3PL Trends: Keeping up with the e-commerce boom

Keeping up with the e-commerce boom: trends in 3PL logistics

On the fulfilment front, each and every shipper has a predetermined set of performance measures or key performance indicators (KPIs) to strive toward. On-time in-full (OTIF) is one of the more general goals that should be pursued for each and every purchase. Other metrics, such as order accuracy, days to delivery, returns turnaround time, and satisfying next-day shipping obligations, also play a role in the equation.

In the current, fast-paced climate of fulfilment, it might be challenging to meet these standards, and this is especially true if the shipper does not have fulfilment as one of their core competencies. It is possible that the online retailer whose company has experienced rapid expansion over the past two years, the manufacturer whose primary focus is on the production of high-quality products, and the brick-and-mortar store that has been forced to transition to more online sales will all struggle with the new fulfilment realities.

The third-party logistics (3PL) industry is well aware of this fact, and as a result, it has been working to improve its game by expanding its service portfolio and making it available to a wider range of consumers. The practise of outsourcing some or all of one’s fulfilment activities to a reputable third party was once the sole purview of very high-volume enterprises; however, in today’s market, even a modest online clothing retailer understands the value of doing so.

The explosion in e-commerce has undeniably encouraged an increased number of businesses to investigate the possibility of working with a 3PL. U.S. e-commerce sales have been on a roll recently, and it is anticipated that they will pass the $1 trillion mark for the very first time in the year 2022. This landmark was previously scheduled to occur in 2024, but it was bumped early because of the pandemic.

It is anticipated that e-commerce sales would amount to a total of $5.5 trillion worldwide in 2022; this figure is anticipated to continue increasing over the course of the following few years. Shopify forecasts that by the year 2022, more than twenty percent of the total global retail sales would have been generated online. This indicates that more than twenty-two cents of every dollar spent on retail products in 2017 will be transacted over the internet.

According to Nia Hudson, a research analyst at Transport Intelligence Ltd., “over the past year, we’ve seen e-commerce retail sales continue to ride the momentum of 2020,” in which sales increased very significantly due to pandemic-related restrictions and the closure of brick-and-mortar stores. “Over the past year, we’ve seen e-commerce retail sales continue to ride the momentum of 2020.” (TI). “Online shopping is becoming increasingly popular among consumers, who are doing it across a wider variety of product categories than ever before.” As a direct consequence of this, a rising number of firms, particularly small to medium-sized organisations, are opting to relocate their operations online in order to reach a bigger audience.

Bringing some relief from the complications

According to Hudson, these changes have increased the amount of pressure that is placed on 3PLs to provide flexible and automated e-fulfillment alternatives, especially those that are aimed at the direct to consumer (D2) market.

According to the data provided by TI, the momentum also accounted for approximately 20% of the growth in the worldwide e-commerce logistics market in 2021 (relative to 2020). At the same time, a number of new marketplace providers have also emerged, ready to assist enterprises in tackling the rigours of e-commerce logistics. These new marketplace providers offer fulfilment and technology-led platforms.

“The convenience and speed of online buying is a key lure for customers, who increasingly anticipate faster and more accurate delivery dates,” says Hudson. “Online shopping is becoming increasingly competitive as a result of these factors.” Additionally, they desire more adaptable return procedures, notably in the garment sector. She goes on to say that “fast fashion has one of the highest rates of returns due to the practise called bracketing.” Bracketing is when customers buy more than one size of a particular item to try to find the best fit, and then they return the unwanted ones. “Fast fashion has one of the highest rates of returns.”

These are only some of the new consumer demands that shippers and their third-party logistics providers (3PLs) will need to meet in order to maintain their position in the market. “At the same time, third-party logistics providers are also contending with rising shipping prices, a lack of available warehousing space, and rising labour costs,” notes Hudson. “As e-commerce continues to grow in popularity and the following fulfilment processes become more complicated, third-party logistics providers will be reevaluating the ways in which they might simplify matters for shippers,”

What shippers are looking for
E-commerce shippers are increasingly turning to their 3PL providers for assistance in meeting changing customer expectations and coping with the disruption in the supply chain, labour constraints, transportation woes, inflation, and other challenges that have become the “new normal” in today’s operating environment. These issues are among the many challenges that have become the “new normal” in today’s operating environment.

As a response to this trend, third-party logistics providers (3PLs) are offering shippers with strategic locations, space that can manage increased inventory levels, as well as a wider variety of delivery alternatives.

E-commerce shippers also want to engage with third-party logistics providers (3PLs) that can make the returns process easier for their clients because the amount of returns has increased over the past year. According to Hudson, “Omni-channel logistics services are also in demand,” and “automation is a vital cornerstone of e-fulfillment processes.” [Citation needed]

The traditional third-party logistics providers have responded by adding new technical capabilities that assist customers in achieving cost reductions and advances in efficiency. In addition to this, they have been establishing distinct departments that are solely devoted to e-fulfillment.

