3PLs to Capture More of 2017 Holiday Shopping with Improved Technology
Research and Markets announced in the Global IT Spending by 3PL (Third Party Logistics) Market report that global IT spending by 3PLs is expected to grow at a CAGR of 12.5% over the next two years. The 3PL market is growing because it involves low-cost labor, robotics, and improved infrastructure starting with the demand in the e-commerce business model.
With consumers demanding next day (even same day delivery), companies are engaging 3PLs closer to their customer base. Often West Coast e-commerce companies are engaging 3PLs in the Midwest, Northeast, Southeast, and Southwest to meet next day customer expectations.
Because 3PLs charges are based on product picked, packed, and shipped, the commitment from new e-commerce issues is lessened. As the demand is substantiated over time, new DCs (distribution centers) will be acquired. Until that data is demonstrated, 3PLs provide an effective alternative without disappointing the customers.
The global IT spending market by 3PLs can be segmented into six elements: SCM and procurement, warehouse management, transportation management, field service management, freight management, and others.
As 3PLs are anticipated to ship more than half the holiday packages in 2017, e-commerce companies are capturing a significant share of the small and mid-sized 3PL market. Tier II third-party logistics providers are finding their niche; they come in many shapes and sizes. The “not-too-big and not-too-small” proportions of Tier II 3PLs make them just right for many shippers. Bigger is not always better. Tier II 3PLs generally bring in revenue of less than $250 million annually, and often offer some specialization in mode, vertical, region, or technology that allows them to carve out their own niche. Volumes handled by 3PLs will be 100% higher this holiday season and terms of engagement will be required before the end of Q2 2017.
According to Tim Hoj, at WarehouseOS, “Fulfillment systems whether at a 3PL or a small manufacturing distribution, operations must be part of a lean process, offering shorter throughput times, fewer errors, and significant cost savings.” Hoj added, “The result is increased customer satisfaction, a faster ability to supply products, and process transparency. Traditional picking methods are one of highest expenses when operating a warehouse. By lowering that cost through leading edge ready-to-use solutions we are seeing customers experience huge growth in hundreds of business sectors throughout North America.”