  down from a high of 15.7% in the second quarter of 2020, but still up from pre-pandemic levels of 11.3% in the fourth quarter of 2019. 

2022 is trending in the same direction as 2021. Merchants and 3PLs will need to continue to get creative this year. Success will come from finding a balance between keeping costs down and maintaining a steady flow of inventory to meet (what will likely be) another record year for ecommerce demand. Reliance on technology and automation to improve efficiency has accelerated over the past few years, and it’s only just begun. Here are the top 3PL trends of 2022. 

1. Last Mile Delivery

Getting your product to a customers’ doorstep has never been easier. The blue chip, asset-based carriers, like FedEx and UPS, have poured billions of dollars over the last decade to improve their small parcel infrastructure to get packages to households faster and cheaper. However, last year, hampered by labor shortages and operational bottlenecks, carrier fees climbed and peak surcharges became commonplace. 

Regional carriers with a primary focus on domestic shipments have become major players in the last mile delivery space. As the larger carriers have shifted their focus away from lighter packages to heavier, more profitable cargo, the regional carriers have jumped on the opportunity and gained significant traction in winning more small parcel business. The likes of Pitney Bowes, OnTrac (soon to be LazerTrac after their acquisition of Lazership), and DHL will continue to win the hearts and minds of merchants looking for fast and cost-effective domestic shipments.

2. Costs Will Continue To Rise

When it comes to supply chain costs, 2022 will be a continuation of the last two years with all aspects of supply chain costs pointing up and to the right. Economics 101: demand continues to outpace supply and as a result, cost will rise. 

If you look across the supply chain, relief from high costs doesn’t seem to be close on the horizon. Labor rates in the US, the biggest cost center in the supply chain, continue to rise for skilled workers. According to a recent study conducted by McKinsey, job openings rates are approximately 50% above the pre-pandemic levels despite the fact that the workforce has shrunk. 

3PLs and merchants are also experiencing a dramatic rise in carrier fees which is material considering up to 70% of fulfillment costs is tied to shipping. Historically, peak surcharges would be tacked on during the holiday season but it’s becoming more common for carriers to add year-round surcharges, also known as demand surcharges.