For example, DHL Supply Chain was recently awarded a contract with Revolution Beauty that will last for five years. According to Hudson, the 3PL will scale up its existing robotics and automated solutions in order to manage the fulfilment of Revolution Beauty’s e-commerce orders for customers in the UK and internationally. In addition, Hudson is seeing an increase in the number of micro-fulfillment and dark stores being placed in strategic locations in order to reduce delivery times and costs.

For instance, CJ Logistics has formed a partnership with SK Energy in South Korea in order to establish micro-fulfillment centres, while the City Delivery service provided by GEODIS provides customers with micro-fulfillment alternatives that assist reduce delivery times and costs.

Closing last-mile gaps

In his analysis of the current state of e-commerce fulfilment in the United States, Evan Armstrong, president of Armstrong & Associates, Inc., predicts that demand for third-party logistics (3PL) services will most likely continue to rise, despite forecasts predicting a “cooling” of the economy in the near future.

For example, e-commerce sales in the United States are on course to pass the $1 trillion market this year; hence, businesses will still require a location to store their inventory as well as dependable partners to receive, stock, and distribute the goods on their behalf. According to Armstrong, “for the year 2023, we anticipate that warehousing as well as e-commerce fulfilment will be among the stronger development areas for third party logistics in general.”

As of right now, most third-party logistics (3PL) providers, according to Armstrong, offer some kind of e-commerce fulfilment operations as part of their more comprehensive service portfolios.

According to Armstrong, the larger 3PLs have various e-commerce businesses. He cites Geodis, DHL, Ryder, and JD Logistics (in Asia) as examples of some of the larger organisations who have been active in the e-commerce market. E-commerce fulfilment services are also being offered by a growing number of smaller service providers. “In the majority of cases, these 3PLs have operations for e-commerce fulfilment that are independent from their regular business-to-business (B2B) sorts of warehousing operations.” [Citation needed]

In the future, Armstrong anticipates that more third-party logistics providers will add further value in the last mile of the supply chain. This is the section of the supply chain in which transporting large and bulky items from the final point of distribution to the location of the customer is still a significant obstacle. It takes more planning to deliver huge products such as furniture, workout equipment, and other large objects to the doors of clients, particularly when those customers desire quick delivery schedules.

The process also has the potential to be time-consuming and costly. Armstrong notes that “the last-mile aspect of the business is still quite fragmented,” noting that XPO Logistics and Ryder rank among the major last-mile providers. “There are other 3PLs providing last-mile services, but here is a point in the supply chain where a lot of things can go wrong, and where quite a bit of skill is needed beyond basic e-commerce fulfilment pick/pack operations,” says one of the companies that offers the service.

reducing our collective carbon footprints

Returns are a necessary evil in the realm of online shopping, where around 20.8% of all goods purchased online in 2021 were returned to their suppliers. This figure compares to 16.6% for sales made in traditional brick-and-mortar stores.

Last year, shoppers in the United States sent back more than $761 billion worth of items, which represented 16.6% of the entire retail sales in the country. The management of this backflow requires a two-pronged approach: not only must the actual objects be brought back and resold or disposed of, but the customer must also receive a replacement, credit, or reimbursement for their purchase.

Even while 3PLs have always provided return processing, Sarah Banks, managing director at Accenture, believes that they will play an even more important role in the management of returns that are sustainable in the future. In other words, rather than letting the returned goods pile up in the corner and possibly disposing of the unsaleable ones in the garbage, third-party logistics providers (3PLs) can provide routes for the resale, reuse, and/or repurposing of the items that have been returned.

Because of this, it is possible that both the shipper and the 3PL will have a smaller carbon impact. The entire quantity of greenhouse gas emissions (including carbon dioxide and methane) that are produced as a result of a company’s activities is referred to as the company’s “carbon footprint.” This serves as a measurement of the company’s influence on the environment.

Banks adds, “I’m excited to see what evolves in terms of returns and the sustainability lens of the returns management process.” “I’m excited to see what evolves in terms of returns and the returns management process.” “This is an untouched field, and I’m excited to watch how the 3PL community responds to the sustainable difficulties that present in e-commerce,” the author writes. “

This is important because the e-commerce distribution model itself is ripe for improvement on the sustainability front. Specifically, it is ripe for improvement because it is “not always the highest-density, lowest carbon footprint option to get products delivered to people’s doorsteps,” as stated in the previous sentence.

In a similar vein, Banks believes that third-party logistics providers, or 3PLs, play an important role in assisting their customers in more effectively managing their inventory and bringing that inventory even closer to their customers, all while keeping in mind the importance of reducing their CO2 emissions.

The third-party logistics provider can then apply more sustainable processing of those orders when the 20.8% of all goods supplied eventually makes its way back through the supply chain, so ensuring that the goods are not “dumped.”

They could, as an alternative, be repurposed, reused, or refurbished for resale instead. Refurbishment for resale is one option. According to Banks, “since it’s going to become an essential component for [product-centric] enterprises to solve, I regard that as a great opportunity for third-party logistics providers to evolve into that.”

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