Check out the most recent article about 3PL Trends in 2021
2019 was a big year in logistics. However, it pales in comparison to 2020 which has seen the coronavirus pandemic pushing ecommerce revenue to record 20% of retail sales in the US, creating havoc on the global supply chain. Additionally, a major trend continued as the leader in ecommerce logistics: Amazon increased their market share and invested heavily in their in-house logistics capabilities. With global parcel delivery expected to pass the 100 billion mark in 2020, and consumers expecting 1-hour deliveries, 2020 is bound to be a busy year. Here are the top third-party logistics (3PL) trends predicted in the logistics industry in 2020.
1. The Rise of Robotics
The explosion of e-commerce coupled with a recent labor shortage, warehouses are reaching a production limit. Many third-party logistics (3PL) companies are beginning to deploy mobile robots to increase their ecommerce fulfillment productivity in 2020.
Data from the Robotics Industries Association estimates that between 2019 and 2021, 485,000 units of logistics robots will be sold in total, rising at a rate of 18% compound annual growth rate (CAGR). The adoption of robotics in 2020 was accelerated due to the coronavirus as 3PLs leveraged robots to manage the increase in ecommerce demand without compromising the the safety of their employees.
These collaborative robots—often called cobots—have the ability to guide warehouse associates around facilities with instructions on what to pick. As temporary workers become increasingly scarce, this could usher in a shift toward relying on robots to handle tasks such as quality checking and pack out.
In 2020, robotics will no longer be only for companies with big pockets (based on research from Mckinsey); over the past 30 years, the average robot price has reduced by half. Consequently, it’s possible that 3PL providers will begin leveraging Robotics-as-a-Service (RaaS) to automate warehouses. With zero additional infrastructure requirements and little upfront cost to get started, the RaaS model would offer 3PL companies a scalable way of adopting robotics.
Global ecommerce sales are projected to reach $4.206 trillion in 2020, according to eMarketer. The industry is still growing rapidly which would make an RaaS subscription model, or pay-as-you-go option, get robotics into many warehouses quickly and easily. In 2020 expect to see more 3PL companies adopt RaaS models in their supply chain as early adopters start having quantifiable success.
“In the past our operators used to be working throughout the warehouse, now they are only working at one specific area (we call it the port) and all the product is being brought to them by robots.”
2. The Amazon Effect
Amazon has continued its domination in the US as the #1 ecommerce retailer with an estimated 38% share of all US ecommerce sales. It is one of very few companies to surpass a 1.5 trillion dollar market cap. It’s estimated that there are over 2 million sellers on amazon, leveraging both the Amazon Vendor and Seller Central platforms. Amazon has continued to invest heavily to support the growing demand of shoppers and sellers and now boasts over 100 fulfillment centers and 300 delivery centers to handle last-mile deliveries
The stranglehold that Amazon has on the US ecommerce space isn’t without it’s pitfalls. Shortly after the pandemic started, Amazon temporarily prioritized inbound shipments of household staples, medical supplies, and other high demand products for both Amazon Seller and Vendor Central. As a result, Amazon sellers experienced major delays of their shipments and often experienced out of stock items in their Amazon store leading to loss of sales or a poor customer experience. Furthermore, in July, Amazon announced they would be limiting shipments of Fulfilled by Amazon (FBA) sellers during the 2020 holidays.
These major changes has led to many Amazon sellers scrambling to find alternative sales and fulfillment options. Sellers have been forced to diversify their sales channels by building their own ecommerce stores, leverage other online marketplaces including Target.com and Walmart.com, or use alternative Amazon fulfillment options. You can read a more detailed breakdown of FBA alternatives.
3. Shippers Demanding Analytics from 3PL
Shippers are making more data-driven decisions and in 2020 will begin to expect 3PLs to have analytics expertise. The 2020 24th Annual Third-Party Logistics Study states that 94% of shippers believe analytics is helpful for ensuring on-time and complete order fulfillment and shipment visibility.
It’s only fitting that once 3PLs begin getting into the analytics business, they will move from basic descriptive analytics toward prescriptive and cognitive analytics. This might also mean 3PL companies will start build data science teams to ensure they can translate business data into meaningful insights.
