Online shopping has not only revolutionized the way we purchase goods — it has up-ended distribution as well. In the latest Precision Report we look at how vastly increased parcel volumes makes multi carrier shipping software critical for 3PLs.
The world of logistics has changed. Smaller shipments, going to more places, with more carriers, more often, is now the new normal for most 3PLs. Logistics providers are just as likely to ship small packages via parcel carriers as they are to ship bulk freight. This trend is likely to continue. Global parcel shipping volumes are forecast to surpass 100 billion parcels by 2020.
More parcel shipping, more carriers, and more destinations means lots more hassle for 3PLs. Most logistics providers have business processes and technology systems that are designed to manage large freight orders.
These changing market conditions mean that a comprehensive multi carrier shipping solution is increasing important for 3PLs. When your business changes, the solutions you use must change too. Below we discuss the benefits of multi carrier shipping software for 3PLs.
Meeting Changing Customer Needs
Many logistics providers have seen a significant shift in their shipping profile. This is particularly true in the retail portion of their business, but not exclusively. In a number of other industries, shipping directly to customers has become commonplace.
In years gone by, 3PLs mostly sent large freight loads to storefronts for distribution. They often worked with a handful of carriers to manage these shipments. As a result, managing these carrier relationships, negotiating rates and following up on shipments to ensure their safe arrival was a relatively simple task.
Under the traditional 3PL/retail/DC model, the journey of an item from the 3PL to the end customer looks something like this:
Order transmitted to 3PL from retailer
Order fulfilled in bulk (cases, cartons or pallets) to retail distribution center
DC maintains inventory and ships to retail store
Or like this:
Retailer markets products on e-commerce site
Customer orders product, order is sent to the retailer’s DC
DC picks and packs product
Parcel carrier delivers to customer
Of course, many 3PL customers still require these services. However, the journey to the end user is changing. Today, a 3PL often performs more of the steps to get a products to the end customer:
3PL manages and maintains inventory in warehouse
Retailer markets product on e-commerce site
Customer places an order
3PL picks and packs order to send to customer
Parcel carrier delivers to customer
Final delivery is not necessarily the final step, given the high volumes of returns that online shoppers generate.
Managing Reverse Shipping Efficiently and Cost-Effectively
Customer needs are changing in other ways too. Many increasingly demand that 3PLs manange returns and reverse shipping, particularly retailers. A third of all retail items bought online are returned. For clothing, returns are as high as 40 percent. Without the means to efficiently manage this process with parcel carriers, items are easily delayed or lost in transit.
Logistics providers can often can negotiate very favorable rates with parcel and freight shippers. However, there are some 3PL customers — including some global high-tech giants — who already get unbeatable rates. These customers expect their 3PL partners to manage the warehousing and shipping of their products, using the customer’s carrier account to get the lowest rates.
Technology designed for large freight orders is not optimized for this task. Therefore, many 3PLs manage their carriers and customer carrier accounts separately. But with best-in-class multi carrier shipping software, all carrier accounts — whether for bulk freight or parcel — can be managed in one centralized system.
There’s More Competition
Logistics providers work in a very competitive industry. Some of that competition is coming from companies that previously were customers. Efficient logistics is critical for e-commerce. No wonder then that leading online and omni-channel retailers are bringing logistics functions in-house, including Walmart and Amazon.
Since mid-2018 Walmart has been piloting a program in Southern California using its own rail containers. For this program, Walmart truck drivers are also moving these containers between the railway and Walmart facilities. Amazon launched its air cargo operations in 2015, and the company currently has 40 Boeing 766 planes with 10 more on the way this year. Even companies not investing in logistics operations have been moving some order fulfilment in house. As customers have demanded ever quicker delivery of online orders, retailers have responded. Target has instituted a both Ship From Store and Buy Online Pick-up In-store fulfilment, including a “Drive Up” option — a move that seems to be paying off.
None of this negates the need for 3PLs. As the 2019 Third-Party Logistics Study notes, the “always-on, always-open shopping experience” means that retailers need their 3PL partners to be able to rapidly respond to consumer expectations. This includes offering a number of different delivery options.
Logistics providers must force down cost while improving performance to meet these expectations. Managing carriers and ensuring that shipments arrive on time at the lowest possible cost is key to staying competitive.
About QAD Precision – Trusted Global Trade and Transportation Execution
QAD Precision (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 QAD 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, QAD Precision 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. QAD Precision’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 QAD Precision, visit www.precisionsoftware.com.
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