The advent of lower prices and ever-faster shipping, especially from online retailers, has taken 3PL services from a small, niche industry to a major part of modern commerce. Outside of transportation, most people have never heard the term 3PL. But they know what it means when their package doesn’t arrive on time.
Since the Industrial Revolution, companies of all types had to handle their entire manufacturing and sales process, from research and design to getting a product to a customer. Over time, outsourcing specific functions became more common, and help companies operate leaner and more efficiently.
Many modern companies don’t handle their shipping, receiving and warehousing anymore, since it’s easier and more efficient to hand over these functions to 3PL companies that specialize in supply chain management.
From small startups and entrepreneurial adventures to multinational corporations, the advent of 3PL has opened up commerce like never before.
Driving 3PL Services Growth
The drive for additional efficiency has turned 3PL services into a continually burgeoning industry, with no signs of slowing down. 3PL is vital to companies who want to offer a wide variety of products with timely delivery.
Hexa Research’s report on the growth of the 3PL market indicates that from 2016 through 2025, the market is predicted to expand with a CAGR (compound annual growth rate) of at least 5%. More focus on core business activity and a decrease in shipping costs is expected to fuel growth in an already busy industry.
3PL services market researcher Armstrong & Associates, Inc. also estimates that in 2017, 3PL net revenues expanded 5% to $77.1 billion, and gross revenues increased 10.5% to $184.3 billion. Overall, U.S. 3PL market revenues were up 10.5%, to $184.3 billion.
The emergence of industry-specific logistics services and Big Data are also important factors in driving the growth of 3PL. Many vendors are also adopting cloud-based CRM functions that increase visibility in the supply chain process and improve the relationship between shippers and vendors.
The advent of IoT (“Internet of Things”)-based services and logistics automation are also expected to drive growth. Increasingly, providers are choosing automation solutions, which have improved the logistics process through increased efficiency and reduced errors.
Mergers And Acquisitions
While the 3PL services market is expected to continue expansion, one side effect of that expansion is the buy-up of smaller companies by larger ones. Buying is frequently an expansion strategy, usually to gain a foothold in a previously unavailable market, or to an underserved market. But the total number of 3PL providers has been shrinking after several acquisitions, including seven in a one-year period.
One concern you will have is what happens to you if your 3PL provider becomes the subject of a merger and/or acquisition. Will you be able to work with the same team, or will you have a new point of contact? Will the two companies’ technologies be compatible so you can continue to work as before? How will the merger affect your company? Stay alert for changes that could negatively impact your own business’s operations.
California’s Third Party Logistics Solution
3PL Worldwide has you covered from coast to coast, from warehousing to logistics and everything in between. If you’re ready to get started, or just thinking about going with 3PL, contact us today at (888) 456-1920 or use our online contact form.