3PLs are experiencing unparalleled success, and industry experts are starting to take note. Despite continued economic challenges and unpredictable disruptions to the supply chain, 3PLs are not just succeeding — they’re thriving.
What’s driving the high demand for 3PLs? And can this type of growth be sustained over time? Find answers to these and other questions below as we dive into the current 3PL market and highlight key factors and trends driving its rapid growth.
3PLs Are Growing At Record Rates
Businesses are turning to 3PLs at a record-breaking pace (evidenced by the third-party logistics market achieving 50.3% market growth in 2021). The growing demand is spurred by a number of factors, which include evolving customer buying behaviors and an increasing need for businesses to quickly scale operations up or down in the most cost-effective manner.
Among the most significant changes to consumer behavior in the post-pandemic world is a greater preference for the ease and convenience of online shopping compared to traditional in-person purchases. However, while this surge in eCcommerce certainly plays a role in 3PL usage, the highest demand isn’t coming from the B2C market at all – it’s B2B fulfillment that’s keeping 3PL providers extra busy. Though B2C may eventually take precedence as eCommerce continues to flourish, the bulk of today’s business comes from B2B transactions.
Businesses are always looking to cut costs and optimize supply chains, and with the economic outlook particularly shaky as of late, it’s likely the emphasis on supply chain efficiency will only grow louder. Efficiency has become the name of the game, and businesses want to partner with reputable 3PL providers who can maximize profits by prepping and shipping orders as quickly as possible.
Key Trends Driving the 3PL Industry
3PL industry growth is predominantly driven by these five trends:
- A rise in globalization. With broader manufacturing and trade networks comes broader markets and the challenge of fulfilling orders internationally. 3PLs are uniquely suited to manage the nuances of distributing products on a global scale.
- Increased focus on “core competencies.” Keeping supply chains running smoothly is a daily challenge, particularly as a business aims to scale. While the logistics arm of your operation is crucial, managing all the moving pieces involved in a strong supply chain can take attention away from other core needs of your business if you aren’t careful. 3PL partnerships allow brands time to focus more on their “core competencies” and the areas of their business they know best.
- Advancement of new technological solutions. Several advancements like automated guided vehicles (AGVs), artificial intelligence (AI) and even improved barcode scanning technology are allowing 3PLs to increase accuracy and efficiency across the board. It also provides more in-depth reporting and analytic capabilities, which can help bolster a business’ confidence in a 3PL provider and significantly cut production and distribution costs across the board.
- Lasting effects of the COVID-19 pandemic. COVID-19 exposed a host of weaknesses within the supply chain and caused a monumental shift in consumer behavior. 3PL providers experienced in adapting to abrupt market changes are better positioned to keep up with these shifts in demand. They are also equipped to discover innovative ways to increase their own capacity, and in turn, serve more businesses and consumers.
- Growing consumer preference towards eCommerce. Though many stores have resumed regular on-site hours and services, a growing number of consumers are demonstrating an increased preference for eCommerce over traditional in-person shopping. Today, eCommerce accounts for 22% of all retail sales – a figure only expected to grow.
The Role of eCommerce in the Future of 3PL
The growing popularity of eCommerce is likely to accelerate demand for 3PL services for years to come, as utilizing a 3PL provider has become a natural step in the development and growth of eCommerce retailers both large and small. The ability to quickly fulfill and deliver orders 24/7 is a vital factor influencing a consumer’s choice between competing retailers and suppliers.
A great logistics partner also provides flexibility, making them the ideal choice for an often unpredictable eCommerce marketplace. Scaling up and down according to seasonal trends, supply chain disruptions and other unforeseeable wrinkles means less waste and more consistent in-stock items on shelves across the country.
As eCommerce continues to grow, the natural result will be increased demand for 3PLs as retailers take steps to keep up with demand. With eCommerce sales expected to reach $8.1 trillion by 2026, the future of 3PLs appears bright.