The dynamic world of third-party logistics (3PL) is undergoing a transformation. With the onset of new technologies and changing market conditions, staying ahead requires an understanding of current trends.
The following statistics pulled from Extensiv’s 2023 Third-Party Logistics Warehouse Benchmark Report offer an in-depth view into the key trends of the industry.
1. Balancing Labor Costs with Growth
Rising Labor Costs: 70% of 3PLs reported an increase in labor costs this year. Such a rise could be traced back to numerous reasons including wage inflation, global economic factors, or the demand for specialized skills outpacing supply. In several regions, minimum wage increments and tighter labor markets have also played a role.
Investing in the Future: Despite the mounting costs, 64% plan to expand their workforce in the forthcoming year. This seemingly counterintuitive approach underlines the importance of human resources in a domain that, while increasingly automated, still demands the human touch for quality assurance, customer service, and on-ground problem-solving.
2. A Mixed Bag of Order Volumes
Challenges Ahead: The 22% of 3PLs facing stagnant or declining order volumes face an uphill challenge. This stagnation could be due to market saturation, regional economic downturns, or increased competition from newer, agile entrants.
Strategies for Growth: For these companies, growth might lie in specializing—offering value-added services, tapping into emerging markets, or investing in advanced tech solutions to outpace competitors.
3. Speed and Profitability Go Hand in Hand
The Need for Speed: In today's age of instant gratification, 54% of companies pick, pack, and ship orders in under an hour from receipt from the customer and are setting new industry standards. As ecommerce giants raise consumer expectations, other logistics businesses looking to stay competitive are scrambling to keep up.
The Profitability Link: The data suggests speed isn't just about customer satisfaction. Those who can process orders in under 30 minutes are considerably more profitable, specifically 1.67x more likely to demonstrate 50%+ profitability growth. This could be due to higher customer retention, reduced errors, or the ability to handle larger volumes with streamlined operations.
4. The WMS Dilemma
Barriers to Adoption: For 52% of the companies not utilizing a warehouse management system (WMS) solution, the expense of adoption is a significant barrier. This hesitance might stem from not just the initial investment but also the perceived costs of training, integration, and potential downtime.
The Real ROI: However, 26% of WMS users report massive time savings. Beyond just efficiency, a WMS can lead to better inventory management, reduced waste, and enhanced customer experiences. Real-world successes like Averitt's 60-hour daily savings highlight the transformative potential.
5. New Customers, New Horizons
Expansion in Sight: With 86% of 3PLs targeting new customer acquisition in 2024, marketing, and sales efforts are bound to intensify. This statistic indicates a bullish outlook and confidence in the value proposition these 3PLs offer.
Building Relationships: Beyond just adding numbers, fostering relationships with new customers will be vital. Tailored solutions, personalized experiences, and value-added services might be the key differentiators in this highly competitive market. Long-term contracts and partnerships could also be on the rise, as 3PLs aim to solidify their client base.
6. Billing Challenges in Focus
The Billing Quandary: A significant 55% of 3PLs highlight uncaptured charges as their primary billing issue. This problem represents lost revenue and underscores the complexities of the billing process in third-party logistics. Variability in services, fluctuating rates, and human error contribute to this challenge.
Strategies to Counter: Efficient auditing systems, investing in automated invoicing tools, and regular staff training sessions can minimize these uncaptured charges. As the saying goes, "take care of the pennies, and the pounds will take care of themselves." Addressing these seemingly minor discrepancies can significantly boost bottom-line profitability.
7. Tech Investments for the Future
Planning Ahead: With 39% of 3PLs looking to integrate billing and invoicing technology in 2024, the industry's digital transformation journey continues. Such tools can automate repetitive tasks, reduce human errors, and offer valuable analytics to optimize pricing strategies.
Beyond Billing: This inclination towards tech isn't just restricted to billing. The broader trend suggests a growing acceptance and integration of technology in every facet of 3PL operations. From AI-driven forecasting tools to IoT devices for real-time tracking, the future of 3PL seems intertwined with technological advancements.
As the 3PL industry steers ahead, it does so with a keen eye on both challenges and opportunities. Whether it's optimizing labor costs, refining billing processes, or leveraging technology for growth, these key statistics offer a roadmap for the future. In a rapidly changing world, adaptability and foresight will be the cornerstones of success for 3PLs aiming to make a mark.
For more insights on 30+ industry-specific topics and best practices, current issues, and opportunities facing 3PL warehouses, download our 4th annual Third-Party Logistics Warehouse Benchmark Report!