With access to more robust data a clearer data strategy, 3PL providers will be able to give shippers end-to-end visibility and traceability across the supply chain. The only caveat to this trend is the vulnerability it brings. Along with more data, 3PL companies would be wise to include data protection plans, and to prioritize cybersecurity.
4. The Supply Chain Continues to get Greener
According to CSG’s 2019 Retail and Sustainability survey, 68% of consumers rate sustainability important when making a purchase. To attract shippers in 2020, it’s imperative for shippers to be eco-friendly and 3PLs will have to integrate environmentally-conscious practices into their operations.
Optimization has been the main way that 3PLs become greener, and that will likely continue. However, there are voluntary programs cropping up, such as SmartWay Transport Partnership a program that assesses the environmental and energy efficiency of shipping within supply chains and helps reduce fuel use and associated emissions.
Another key eco-conscious strategy for 3PLs is to use alternative fuels, such as liquefied natural gas, to reduce their carbon footprint and help shipping customers achieve sustainability goals. Presently, 19% of 3PLs are piloting alternative fuels. Other trends in the industry are the use of parcel lockers, bikes, and electric vehicles to reduce carbon emissions in last-mile delivery. Although drone delivery may finally be coming to a city near you in 2020, a murky regulatory framework could prevent widespread adoption.Learn More about How 3PLs Build a Sustainable Supply Chain
5. Last-Mile Delivery
An obvious but overlooked concept, which many players don’t always get right, last-mile delivery looks set to become a game-changer for many providers within the new year. Focusing on customers through added efforts, value and taking the extra step will be key in customer retention, loyalty and satisfaction. In many cases, last mile service could make or break companies.
In the US, the United States Postal Service (USPS) has been the primary platform for last-mile deliveries. With over 600,000 employees in the US, all small parcel carriers, including UPS, FedEx, and DHL, have leveraged USPS to deliver millions of packages to US residences daily. However, the USPS has experienced financial troubles and has looked to the US government to pass a 25 billion dollar stimulus package to stabilize things. As the USPS deals with their financial issues, they’ve been forced to eliminate overtime, reduce their investment in automation, and implement holiday surcharges which have resulted in higher costs, slower delivery speeds, and a less reliable service.
6. Urban Fulfillment
The placement of fulfillment hubs is trending toward accessible urban locations as 3PL companies race to shorten the last mile. According to a report from Capgemini, 55% of consumers said they will switch to a competitor if that competitor offers faster service.
Finding space to set up urban fulfillment centers will be a challenge for 3PL companies as real estate continues to be scarce and expensive. According to the real estate firm, CBRE, rents for smaller urban warehouses between 70,000 and 120,000 square feet have risen by a third over the past half-decade, while availability has dropped between 7 and 11%. It may be that 3PLs will convert underutilized and inexpensive spaces into fulfillment centers.
7. Supply Chain Integration
To deliver the best results, all players across the value chain need to be in sync. 2019 will witness more integration through data sharing, insight-driven strategies and possibly, a greater shift towards blockchain technology, to encourage visibility, transparency and accountability by all parties involved. Thus, the greater good purpose is poised to be served and taken into account, especially within an industry that involves such a large number of players at any given time.
8. Cross-Border Commerce
Consumers are increasingly comfortable buying from retailers abroad. Research from Forrester estimates that cross-border shopping will make up 20% of eCommerce in 2022, with sales reaching $627 billion. Despite this, cross border logistics will remain challenging for shippers in light of the 2019 trade wars and recent geopolitical turbulence.
The two logical trends that will support more international commerce are: 3PLs retaining a more flexible supply chain to match geopolitical shifts; and outsourcing cross-border freight to help ensure on-time delivery, optimize efficiencies, and maximize the bottom line.
One technology that isn’t limited by cross-border transactions is the use of blockchains. There may be more 3PL collaborations with blockchain initiatives, targeted at recording digital transactions and improving security and visibility.
No doubt, 2020 is shaping up to be an interesting year for shippers and 3PL providers. Whatever direction the supply chain ultimately takes, shippers that stay competitive in 2020 are those who partner with 3PLs that understand the complexities of the modern supply chain.
If you are interested in working with an experienced 3PL, send us a note to connect about how we can help your company grow. You can read DCL’s list of services to learn more, or check out the many customers we support to ensure great logistics support.