Redefining the Model for Third Party Logistics (3PL) Innovation

Over the past 30 years, the 3PL industry has gone through tremendous transformation. The shifts in manufacturing and retail business models, enhanced delivery models, such as last mile and click and collect, along with the innovative advances in technologies, have created significant opportunities for 3PL companies. On the other hand, commoditization, mega consolidations, workforce shortage, rising omni-channel expectations and aggressive expansion of products and services influenced by Amazon and Alibaba are more than enough reasons for 3PL companies to further develop their service model, build new capabilities that protect and differentiate their businesses and begin their own digitization journey.

Commoditization is the Biggest Challenge for 3PLs

According to the 2017 EFT Report, “How to Thrive in a World of Commoditized Logistics,” almost 48 percent of shippers reported they’re looking for new ideas and solutions from their 3PL providers. Growing needs to support e-commerce, online fulfillment, personalization and omni-channel expectations require innovation that can help turn orders around quickly, with flexibility and cost efficiency. Leading 3PLs differentiate themselves by diversifying their services and becoming full-service logistics providers for their shippers beyond the traditional warehousing and transportation services.

The Percentage Gap

Most 3PLs agree that innovation is important to retain and grow their market share, and many have even invested heavily in process and technology capabilities to redefine their value propositions. However, there is a gap pointed out in the 2017 SC Digest Shippers & 3PL Benchmark Study around the shippers’ perception about 3PL’s capabilities versus what 3PLs believed they’re capable to deliver. This clearly shows the opportunities for both sides to collaborate and define joint improvement programs.

3PLs are Facing Capacity and Cost Pressures

The global logistics industry is facing an unprecedented warehouse and workforce shortage, which is a challenge. New warehouse construction isn’t keeping up with demand, and the aging workforce population is retiring at a faster rate than the younger workforce entering the industry. In some regions, the warehouse rental and labor costs have even increased by double digits. These trends continue to drive costs up, while productivity improvements are relatively mild.  Leading 3PLs are finding ways to optimize operational efficiency in order to offset the rise and volatility of costs, deliver value to shippers and protect margins. Investing in an enterprise workforce management solution will deliver around 5 percent productivity increase.

Take Your 3PL Business to the Next Stage

JDA’s Third Party Logistics Industry Guide provides strategies that’ll guide where and how 3PLs should create their roadmaps and invest in order to take your business to the next level. This industry guide gives insight around segmentation, strategic engagement, innovation, standardization and continuous discovery. Get your copy of the Third Party Logistics Guide here.

How JDA Can Help

Identify the opportunities within your business by starting with a self-assessment of your logistics operations and building a short to long-term roadmap that delivers ROI. This will help you identify the gaps in existing operations, as well as what your customers expect from you tomorrow, next year and in the near future. As an extension of JDA’s Warehouse Management System solutions, JDA’s Intelligent Fulfillment (IF) can help your 3PL business achieve the next level of fulfillment efficiency and flexibility. Additionally, it can provide even greater levels of supply chain profitability by breaking down the barriers between operational silos: Sales, purchasing, forecasting, fulfillment, warehouse, transportation and e-commerce fulfillment. Learn more by contacting JDA today.

  1 Comment   Comment

  1. The key to long term 3PL success is to continually be measuring performance and looking for new ways to optimize performance. Too many 3PLs are guilty of sticking with outdated practices for far too long, simply because it’s what they are comfortable with.

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