When it comes to your business, your focus should be on growth, not logistics. That explains a great deal about the growth in the 3PL industry.
Earlier this year, the Wall Street Journal published an article on the growth of the third-party logistics industry as more companies push to outsource their supply chain management. The article noted that revenues for U.S. 3PLs, exceeded $157 billion in 2014, and are estimated to reach more than $195 billion by 2018. So what’s leading to this incredible growth?
When you consider what is going on business today, it really should come as no surprise. Businesses are more intent than ever on focusing on their core competencies and, unless they’re in the trucking business, getting their product to market is not where they want to be spending their time and money. Manufacturers and shippers would prefer not to have to deal with the headache of driver shortages and tightening capacity. So they turn to a 3PL rather than deal with multiple carriers and multiple pricing programs.
And it’s not just the transportation end of the business; 3PLs are better at the technology aspects of warehousing, as well as transportation. And since manufacturers and shippers with brick and mortar space are now expected to do more with the space they have, working with a 3PL gives that entity access to the newer technology and technological resources they might not otherwise have. The 3PL sector has become much more diversified, fully impacting all areas of the supply chain management.
The rise of 3PLs can also be attributed to the recession of 2008. During tight times, companies cut back; but as demand increased, those same companies may have found that they were unable to ramp up quickly enough, so they turned to a third party to handle the increase. When a company works with a 3PL, they’re effectively working with a one-stop shop.
Turning to a 3PL doesn’t necessarily have to be a permanent step either. When retailers want to move into a new market, or launch a new e-commerce initiative, or open a new store location, they’ll often look to a 3PL to handle all aspects of supply chain fulfillment until the company can actually build a DC or a transportation infrastructure to move their product.
See how you can drive your profits higher with logistics.