The 2016 third-Party Logistics Study conducted by Capgemini Consulting and Penn State University shows continued collaboration between shippers and third-party logistics providers. This year’s survey indicates that the partnerships between customers and logistics are becoming more proficient at what they do and the relationships are deepening. The study showed that 70% of logistics service users and 85% of 3PL agreed that the use of 3PL services has contributed to improved customer service declaring that 3PL providers are offering new and innovative ways to improve logistics.
The impact of 3PL providers is being felt by major shippers. Top retailers are saving 25% or more on net shipping cost by shipping using their 3PL company’s FedEx account rather than their own FedEx accounts. FedEx itself is reporting operating income down 1% from $545 million last year to $537 million this year. FedEx’s announcement of increasing shipping rates by nearly 5% is adding pressure for online retailers to move to 3PL companies.
Collaboration is Expected to Grow
Relationships among companies, even competitors, are changing in the industry. To achieve cost and service improvements 41% of shippers and 81% of 3PL providers value collaborative relationships with other companies.
Shippers continue to rely on the information processing services that 3PL companies provide. The ability to provide these services is viewed as a necessary core competency.
Growth of E-Fullfillment Should Increase
Increasing development of Omni-channel retailing will lead to increased growth of e-fulfilment warehousing specialty operations. Multiparty third-party warehouse courier operations can substantially reduce the cost of deliveries. A continuing interest in e-marketing, where the marketers themselves have minimal logistic support is driving up the market for 3rd party logistic services.
Robotics Will be Used More Frequently
Robotics is perhaps the most important area of new technology in third-party logistics. Robots are having a rapidly increasing part to play in large third-party logistics operations. As vision systems and robotic arm technologies advance, more human beings will be taken out of the process of carrying the loads. Robots will decrease the need for warehouse labor to near zero in 2016. New robots can lead to something that is starting to get close to a “lights out warehouse” operating 24/7. Investment in this kind of robotic technology is more likely to occur in large third-party operations where demand dictates high efficiency. Amazon Robotics (also known as KIVE systems) is among the major research and development laboratories that have been developing the kind of sophisticated robotic technology to redefine logistics in large-scale warehouses.
In one facility in Seattle, squat orange wheeled robots move stocked shelves to the workers instead having the employees seek items among long aisles of merchandise. “Pickers” at the facility stand in one place and wait for robots to bring the 4X6 foot shelving units to them, sparing the employees from having to walk as much as 20 miles a day as they did under the old system.
Each robot investment has been shown to represent a long-term expense reduction, improved efficiency. The typical one-time cost of a “Sawyer” robot is about $25,000, about the equivalent to the annual salary of a starting employee. Within 40 years the robot will save the company $1 million.
High-Tech Warehousing Will be the Norm
Warehousing and storage systems are becoming increasingly automated. This trend will accelerate in 2016. Using Radio Frequency ID systems and other electronic labelling technology will continue to improve accuracy and speed. Mobile storage systems, movable racks and systems that move pallets are reducing labor costs. Motorized mobile bases are electronically powered and guided by rails in the floor. New warehouse structures (rack supported buildings) are being built with the rack systems integrated into the actual construction, utilizing height rather than land mass.
Natural Gas Conversion Could Impact Fleets
Large third-party logistic fleets are quickly converting to natural gas fuel. This is certainly a trend that will accelerate in 2016. The increased production of domestic natural gas fuels is making this alternative fuel the choice of increasing numbers of logistics fleets.
Improved Logistics Software Will Improve Performance
Supply chain software is developing very quickly with new front-end interfaces that make them easier to use. The software is functioning more and more like social media, enabling groups to interact to solve problems. The programs are integrating real-time analytics into their operation which makes decision-making easier. Alongside supply chain software, other shipping software will play a vital role in logistics. As an example, fleet maintenance software assists in fuel and equipment management, GPS tracking, and even provides valuable tools like free preventative maintenance schedule. Logistics professionals will target every area of the supply chain in order to improve performance and reduce costs.
If you are looking for third-party logistics services for your business, WarehousingAndFulfillment.com can help. We are the only site that rigorously screens 3PL companies to find the best match. Please contact us to learn more.