3PL Market Transformation

Just as the retail marketplace is going through a transformation in the way the retailer interacts with the consumer and the challenge of changing consumer demands, the 3PL marketplace is going through a similar transformation to react and support the product delivery requirements to meet both retailer and consumer demands while juggling labor, carrier and physical challenges especially in the last mile delivery.  The leaders in the 3PL marketplace have recognized the challenge and are focused on meeting these challenges now because they see the future of the marketplace and the opportunity available for these leaders that are able to sense and respond to the changes in a manner that supports their customers. The leaders in the 3PL market are transforming or disrupting the industry to provide a wide array of services based on demand just as the retail leaders such as Amazon transformed the retail experience.  

I believe the transformation and the ensuing growth of importance and influence of third party logistics providers started with the recession when retail and other organizations shed supply chain expertise in an effort to reduce costs and survive.  Many of these experts found a place with third party logistics providers and this allowed the the 3PL industry to expand and support new opportunities that developed as a result of the recession and need for organizations to reduce costs. Initially the focus on the 3PL services was cost savings, a way for organizations to eliminate costly investments in real estate and replace with charges based on demand and complexity of activities.  This provided a means for the 3PL customer to reduce long term costs which was important during the recession and the aftermath.

Leaders in the 3PL industry took the long term view to develop strategies to cement their partnerships with their customers to provide industry leading services and strategic capabilities to their partners based on their supply chain expertise and the demands and future vision of the industry demands.  These leaders took stock of their existing capabilities to how to improve and expand to meet the strategic future demands and set about to develop and acquire these capabilities. This has paid off for these 3PL leaders that invested in the future and these capabilities are now aligned with the demands in the retail market from consumers to support their lifestyles.  Now these providers are consolidating and developing new capabilities to support a flexible and cost effective services to support distributed inventory management to provide consumer delivery capabilities that would require significant investment and time for retailers to develop themselves.

Leaders in the 3PL industry realized early that their skillset and also physical distribution center networks would provide  strategic advantage that would support the retail omni market demands and they focused on developing the capabilities to provide cost effective support to their partners.  These leaders have transformed the 3PL market with these services and I expect this to be just the beginning. We can look to the future with new consolidation of products and services to extend the capabilities of the 3PL leaders to strengthen and extend their positions.  I see this to be the beginning of an increase in the 3PL market resulting from more and more retailers using a 3PL to support their supply chain and logistics.