The ongoing rebound of the U.S. economy has given way to a period of rapid change within the third-party logistics (3PL) sector. Arguably more diversified and sophisticated than ever, the 3PL sector is seeing an emergence in more 4PL partnerships, resulting in deeper, more strategic relationships. This shift comes as a result of challenges 3PL organizations are currently facing in the marketplace—from greater reliance on just-in-time inventory and the increasing role and reliance on technology, to congestion at the ports and the truck driver shortage.
Collaboration has led to the consolidation of the supply chain, resulting in more agility, visibility and flexibility throughout a product’s lifecycle. Today’s 3PLs must be able to work with other partners and vendors in the supply chain to provide real-time data, forecasts and key performance indicators (KPIs) to react promptly to issues. Technology has become as important as cost when it comes to the selection of supply chain partners, and 3PLs that are not continually making investments into their technology infrastructure are finding they are lagging behind. 3PLs must have the ability to leverage technology to accommodate additional transactional volume at greater speed. The rate of change is exponential.
E-commerce now comprises 15% of all retail sales, driving smaller order quantities and more logistics around final-mile delivery. As a result, operational excellence is no longer a differentiator, but a requirement, as the standards for supply chain partners continues to increase. Additionally, we’ve seen an elimination of inventory builds and holds, as shippers and manufacturers move toward just-in-time inventory. Further, warehouse space in dense markets is tight, driven by big box retailer growth—this is especially true in port-centric areas like New York/New Jersey and Los Angeles/Long Beach.
With an increase in the number of transactions taking place on a daily basis, more requirements are being placed on the supply chain. Additionally, driven by an increased reliance on technology, there’s more of a need than ever for data and visibility throughout the supply chain. This is compounded by the fact that across the logistics industry, most organizations are not “on the same page,” so to speak, when it comes to technology and infrastructure. This can create extra headaches when the products in question are temperature-controlled, therfore maintaining and ensuring quality once they reach their end-user is paramount.
With cold chain manufacturers increasingly relying on their logistics providers to help improve sales, 3PLs must streamline their organizations to ensure customer supply chains operate efficiently and seamlessly. Today’s cold chain manufacturers need a 3PL partner with the ability to provide all of the necessary resources from a business, operational and IT standpoint in the most effective, cost-efficient manner.
The changing needs of today’s cold chain manufacturers coupled with the intense challenges 3PLs are facing have led to a landscape ripe with competition. To succeed, logistics providers must clearly communicate their value proposition to stand out in the marketplace as not just another warehouse, but rather as a strategic partner and critical component of the cold chain. Additionally, they must work to drive more 4PL-type partnerships and serve as an integrated end-to-end solution. This is especially important because cold chain demands for 3PL services in the United States extend beyond a single distribution point, which means cold chain manufacturers are increasingly looking for a one-stop-shop with greater integration of supply chain partners, so they can focus on other priorities. Logistics companies that can consolidate all operational and customer service functions through a united platform will also be able to handle larger cold chain manufacturers whose supply chains are more diverse and complex.
As technology continues to play a larger role within the 3PL sector—especially as cold chain manufacturers have an increased demand for up-to-the-minute information with the click of a button—it’s important that customer service remains a priority. 3PL organizations that commit to customer service excellence by cultivating a skilled and helpful team that is always at the ready to assist with a supply chain question or issue can further differentiate themselves in the marketplace.
Finally, it’s important to create an infrastructure that’s flexible. The one thing that’s constant is change, and logistics companies that can easily adapt to the evolving needs of cold chain manufacturers are the ones that will solidify their position in the marketplace and be poised to grow.