Ominchannel Shipping Blurs Lines Between 3PL and Forwarder
By Patrick Burnson | Supply Chain Management Review
Citing the recent findings of the consultancy, Armstrong and Associates, this year’s 2015 State of Logistics report, states that revenues for the 3PL sector rose 3.2 percent in 2013, much lower than the 5.9 percent growth a year ago.
“The industry has been faced with slow growth globally, and a general reticence to make new investments or to change situations now,” says Analyst Rosalyn Wilson. “The exception has been the continued strength of the domestic 3PL market. Shippers are engaging 3PLs to ensure that they have the capacity when it is needed.”
According to Wilson, the 3PL sector can be sliced into four segments, each representing a subset of the industry. While still the smallest segment, the domestic transportation management segment has been the fastest growing. 2013 was no exception with gross revenues up 7.1 percent, just a little lower than last year’s 9.2 percent. With capacity an issue the dedicated contract carriage segment continues to gain, rising 3.6 percent in 2013.
“Freight forwarder revenue rose 4.2 percent,” adds Wilson. “The forwarders category represents non-asset based freight services providers and the 3PL segment is the largest.”
Meanwhile, Capgemini Consulting NA – a prominent IT think tank and 3PL outsourcing advisor – contends that ominchannel imperatives are reshaping the current marketplace. The distinction between forwarder and lead logistics provider, as a consequence, may be blurred.
“A customer-driven supply chain may eliminate some legacy roles,” says Shanton J. Wilcox, vice president, Capgemini Consulting NA. “The last mile logistics now includes responsibility for the customer experience, shifting priorities and attention across the supply chain.”
Likewise, he says, customer demand is pushing delivery interfaces up the supply chain and nearer to the point of manufacturing. Retailers are moving to virtual inventory management (accounting for product at all phases of production/movement) as opposed to limiting sales by physical warehouse inventory rules.
“Overall fulfillment is being driven by the savviness of the consumer, with creative and diverse solutions entering the third-party logistics market space,” contends Wilcox.
But Evan Puzey, CMO of Kewill, says Wilcox may be overstating the obvious. He maintains that the customer has always driven business change directly or indirectly.
“The reality for the supply chain is that it exists to ensure the efficient and effective flow of goods from beginning to end,” he says. “ In the last five years the end consumer has increased their demand for more flexibility in how they shop and how they have their orders fulfilled. This is a mirror on today’s changing social climate where more people want easier access and more flexibility in all facets of their lives.”
Both Wilcox and Puzey agree, however, that collaboration across the supply chain is still a priority.
“The logistics and supply chain industry is becoming as complex and diverse as the consumer demand it is designed to fulfill,” says Wilcox. “Successful shippers are leveraging the options to meet their segments’ demands while distinguishing themselves within the market.”
Adds Puzey: “The potential to actually deliver a truly collaborative supply chain is closer than ever, thanks to the access people have to interact electronically in a way that suits their needs.”