It’s one of the most important parts of any company: profit margins. Without them, the company wouldn’t be able to pay employees, fees, and continue to operate. But market variables are always a threat to nearly any business, but especially 3PL companies.
Sudden Ups And Downs
For 3PL companies, profitability can change almost in an instant with an uptick in shipping. Immediately, there are more packages and freight to ship than there was last week, but no one knew.
One of the advantages of hiring 3PL companies is dealing with seasonal or market fluctuations that affect businesses. With warehousing and other resources located strategically, your company’s goods can be delivered faster from any number of places. Many 3PL companies specialize in adjusting to these fluctuations, especially during the holidays, or when companies see a period of growth, leading to more sales and more shipments.
Conversely, when things slow down, such as right after the holidays, the sudden drop in freight shipments can directly impact the 3PL company’s profit margin, especially if multiple customers experience a decrease in freight.
Capacity
This year sees an increase in trucking capacity after years of being stretched. Even in 2018, capacity was at a premium after two major hurricanes that hit the US in 2017. An increase in heavy truck orders and registrations earlier this year means that there is additional capacity, and spot market truckload pricing saw a double-digit reduction.
In 2017, on the heels of both storms, most shipping was FTL (full truckload), meaning that there was not only less capacity, but higher carrier costs. This also means that companies who had annual contracts with customers were losing money with no way to recoup losses. Shippers frequently lost income in order to be able to continue their level of service to customers.
LTL, or “less than truckload,” has seen a steady increase and become more profitable. Shipping your goods on the same truck as other customers gives you the advantage of lower costs. E-commerce has fueled the market for LTL, occasionally shrinking capacity, and works with companies whose output for shipping changes frequently. But if a truck rolls without being at full capacity, it’s has a negative impact for the 3PL company that’s sending it.
Fuel Prices
This is a topic that’s on nearly everyone’s mind on occasion, but especially 3PL companies and others involved in shipping.
When fuel prices rise, companies must either raise prices or take a loss. Some companies may use rail as a less expensive method of shipping when trucking becomes too costly. Eventually, higher fuel prices mean higher costs to the consumer.
But when fuel prices decrease, everything changes—shipping costs decrease, leading to more orders, more freight, and lower prices passed along to the consumer. Surcharges are reduced, creating savings for customers as well as carriers. Older, less fuel-efficient trucks are brought in to handle the additional freight, increasing capacity. Companies can again schedule routes based on market demand rather than fuel pricing and efficiency.
Work With 3PL Worldwide To Keep Your Company Moving
As a 3PL company based in Southern California and Connecticut, we’re ready to help with all of your supply chain and logistics needs. From scheduling to shipping, as well as warehousing, order fulfillment, reporting, and customer service, we help e-commerce, direct response and catalog marketers get their orders to their customers the best way we can.
We can also handle your supply chain logistics in both directions, shipping and returns, so you can take care of the important aspects of running your company. If you have questions, or are ready to step up to outsourcing to a 3PL company, contact us today at (877) 444-0002 or use our online contact form.