Exclusive Interview: E-commerce fulfillment driving double digit growth in some 3PL sectors

While stay-at-home orders imposed by government leaders in California may have challenged many logistics managers in the state, one prominent player in the marketplace has found a way prosper by the “new normal” mandate.

El Segundo-based 3PL Central, a Warehouse Management System (WMS) leader, recently shared data indicating unprecedented growth in order volume from 3PLs supporting ecommerce since the lockdown.  

Analyzing proprietary data from its customer base, 3PL Central has seen an 81% increase in order volume over the same time last year and the highest order volumes per 3PL ever, on par with Black Friday in 2019 and on pace to exceed that volume in the coming week.  

On March 19th, California issued the first “Stay at Home” order to prevent the spread of COVID-19, limiting business operations except for those providing essential services. Most of the United States followed with similar “Stay at Home” guidance shortly thereafter, driving consumers into confinement and fundamentally changing their buying behavior.

While many companies struggled to adjust to the economic and confinement headwinds, 3PL warehouses fulfilling ecommerce orders have seen a consistent ramp in order volume week over week since the first “Stay at Home” order. Order volume from March 19ththrough April 20th has increased to 154% of its initial volume. In fact, last week alone, 3PLs processed 16% more orders than the week prior. Since the beginning of the year, order volume processed through the WMS increased to 174% of its initial volume.

With 3PL Warehouse Manager processing in excess of one million orders per week, 3PL Central shippers offer a relevant barometer for the growth of the 3PL warehousing market. 

Out of the top 100 shippers, the average growth rate per 3PL exceeds 61%, with more than 80% experiencing growth. Of the total 3PLs using 3PL Warehouse Manager, 45% have experienced growth. Acute areas of growth include those 3PLs fulfilling ecommerce orders for essential goods and nutraceuticals. However, those 3PLs focusing purely on B2B fulfillment of non-essential items have been the hardest hit. 

David Miller, General Manager of Platform Services at 3PL Central, told LM in an exclusive interview that some industry players are dealing with disruption in a positive way. 

Logistics Management: How is the marketplace changing with top providers?

David Miller: We're seeing 3PLs pick up a lot of business from Amazon fulfillment centers as that inventory is being displaced.  Amazon is prioritizing household items, opening up a lot of demand and opportunity for other 3rd party warehouses to fill additional consumer demand. 

LM: Any new discoveries?

Miller: Top providers are also discovering how essential their businesses are. Obviously med-tech and food/cold storage has been an imperative part of the essential supply chain, but other items such as electronics and communication equipment, literature and leaning supplies, arts and crafts have all become critical for continued education.

LM: Have you come across any new trends?

Miller. Yes. We’ve identified four trends across the top 3PLs we work with, including driving warehouse space efficiency to accommodate more inventory on hand, leveraging more integrations with shopping carts for real-time visibility, driving warehouse efficiency and increased throughput through automation, and also providing more visibility to their customers around inventory status, order volume, and over allocated products. The 3PLs responding to this increased demand have to act quickly to support unprecedented volumes or risk losing customers in this critical time.  

LM: Where will the greatest shift occur in the sector: Air, ocean, intermodal?

Miller: I think long term we're going to see a resurgence of manufacturing in the U.S. and continued reduction of Chinese manufacturing.  This will lead to reduced ocean freight for years to come and potentially increase the needs of domestic intermodal transportation. In fact, a lot of ocean capacity is tied up due to closed ports, and ocean rates are starting to spike in certain lanes.  

LM: So, where to do you see future growth?

Miller: It is possible that some freight recovery happens faster than personal travel, this demand should put more airplanes back in the air at more competitive freight rates (compared to ocean) than before.  Long term I expect to see all of these sectors recover, but the next couple of years will be interesting.