Bad News, Good News

Why does logistics giant XPO Logistics invest $500 million annually on IT to drive its business? The explosion in e-commerce, according to Brad Jacobs, CEO of XPO. But it’s not only consumers who have been acculturated to supply chain impatience. Purchasing, buyers, and supply managers in industrial sectors also feel the need for speed—and for IT connectivity as well. That’s part of what is being called Manufacturing 4.0 as industry adapts the Internet of Things (IoT) to their manufacturing and supply chain processes.

What do those trends mean for your logistics partners, especially if they are not market monsters? Can mid-size warehouse operators, brokers, and 3PLs flourish in this environment? Or will market monsters—and Amazon, as some are foretelling—squeeze them out of existence, consequently leaving you with fewer solutions and choices?

The bad news: The challengers and challenges are formidable. The size of the market monster competition is daunting to small and mid-size solutions providers. Few logistics player have millions to invest in the kind of technology that provides global visibility and control, and wrings out every transportation efficiency. Clearly, not many 3PLs have the wherewithal to quickly invest in robotics and supply chain automation that continues to feed the customer and consumer need for shipment speed and reduced, or even free, shipping.

Now add the supply chain professional talent gap, which is driving salary increases for skilled supply chain professionals needed to master the increasing complexity of logistics operations. Then, there’s a gap at the operational warehouse and fulfillment level, and minimum wage initiatives that continue to spread. That begs the question: Can sufficient logistics labor to drive customer demands and expansion be accessible only to 3PLs with the deepest pockets who have a greater ability to pay more for workers when they have to?

But there is good news for those using mid-tier brokers, warehouse operators, and 3PLs to help administer logistics networks and supply chain operations: they offer advantages, too. Specialization, personalized service, and being closer to the customer engenders a fuller understanding of your business challenges. They can also compete by staying up to date on low barrier to entry technology, such as cloud and pay by the drink applications, which offer powerful low-cost IT solutions. And, they can ally with other 3PLs and carriers to fill service and coverage gaps.

The good news: These approaches are paying off. Eighty-seven percent of service providers surveyed in Inbound Logistics‘ 2017 3PL Perspectives market research report have grown their client base by at least five percent over the past year; 89 percent have increased sales; and 81 percent have grown profits. That growth is primarily in the mid-tier 3PL quadrant, which is more good news.

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