Third-party logistics is a growing area, and expectations are that this upward trajectory will continue into 2023 and beyond. In fact, ReportLinker’s Third-Party Logistics (3PL) Global Market Report 2022 found that 3PL is expected to jump from a $906.98 billion USD valuation in 2021 to a $1,418.70 billion USD one in 2026 worldwide. That’s a compound annual growth rate (CAGR) of 9.2%.
This rosy outlook almost belies recent events that have affected trade everywhere. As we all know, the sharp bounceback from the Covid shutdowns created bottlenecks that resulted in inflation. Transportation costs shot up, packing costs shot up, and the high demand for almost everything produced shortages.
But let’s not forget that Covid was a boon to online sales. Shut indoors, consumers relied on ecommerce for almost all their needs, from goods to groceries. And this reliance has turned into a habit, a new way of shopping for almost everyone. Because of this, more and more companies are using online platforms to showcase and sell their offerings, and that means more business for those organizations that specialize in taking care of fulfilling these orders and shipping them out to the customers: the 3PL companies.
Given this increased focus on 3PL and its growing importance in the supply chain, we thought it would be interesting to jump ahead and take a look at trends that are expected to take hold in the space in 2023.
5 trends in 3PL to watch out for in 2023
NTT 2023 Third-Party Logistics Study reported that the most frequently outsourced activities are as listed below:
|Activity||Percentage of outsourcing|
Let’s use the NTT 2023 third-party logistics study as a basis to figure out X 3PL trends to watch out for in the coming year.
1. Success through synergy
71% of the shippers said partnering with a 3PL company contributes to improving customer satisfaction. Naturally, they plan on leveraging this partnership increasingly in the future.
The trend of consolidating the powers of shipping and 3PL providers is creating a synergy beneficial to every party involved – manufacturers, customers, shipping companies, and 3PL providers. This synergy not only improves the effectiveness of logistics but also cuts costs. This year might see more consolidations as both shippers and 3PL providers realize the power of synergy.
2. More reliance on IT capabilities
Shippers expect more technological advances from 3PL providers. They believe 3PL providers should not only provide shipping but should also give tactical advice on transportation management and potential improvements for their supply chains.
For 3PL providers, this means they should invest more in technological advances in 2023 to gain a better hold on the market. When shippers were asked about the IT capabilities expected in 3PL providers, they listed some of the execution and transaction-based technologies as crucial. Sixty-two percent of shippers believed 3PL providers could assist them in transportation management planning (an increase of 11% from the previous year), 57% said transportation management scheduling (an increase of 6% from the previous year), and 40% said warehouse automation (an increase of 23% from the previous year). Thus, if you’re a 3PL services provider, investing in these areas could reap huge benefits for your company and your clients.
3. Efforts to counteract labor shortages
Right now, there’s a shortage in labor. In fact, 78% of 3PL companies say they are short staffed.
In answer to this, we predict that while 3PL companies will be offering higher hourly rates to low-level staff like pickers, packers, and drivers, they will be more reliant on technology like robots and storage and retrieval systems. The stats are that 84% of 3PLs are either replacing workers with tech already or considering it. We expect this trend to expand.
4. Banking on reverse logistics
The reverse logistics market – or goods that are returned by the shopper – was valued at $635.6 billion USD in 2020 and is projected to reach $958.3 billion USD by 2028, which is a CAGR of 5.6%. In other words, it’s huge.
There’s a lot that has to be taken care of when goods are returned. They have to be checked out and the inventory has to be updated. Plus, some items may need to be repaired or have parts replaced. It’s a whole logistical process in itself, and it needs a dedicated staff and planning. All this can be costly, but it’s important to remember that freely accepting returns without question encourages customer loyalty.
With this in mind, we expect reverse logistics to take a bigger slice of the business 3PL companies handle in 2023, and we predict that that will grow even more.
5. There’ll be more emphasis on sustainability
The entire world is moving towards sustainable practices, and 3PLs are no exception. Consumers expect it, and it’s the right thing to do.
For 3PLs, sustainable practices mean using electric vehicles and products like cleaners that are recyclable. We expect this trend to continue and expand in 2023.
As the online-sales market grows, so will 3PL companies. In that regard, 2023 should be a challenging but exciting year for them.
In anticipation of that growth, if you’re part of a 3PL company, you should have a good automated system in place. We suggest our Cin7 Omni. To learn more about our software and the superior advantages it offers, click here to request a demo.