2014 State of Logistics: 3PL—Omni-channel fulfillment to reshape market
July 01, 2014
The 25th Annual State of Logistics Report states that revenues for the third-party logistics provider (3PL) sector rose 3.2 percent in 2013, much lower than the 5.9 percent growth the market saw in 2012.
“The industry has been faced with slow growth globally, and a general reticence to make new investments,” says analyst Rosalyn Wilson, the lead author of the annual report. “The exception has been the continued strength of the domestic 3PL market, where shippers are engaging 3PLs to ensure that they have the capacity when it’s needed.”
Citing the work of 3PL market analyst firm Armstrong & Associates, the annual report states that the 3PL sector can be sliced into four segments, each representing a subset of the industry. While still the smallest segment, the domestic transportation management segment has been the fastest growing.
And last year was no exception, with gross revenues up 7.1 percent—just a little lower than 2012’s 9.2 percent. With capacity a rising issue, the dedicated contract carriage segment continued to gain ground, rising 3.6 percent in 2013. Freight forwarder revenue rose 4.2 percent as well, adds Wilson.
Meanwhile, Capgemini Consulting, a prominent IT think tank and 3PL outsourcing advisor, contends that omni-channel fulfillment challenges, especially in the retail sector, are reshaping the current 3PL marketplace. The distinction between forwarder and lead logistics provider, as a consequence, may become even more blurred over the course of this year.
“A customer-driven supply chain may eliminate some legacy roles,” says Shanton Wilcox, vice president at Capgemini. “The last mile logistics now includes responsibility for the customer experience, shifting priorities, and attention across the supply chain.”
Likewise, Wilcox says, customer demand is pushing delivery interfaces up the supply chain and nearer to the point of manufacturing. Retailers are moving to virtual inventory management, accounting for product at all phases of movement as opposed to limiting sales by physical warehouse inventory rules.
“Overall, fulfillment is being driven by the savviest consumer, with creative and diverse solutions entering the third-party logistics market space to meet those omni-channel needs,” says Wilcox.
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