The landscape for third party logistics (3PL) has altered significantly in the last decade, and is tipped to experience further growth and change as mobile technologies and 'smart' working practices develop. With growth in 3PL markets forecast to be as high as 15% in *South America and the Asia Pacific regions, the demand to service these markets in 2020 will generate fierce competition.
A greater consumer demand for 24/7 services and reduced costs means efficiency and accuracy will be crucial for the future of the successful 3PL firm. Businesses will remain keen to drive down their own operation and labour costs by outsourcing to 3PLs but success will hinge on firms' willingness and ability to adopt new technologies.
Simon Fowler, Managing Director of Advanced Business Solutions (Commercial) takes a glimpse into the future and offers his top ten predictions for what the 3PL industry will look like in 2020.
1. More collaboration – logistics companies will rely heavily on technology to collaborate, connect, and engage with customers. Electronic data exchange will be critical, not only for the performance and integrity of the data, but the flexibility and speed of change. Vendor managed inventory – where the supply chain vendor monitors the buyers inventory and makes periodic resupply decisions – will be common in even the smallest 3PL via web-based portals and access to the systems of the 3PL.
2. Increased visibility – methods such as continuous replenishment and inventory management will be commonplace. A more holistic approach to the entire supply chain will be typical, with more emphasis given to external visibility. Collaboration with manufactures will assist with visibility of production schedules with supplier and ensure raw material availability, but also with sales channels so that demand is connected with availability.
3. Rise in mobile use – paper records in warehouses will be a distant memory, and everything in 2020 will be focussed around agility through mobility. Mobile devices will be commonplace and used right across the board at all 3PL firms. With the potential for RFID enabled devices to hold data so that the items carry information with them e.g. product and providence for identification and traceability. Customers will be able to order and process anytime, anywhere, 24/7.
4. Workflow automation – information previously generated by people will increasingly be automated and system-generated, and data will flow out of increasingly sophisticated stock sensors. Inventory will count itself, and containers will be able to detect their own contents. GPS technology will allow pallets to report in if they end up in the wrong location allowing delivery errors to be put right while still in transit.
5. Smarter technology – firms will see the benefits of investing in smarter IT and software systems which can deliver rapid ROIs. Software, such as Advanced's Warehouse Management System (WMS), will drive cost and time saving, increasing efficiencies. Voice picking will be standard in the supply chain process, such as stock enquiries. Improved speech recognition software will also allow workers to communicate directly with their Warehouse Management System (WMS) to improve stock recording, speed up order turn-rounds and shorten staff training periods.
6. Diversification – outsourcing to 3PLs has seen fierce rivalry between businesses and only those which are able to add value to the services they offer, with differentiators, will survive. Those who make it will have morphed from commodity distribution services to more complex organisations offering online ordering, returns processing, product assembly and kitting, documentation and inventory management. Integrating customers with a broader range of solutions will become a way for 3PL firms to form longer lasting partnerships and become more profitable in the future.
7. Big Data and sharing information – cloud-based technology will be used by the majority of logistics companies as they embrace the new age of 'Big Data'. 3PLs will recognise the need to allow clients access to their own systems to improve efficiency in areas linked to seasonal trends and the demands of flexible operations. Shared data will also allow the traceability of an item in the supply chain.
8. Better management – while commercial success will largely depend on staff, an all-encompassing warehouse management system will encourage better employee management. Staff will be more accurately measured against KPIs from time per task, picking routes and over/under performers to staffing levels required for specific orders and picks.
9. Globalisation – in 2020 the world economy will be more integrated and 3PLs will be expected to work on a larger scale with a distinctly global outlook. Distribution will expand globally with more opportunities opening up in other parts of the world including the Far East and South America.
10. Sustainability – as businesses identify new ways of working to increase efficiencies, sustainability will be key. This will impact on the buildings and equipment used by the 3PL companies, which will look to green-friendly technology to deliver efficiency savings in areas such as energy consumption and transport costs. Expect companies, even direct competitors, to share transport in order to reduce overheads, including fuel and maintenance costs.
The 3PL industry will face many challenges in the future, but by 2020 the sector will have grown dramatically, largely down to the massive expansion of emerging global markets.
Technology will continue to be vital to the sector, mobile devices and business intelligence solutions playing a big part in streamlining the industry. Those firms that are the most agile and are quicker to invest in new technologies and adopting smarter ways of working, will be the 3PL companies leading the field in 2020.