Technology and 3PLs: How E-Commerce has Made New IT Capabilities Critical

The explosive growth of e-commerce has shifted the shipping profiles of many logistics providers. To keep up with the challenges, 3PLs need technological solutions that allow them to offer value-added services to their customers.

E-commerce has been a boon — and a challenge — for logistics providers. Grand View Research forecasts that the 3PL market will reach USD 1.24 trillion by 2025. Unsurprisingly, one of the main driving factors is retail e-commerce. Around the world, online sales make up 9 percent of all retail sales. That’s still a small percentage, but the market is growing by 20 percent every year. Many retailers have turned to 3PLs to meet growing customer demands for quick delivery.

As a result, 3PL businesses are seeing a shift in their shipping profile. This is particularly true in the retail portion of their business, but also in other industry segments. Shipping directly from a manufacturer or warehouse to a customer has become commonplace. Companies that lack the internal control or expertise to manage greater numbers of shipments to more places turn to 3PLs to help them overcome these challenges.

The growth of e-commerce — both B2B as well as B2C — means that today’s busy 3PLs are just as likely to be shipping small packages via parcel carriers, as they are to ship bulk freight across town, across country or around the world.

Last year, nearly 100 billion parcels were shipped around the world. The explosion in parcel shipping volumes means that 3PLs need more parcel carriers, serving more destinations than ever before. A 3PL whose technology systems are built around large freight orders may struggle with this new normal.

The Increasing Importance of IT Capabilities

Every business wants to add services that are meaningful to their customers. 3PLs are no different. However, many 3PLs do not have the technological capabilities their customers require. The 22nd Annual Third-Party Logistics Study found that in 2017, 65 percent of shippers said that they were happy with their 3PL’s IT capabilities. This year, only 56 percent of shippers were satisfied. As technology has improved, shippers’ expectations have risen.

A 3PL is no longer just an asset-based business that is all about warehouses and shipping capabilities but one that is equally about technology, service and expertise. A number of these technologies and value-added services ease the burden of shippers. Value-added services include a wide variety of activities such as kitting and bagging, labeling or even final assembly. However, the greatest growth opportunities lie in services that allow 3PLs to support global trade and e-commerce activities. We will take a brief look at these.

GLOBAL TRADE MANAGEMENT

The World Trade Organization forecasts that global trade will grow by 3.9 percent in 2018, with trade expansion slowing to 3.7 percent in 2019. However, the WTO also warns that growth could be hampered by changing political and trade relationships. 3PLs can differentiate and attract new business by helping their customers manage these changes, ensuring customer trade flows are minimally impacted by potential trade disruptions. With the right global trade management software, 3PLs can effectively manage this changing environment.

TRADE COMPLIANCE

Trade compliance is significant pain point that 3PLs can address as a value-added service. Compliance violations are extremely costly, but remaining on the right side of the law can be burdensome. Published lists of sanctioned entities change frequently and without warning. Therefore, it’s challenging for companies to keep up. By offering trade compliance as a value added service, 3PLs can help customers manage risk and reduce their liability.  

Trade compliance software can vet every export automatically, to verify that your trading partner has passed DPL screening, determine the End Use of the item, validate that the country of destination has been approved and ensure that the sale can proceed.

E-COMMERCE FULFILLMENT

For a very long time, 3PLs mostly shipped large freight loads to a retail storefront for distribution. Because of this, they generally worked with a handful of carriers to manage these shipments. This made made managing these carriers, negotiating rates and following up on shipments a relatively simple task.

However, the explosion of e-commerce has changed traditional distribution models. This adds complexity to a 3PL’s operations. But e-commerce is also the driving force for much 3PL growth. E-commerce fulfillment is driven by small package sizes, demand for rapid delivery and the ability to provide up to the minute status on deliveries.

Because of the global nature of e-commerce, the ability to connect to a global carrier network is a critical requirement. Moreover, regional carriers may also provide industry/niche specific services. Examples of these include hospital distribution for medical and life sciences companies or PUDO point determination for B2C and service parts logistics.

Furthermore, a 3PL’s retail customers are increasingly demanding that reverse shipping be handled quickly and efficiently. Yet, without a means to efficiently manage the process with parcel carriers, it’s all too easy for items to be delayed or lost in transit. To manage to manage outbound e-commerce fulfillment and reverse logistics efficiently, 3PLs benefit from multi carrier shipping software that can handle these tasks.

About Precision Software – Trusted Global Trade and Transportation Execution

Precision Software, a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, Precision Software assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. Precision Software’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about Precision Software, visit www.precisionsoftware.com.