GOOD QUESTION: Has the pandemic accelerated logistics outsourcing? Why or why not?
The use of third-party logistics has accelerated since the pandemic, with new opportunities in last-mile e-commerce and carrier collaboration. We have seen tracked orders between network shippers and logistics service providers (LSPs) grow 340% year-over-year. As markets continue to rebalance, shippers still seek flexibility, resilience, and sustainability from LSP collaboration and innovation.
SVP and Head of Marketing and Solutions
SAP Business Network
Yes. The organizations that rely on 3PLs are reinforcing their commitment to outsourcing and concentrating on their core business competencies. 3PLs are investing in modernization efforts to position their clients for success in the marketplace, which is also helping attract new customers to outsourcing vendors.
Industry Principal, Manufacturing, Transportation and Logistics
The increase in logistics outsourcing is due to the continual shortage of drivers and increased consumer demand for deliveries. Outsourcing to a company with more drivers offers businesses flexibility and additional resources to recover when an internal driver is sick or unavailable.
Founder & CEO
Advancements in technology have made outsourcing to a trusted network of professionals, especially to those that know your business and customers, easier and more cost effective than ever.
Lead Operations Coordinator
Yes, absolutely. The pandemic catchphrase has been “capacity issues,” which refers to multiple facets of the supply chain—including staffing, equipment, and business hours—reaching critical capacity. With shortages at every step, almost every company has been forced to reach beyond their comfort levels to rely on other logistics companies to assist and try to alleviate pressures.
Our company has been fortunate enough to fill in those missing pieces for many clients that have been hit hard, but even we are at a certain capacity that hinders our rate of growth.
Veterans Logistics Group
The Movement toward outsourcing is mixed and dependent on the organization, its capabilities, and desire to control its destiny. For businesses that have the capabilities and resources needed to insource, they are doing so. For other organizations, we’re seeing a trend toward outsourcing to acquire the scale, skill, and flexibility needed to withstand the volatility of the market.
Operations Transformation Practice Leader
Shippers have improved the flexibility and resiliency of their supply chains. With shortages and capacity constraints becoming a daily issue, using a 3PL is the most effective solution. Instead of relying on their own assets, shippers are partnering with brokerages to provide the capacity needed.
SVP, Carrier Operations
Nolan Transportation Group
In the short run, yes. In the long run? To be decided. Following the initial shock of COVID, companies increased their use of 3PLs to maintain supply by any means necessary—most even willing to take a hit financially. As supply chain issues prolong, however, and as the pressures of inflation mount, staffing up with internal logistics professionals is likely to be a more systematic and cost-effective response.
Dramatically increased. Prior to the pandemic, many companies didn’t have a true understanding of their supply chain capacity and didn’t know how inefficient their operations were. Problems stemming from manual processes, labor constraints, and ineffective systems were exacerbated, and companies turned to 3PLs for faster, more reliable, and less costly distribution.
Zethcon, A Made4net Company
The pandemic accelerated a number of trends, including logistics outsourcing. Outsourcing allows shippers to control costs and to increase certainty. By aggregating the purchasing power of their customers, large logistics companies are able to use their scale to deliver better outcomes.
3PLs have stepped in as flexible outsourcing partners, reducing costs and improving visibility and efficiency. Outsourcing logistics has helped companies focus on their core competencies.
Analytics Head, Supply Chain and Logistics
Undoubtedly. The pandemic impacted the role of logistics professionals. As they’ve contended with major swings in demand, inventory, freight rates, and labor markets, the need for fast, flexible solutions and additional support was paramount.
Outsourcing has been a critical way to fill a gap—in people, technology, capacity, or expertise—quickly. And we’ve seen more customers looking for everything from forecasting and RFP management to TMS technology, on-site support, and fully outsourced solutions.
VP, CTM & Managed Services
The pandemic has forced companies to focus on their core competencies to be competitive, which has led to more logistics outsourcing. The companies that outsource can focus on what they do well and let the logistics professionals do what they do well.
Continuous Improvement Engineer
Yes. Customers were forced to find alternatives to their normal supply chain including new ports of entry as vessel space became difficult and costly. They needed to establish new relationships with new providers in new markets to create flexibility and movement. The question that remains is: Will these new relationships last post-pandemic?
Vice President, Warehousing & Distribution
World Distribution Services, LLC
The pandemic exposed supply chain weaknesses as workers became sick, factories closed, and consumer behavior changed. The way supply chains were managed became outdated. Disruptions remain unabated and companies can’t afford to be in a perpetual reactive mode; a proactive approach that incorporates outsourcing to gain expertise has become critical.
Founder and CEO
Increased costs and constantly changing consumer demand are accelerating logistics outsourcing to keep up with the “next normal.” Therefore, logistics professionals must use strategies yielding higher productivity and asset utilization while also increasing agility and responsiveness, driving the need for outsourced logistics.
Many businesses recognize the need to reduce risks on their supply chains by identifying alternative logistics partners. Leveraging a 3PL or 4PL will not only help businesses address the logistics disruption variables but will also help them stay nimble.
Businesses have realized they need redundant paths to market in case of increasingly frequent “black swan” events. And as the cost of moving product has risen due to staff shortages, rising gas prices and inflation, businesses are turning to third-party logistics companies for support with last-mile delivery and sourcing goods from suppliers.
Businesses utilizing ERP systems have a complete view into their finances, and can easily determine costs for every part of the process, which can help businesses decide if they can manage the logistics themselves or if they need support from a third party.
President, Manufacturing Division
ECI Software Solutions
Yes. The pandemic forced retailers to diversify their supply chain operations, including their sourcing, carriers, warehouse partners, and technology solutions. Building flexibility into the supply chain enables merchants to put the right inventory in the right quantities, in the right locations to optimize their outcomes.
Ware2Go, a UPS Company
It has, to a certain degree. Increased need for distancing combined with fewer workers looking to perform logistics work (as opposed to higher-paying work or retirement) has meant that companies are more dependent on partners who specialize in logistics specifically.
Co-founder and CEO
In today’s unpredictable market, businesses need to be able to pivot without notice. The problem? It takes time to hire and train new people. Plus, bringing staff onto payroll is a long-term commitment. Outsourcing gives companies the agility and flexibility they need to address unexpected challenges or seize new opportunities.
–Gabriel T. Ruz Jr.
Chief Innovation Officer, Co-Founder, and Board Member
Quick strategic pivots are critical to navigating freight market volatility, and the pandemic was no exception. Many shippers leveraged 3PLs and 4PLs to harness efficient procurement functions and meet capacity demands. Those who have established successful partnerships will likely lean on these resources moving forward.
VP, Client Solutions
E-commerce growth has driven the outsourcing of logistics. Retailers were limiting investment in the supply chain to focus on product and marketing so when growth spiked in 2020, there was not enough internal talent, process, or capacity. Using a 3PL supported growth while preserving customer experience and maintaining focus on product.
EVP and COO
With the massive increase in e-commerce volume, the expectation of consumers to immediately receive their goods has only grown. Small and mid-sized businesses simply cannot manage the logistics needed to match the speed that massive players like Amazon can, so they’ve increased their work with 3PLs.
Co-founder and CEO
Have a great answer to a good question?
Be sure to participate next month. We want to know:
What’s your best tip for retailers pivoting to direct-to-consumer fulfillment?
We’ll publish some answers. Tell us at [email protected] or tweet us @ILMagazine #ILgoodquestion