What is 3PL?
Third-Party Logistics (3PL) is a supply chain management service that works by outsourcing its logistics and distribution operations to an external company. 3PL providers help to manage the entire supply chain process, including warehousing, transportation, and other activities such as value-added services like packaging and labeling.
3PL Services Vs. Drop Shipping
Third-party logistics (3PL) is a term used to describe the process of outsourcing warehousing, distribution, and transportation services to an external provider. The 3PL provider takes responsibility for managing the entire supply chain from the point of production to the customer\’s doorstep.
On the other hand, drop shipping is a business model in which the retailer does not own any inventory but instead partners with a manufacturing/distribution partner who ships items directly to the customer. Both 3PL and drop shipping can be beneficial for retailers, depending on their specific needs.
Global Third Party Logistics (3PL) Market by 2030
The Third Party Logistics (3PL) market is expected to reach US$1.9 trillion by 2030, with a CAGR of 8.4% from 2022-2030. With the increasing complexity associated with managing supply chains driven by globalization, multinational companies are increasingly outsourcing their transportation and logistics operations to third-party providers (3PLs). The growth in this market is being fuelled by a number of factors, including the need for greater control over inventory and transport costs, improved access to technology-enabled services such as:
- Supply Chain Visibility
- Tracking and Analytics
- Advanced Technologies
Additionally, 3PL providers are offering innovative solutions such as warehouse automation and outsourced value-added services which enable customers to reduce their operating costs and improve efficiency.
The rise in the e-commerce market and increased demand for last-mile delivery services also drive the growth of the global 3PL market.
Global 3PL Trends for 2023:
To stay ahead of the curve, companies in the global 3PL market are increasingly turning to digital solutions like:
- Automation
- Data Analytics
- Sustainable practices
- Cloud computing
- Artificial Intelligence
These trends will continue to shape this landscape for the foreseeable future, allowing for more accurate tracking of shipments and resulting in optimized supply chain performance.
Automation
Automation is a major trend that is transforming the global 3PL market. Automated processes are becoming increasingly necessary for 3PLs to remain competitive, as they allow for faster and more efficient service delivery. Automation can be used in various areas of the supply chain process, such as:
- Fleet Management System
- Warehouse Management System
- Order Management System
Artificial Intelligence
Artificial Intelligence (AI) is rapidly becoming an integral part of the 3PL industry, providing companies with unprecedented levels of efficiency and increased accuracy in their transportation and logistics operations. AI can be used to automate various tasks, such as route planning and delivery time optimization, which reduces human errors and improves customer satisfaction.
AI-enabled chatbots are also becoming increasingly popular for customer service as they can handle a wide range of inquiries quickly and accurately. Sustainable PracticesSustainability is becoming an important factor in the 3PL market, with more and more companies looking to implement green practices into their operations.
Cloud Computing
Cloud computing is becoming increasingly important for Third-Party Logistics (3PL) companies as it allows for faster and more efficient service delivery. Cloud computing provides 3PLs with access to storage, computing power, analytics, and other services that can help streamline their operations. This can include the ability to manage orders and inventory in real-time and track shipments quickly. The benefits of Cloud Computing are the following:
- Shipping expenses are dramatically minimized
- Unparalleled security and accuracy in billing
- Utilizing this system is effortless and 100% accessible remotely
- Providing superior metrics plus detailed reporting capabilities
Takeaway
Overall, the global Third Party Logistics (3PL) market is expected to reach US$1.9 trillion by 2030 and continues to grow at a rapid rate due to increasing demand for logistics services from multinational companies looking for greater control over inventory and transport costs.
Automation, AI, data analytics, sustainable practices, and cloud computing are some of the major trends that will shape this landscape in 2023 as 3PL providers look to offer innovative solutions such as warehouse automation and outsourced value-added services that enable customers to reduce their operating costs and improve efficiency. Companies should consider leveraging these technologies if they want to remain competitive in the current business climate.
