2023 State of the Third-Party Logistics (3PL) Industry Report
Welcome to the annual State of the Third-Party Logistics Industry Report.
As we near the three-year anniversary mark since the pandemic changed everything, the warehousing and third-party logistics (3PL) community continued to face disruptions related to COVID-19 throughout last year—with experts predicting systems won’t normalize until 2023. With 2023 ramping up, new challenges are arising: lack of warehouse space, consolidation within the industry, the ongoing labor crisis, and an uncertain economic climate to boot.
You need business strategies to combat these challenges and empower your 3PL in uncertain economic times. In this year’s Third-Party Logistics State of the Industry Report, you’ll learn about our top trends for the year and recommended best practices that will help you thrive despite these issues.
Find highlights and 3PL industry best practices below from each section of the report.
A Foundation of (Digital) Automation
It should come as no surprise that implementing warehouse automation technologies leads the trends for 2023. With most warehouses facing capacity and labor constraints, turning to automation to help increase spatial efficiency and reduce labor needs in the warehouse is a no-brainer.
Consider the balance of your workforce between human and machine
ABI Research reports that training in advanced picking software provides massive gains as advanced picking creates a 30% efficiency gain and up to 60% in time savings. Additionally, 54% of organizations are increasing supply chain and technical training to retain laborers and develop a career path for valued employees.
Learn more about what digital automation trends are going to take hold of the industry this year including API integrations, building out a tech stack, and how to leverage technology to become a supply chain leader.
The Continued Rise of 4PLs
Fourth-party logistics (4PL) could end up being one of the biggest buzzwords in logistics in 2023. We mentioned the consolidation within the industry as big retailers are looking to offer 3PL services at their warehouses, and other mega-3PLs operate their own 4PL networks. This injection of competition in an already cutthroat industry can be daunting to many smaller and regional 3PLs. 4PLs can be a growth opportunity or an additional business model for diversification versus a threat to current business practices of 3PLs, and there are many benefits to expanding into 4PL networking.
Expand your geographic footprint
In a survey of ecommerce industry professionals, Saddle Creek Logistics found that “delivery expectations” ranked as the top fulfillment challenge at 45% followed by transportation capacity (36%), headaches that geographic diversification through a 4PL network would mitigate.
See how expanding into fourth-party logistics can benefit your warehouse in 2023.
Customer Service Goes Both Ways
3Your business relies on strong customer relationships, so you need to know how to best serve them, especially as your 3PL grows to take on more and more customers. The 2022 Inbound Logistics 3PL Market Research Report notes that the main reason for a failed 3PL partnership is poor customer service (62%) while another 10% “cite failed expectations, which could include failure to deliver on promises or communicate clearly, both important elements of service.” Prioritizing meeting customer expectations and offering comprehensive customer service could be your life preserver as the economy faces a potential recession.
Offer value-added services to serve your customers
One essential service you can provide is managing shipping volatility, as 3PL’s shipping acumen is one of the top reasons brands partner with 3PLs. Shopify notes that shipping coordination is a key function of 3PLs who can work with established carriers or manage their own fleets to fulfill shipping promises such as 2-day shipping.
Download the complete report to see what other ways you can optimize your customer relationships
The Evolution of Fulfillment
At the end of the day, fulfillment is a 3PL’s bread and butter. Making sure you follow best practices and consider new fulfillment strategies round out our 2023 3PL warehouse business practice trends. In last year’s State of the Industry Report, we named the rise of omnichannel fulfillment as one of our top trends for 2022, and omnichannel continues to be a major growth driver for 3PLs. As omnichannel buying and selling continues to grow—Logistics Management reports that buy online ship to customer from distribution center is the most common fulfillment practice at 35% (expected to be 46% in two years)—you need to embrace an omnichannel fulfillment strategy to support your clients’ sales channels.
Ensure your tech supports omnichannel fulfillment
Even if you do not support omnichannel fulfillment now, you may want to in the (very near) future as ecommerce continues to grow, albeit at a slower rate than during the height of the pandemic. Omnichannel buying and selling continues to grow in popularity, and you don’t want to be limited by your technology in getting in on this trend.
Learn what fulfillment strategies will rise to complement omnichannel workflows
While the effects of the pandemic may be mostly behind us, there is still a lot of uncertainty within logistics as our supply chains recover amid this economic climate. The challenges of an industry-wide lack of warehouse space, consolidation within the industry, and the ongoing labor crisis may seem overwhelming, but they create an opportunity for 3PLs to get creative with how they address these problems. By leveraging digital automation, considering expansion into fourth-party logistics, optimizing the customer relationship, and evolving fulfillment strategies, 3PLs can thrive, increasing profitability and honing their expertise through new business practices.
Extensiv is a visionary technology leader focused on creating the future of omnichannel fulfillment. We partner with warehouse professionals and entrepreneurial brands to transform their fulfillment operations in the radically changing world of commerce and consumer expectations. Through our unrivaled network of more than 1,500 connected 3PLs and a suite of integrated, cloud-native warehouse management (WMS), order management (OMS), and inventory management (IMS) software, we enable modern merchants and brands to fulfill demand anywhere with superior flexibility and scale without painful platform migrations as they grow. More than 25,000 logistics professionals and thousands of brands trust Extensiv every day to drive commerce at the pace that modern consumers expect.