The Growing Importance of the 3PL Relationship

Simon Eskow 3PL Articles Leave a Comment

When you consider what it takes to get products to customers, how high do you rank logistics? How you warehouse and ship your products impacts both your costs and your customer relationship. After all, a great and unique product makes no difference if you can’t get it to your customers how, when and where they want it. Trends in the multi-channel and eCommerce world point to the growing importance of a 3PL relationship in accomplishing that perfect order fulfillment.

From Private Warehouses to the 3PL Relationship

More large organizations outsource logistics now than return those activities to internal operations. According to research from 2017, 58% of shippers planned to outsource logistics. Meanwhile, only 26% planned to bring those operations back in-house.

In other words, companies find a 3PL relationship more cost-effective than developing their own logistics networks. Thus they increasingly turn to 3PLs for warehousing, fulfillment, supply chain consulting and more.

The 3PL Relationship to eCommerce

As an industry, third-party logistics providers currently endure an uncertain time in their business. However, according to a recent annual logistics report, 3PL warehouses enjoy increased revenue.

Storage costs dropped in 2016 after years of annual growth. Simultaneously, 3PLs saw a 1.8% year over year increase in warehousing expenditures.

Researchers say this all comes down to eCommerce. With the increase in pure-play online and multichannel businesses comes an increased demand for warehouse space.

Logistics providers responded by building out their warehouse to respond to demand. For example, from 2010 to 2016 in the US, eCommerce spurred the construction of 120 warehouses larger than 1 million square feet. Analysts expected another 29 this year.

Clearly, 3PL warehousing caught on. For both pure-play eCommerce and multichannel businesses, 3PLs offer a lower cost alternative to investing in warehouse space and resources for stocking, picking and packing inventory.

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