While the shipping industry is still suffering through a glut of overcapacity, things are finally starting to look up. The 3PL Value Creation Summit of 2016 yielded some pretty interesting results. Namely that the value added by 3PLs is only expected to keep going up through 2017 and beyond, a welcome boon for the weary shipper. This growth is expected to continue well through the following year and only continue beyond that.
“The global third party logistics (3PL) market is expected to be worth $925.31 billion by 2020 and will be partially driven by the outsourcing of secondary business activities,” according to a study released by Orbis.
A Combined Front of Transportation
While just about all modes of transportation are experiencing an issue, oceanic freight is dealing with a gross overcapacity and weak demand, truckers are faced with growing legislation and on the road concerns, to name a few issues, it will be the combined effort of all these various modes of transportation that will create the greatest value for shippers. A service, of course, that is rendered by eager 3PLs.
“Although carrier overcapacity on the still continues, Evan Armstrong, the president of Armstrong & Associates, predicts that integrated solutions such as air-ground, air-sea, and other combinations will create more value for shippers and increase 3PL margins,” said Patrick Burnson, executive editor for Logistics Management and Supply Chain Management Review .
The big winner in the transportation race is going to be the domestic transportation sector
However, the big winner in the transportation race is going to be the domestic transportation sector, responsible for facilitating the last mile deliveries for the majority of eCommerce companies.
Calmer Waters for M&A to Mark Stability for the End of 2016
One of the most promising signs of 2016 is seeing the feeding frenzy of mergers and acquisitions finally dying down. Now that all of the smaller companies have either been absorbed or faded away, the transportation industry is able to turn its attention on the importance of building the right team, focusing on training and talent acquisition. This is important to note given the confusion and frustration of the M&A period that many companies have experienced caused by negative acquisition experiences and overpriced companies. With the dust finally settling, 3PLs and logistics companies can focus on adding value for their customers, which will come as no small undertaking.
With the dust finally settling, 3PLs and logistics companies can focus on adding value for their customers, which will come as no small undertaking.
The challenges of managing geographically dispersed supply chain operations as a result of increased globalization, has led to several companies to outsource their logistics function.
And difficulties with addressing logistical challenges has also led to increased outsourcing by wholesalers and retailers, thereby boosting the 3PL industry.
It found that emerging trends such as Big Data and availability of bespoke 3PL services are expected to drive the market over the forecast period,” says Andrew Allen, a CIPS contributor.
Improving Technology will Continue to Add Value
Another driving factor is the continuous improvement of technology which will only add value for all parties involved. Cloud based IT solutions help to control overhead costs while providing invaluable data in real time, which is necessary for the continued success of 3PLs and shippers alike.
All told, 2017 looks to be a more promising year for both Shippers and 3PL providers.