As the Cost of Parcel Shipping Grows, More Turn to 3PLsPosted on August 27, 2018
When the need to manage shipping spend outpaces internal capacity, more shippers are turning to 3PLs to find them the right systems and software to keep ahead of rising costs.
Whether it is selling online, manufacturing, running your office or warehouse, you are good at what you do or else you probably wouldn’t be doing it. However, sometimes, there are things you need to do that aren’t exactly your specialty, so you turn to a pro. Water heater leaking? If you aren’t the handiest of folks, you may call a plumber. Want to spend the weekend with the kids? Odds are you have someone take care of the lawn for you. Your company’s tax extension is up, and it’s time to file? Most likely it’s being handled by a tax pro. With a trucking capacity crunch thanks, in part, to the e-tail and retail delivery boom, shippers are increasingly seeking the guidance of experts to help them spend less time and money on shipping and more on their core business.
And spend on parcel shipping you are. According to the 29th Annual Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report, parcel shipping spend topped $99 billion, a 7 percent growth in 2017 compared to 2016, driven in large part by eCommerce.
“No sector saw more change last year than motor freight, where severe capacity pressures sparked sharp rate hikes,” the report said. “Carriers gained pricing power as demand rose and electronic logging mandates exacerbated driver shortages.”
The study’s authors said that one of the trends it sees for shippers in combating the rising costs is implementing a fully digital, connected, and flexible supply chain optimized for eCommerce. Last-mile, same-day delivery will also become essential to keep up with consumer demands while keeping costs down.
To help find cost-cutting strategies and technologies, many shippers are turning to 3PLs to help shape their logistics in the short term in ways that will help in the long term.
In fact, according to a Twitter poll done by Inbound Logistics, 55 percent of respondents use 3PLs in an attempt to leverage their expertise, while 27 percent are looking to save on cost or time, and 18 percent want to be able to focus on their core business.
“We use 3PLs in regions where it is too costly for us to perform services in-house at the service level we require,” commented one of the respondents in the survey. “3PLs tend to have more density in the regions we use them in, and they can leverage their other partnerships to give us the service level we need at the best possible cost.”
And, according to an article in Logistics Management, shippers are spending on the expert advice of 3PLs. The article states that consultancy Armstrong & Associates Inc.’s annual market research shows that the 3PL industry’s net revenues expanded 5 percent over 2016 to $77.1 billion and gross revenues increased 10.5 percent over the same period to $184.3 billion. And that spend is saving some shippers both time and money.
“Using a 3PL eliminates the need for investment in transportation, warehousing, and many other value-added extras,” says one of the Inbound Logistics Twitter Poll respondents. “It also gives shippers flexibility. It's easier to manage one provider against a set of KPIs (key performance indicators).”
With shippers continuing to look for ways to control the cost of shipping, it seems that those who are seeking partnerships with 3PLs may be making a wise investment in their logistics while freeing up resources to do their business better.