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Logistics has always been a very important part of every economy and every business entity. The worldwide trend of globalization has led to many companies outsourcing their logistics functions to third-party logistics (3PL) companies. This helps them to concentrate more on their core competencies and hence generate higher revenues.
Third-party logistics revenue has been increasing at a rate which is double of United States' overall GDP! In 2014, 3PL revenue was recorded to be a staggering $727 billion and it has only been increasing since then. At the same time, behind all this growth, there are quite a few challenges facing the 3PL and distribution industry. In this article we highlight some of the challenges as well as the future trends in 3PL distribution.
6 Major Challenges in 3rd Party Logistics and Distribution
In spite of the massive growth of the 3PL industry, 3PL companies face several challenges while serving customers across the globe. Some of them are listed above:
Finding New Talent
This is one of the most pressing challenges being faced right now by the 3PL industry and needs a high level of attention. Most of the companies complain that it is very difficult to find the right candidates for the right vacancies. The lack of good candidates leads to loss of efficiency and productivity, and 3PL business traditionally has been a high-churn operation. As a result, 3PL companies find it really hard to find the right person for the right job.
Lack of Good Reporting Systems
In a mid-sized 3PL providing company it is a hectic task to keep track of all the shipments which are sent out. The task of having to ask the vendors about the shipments to create a monthly statement is a painful job. If a proper reporting system exists, these tasks will be highly simplified, but at the same time, mid-sized 3PL companies can only invest in a reporting system which is cost-effective and suits their operational policies.
Increased Emphasis on Rules and Regulations
Since most 3PL companies ship goods to different countries, they are required to follow shipping rules of different countries and regions. Each country has its own set of laws and regulations and these companies need to be updated with all the rules to continue trading without any hassles. Once again, it is a challenging task, especially for 3PL companies who do not access to a suitable taskforce which can take care of remaining up-to-date with the different regulations.
Lack of Collaboration
Transport providers and carriers play an important role in supply chain operations but often the management neglects the mundane side of physical distribution and transportation. The lack of collaboration between the shippers, the carriers, and the end-customers can have an adverse effect on the smooth functioning of the supply chain.
Meeting the Shippers' Specific Requirements
This is a major challenge that is faced by 3PL companies wherein in certain cases they are not able to meet the specific logistical needs of the shippers. The shippers are usually disappointed with the some of the factors provided to them such as packaging, on-time delivery, customer service, etc.
Lack of Infrastructure
This is a major challenge for 3PL companies in most of the developing countries of the world. Some of the problems faced may include bad road conditions, poor connectivity, inadequate air and sea port capacities and lack of developed modes of transports such as railways, roadways and inland water transport system.
5 Latest Trends in 3PL Distribution
The third-party logistics landscape has significantly changed in the last few decades and this change will continue to affect the way 3PL providers operate and conduct their business in the future too. Some of the trends which we can expect to see in the future include:
1. More Collaboration Between Shippers and 3PL Companies: 3PL companies will heavily depend on technology to collaborate, connect, and engage with customers. Electronic data will not only be used for streamlining performance and integrity but also for enhanced operational flexibility and speed of change. Vendor managed inventories will be common even in the smallest 3PL via web-based portals, ensuring both shippers and 3PL companies can function independently without relying on possibly faulty information exchange.
2. Rise of Mobile Apps: Paper records of shipments will be a thing of the past. Mobile devices will be a commonplace and used right across the board at all third-party logistics firms. With the help of RFID enabled devices, it will be easy to hold data so that all items carry their information with them. This will further help in bringing down the amount of paper used to record incoming and outgoing shipments.
3. Dedicated Technology Will Be Put to Better Use: Third-party logistics providers will see the benefits of investing in smarter IT and software systems which can give better return on investment. Specialized software will help to drive the costs down, save time, and increase efficiency. Improved speech recognition software will also allow workers to directly communicate with the warehouse management system.
4. Use of Big Data: Majority of the third-party logistics companies will use cloud-based technologies and embrace the new age of Big Data. 3PLs will recognize the need to allow clients access to their own systems to improve efficiency. Shared data will also allow traceability of an item in the supply chain.
5. Supply Chain and Economic Globalization: With the world economy on the way to being more integrated, 3PLs will be expected to work on a large scale with a distinctly global outlook. Distribution will expand globally with more opportunities coming up in other parts of the world creating an even more complex supply chain.
Find the Perfect 3PL Partner in Flatworld Solutions
In spite of all the challenges in 3PL distribution, Flatworld Solutions has been providing logistics services for about 16 years now to clients across the world. Our team is highly experienced of serving customers from different countries, regions and cultures. Outsourcing logistics services to us can help you stay competitive, and also ensure faster deliveries and accurate documentations.
If you have any kind of logistics and distributions requirement, feel free to call us and talk to one of our representatives and we will be more than happy to serve you.