In recent years, the integration of logistics technology has become increasingly vital for improving supply chain operations. As highlighted in the 2022 Third-Party Logistics (3PL) study, both shippers and top logistics companies recognize the critical role of 5G and logistics tech in enhancing performance and ensuring real-time communication, which is crucial in today’s fast-paced market.
Specifically, the study found that 52% of shippers and 63% of 3PL providers view 5G and logistics technology as essential for achieving operational efficiency and meeting the high expectations of consumers and clients. This trend is further supported by the fact that 53% of 3PLs now offer real-time data services for over half of their operations, reflecting the growing investment in this transformative technology.
The impact of 3PL providers is being felt by major shippers. Top retailers are saving 25% or more on net shipping cost by shipping using their 3PL company’s FedEx account rather than their own FedEx accounts. FedEx itself is reporting operating income down 1% from $545 million last year to $537 million this year. FedEx’s announcement of increasing shipping rates by nearly 5% is adding pressure for online retailers to move to 3PL companies.
How is Technology Shaping the 3PL Industry?
Technology is fundamentally reshaping the 3PL landscape by driving efficiency, enhancing visibility, and enabling more responsive and agile supply chain management. As businesses demand faster, more reliable, and transparent logistics services, 3PL fulfillment providers are increasingly relying on advanced technologies to meet these expectations. This digital transformation is improving operational efficiency and allowing 3PL companies to offer more innovative and value-added services to their clients.
For instance, the integration of AI and machine learning has revolutionized demand forecasting and route optimization, enabling 3PLs to reduce delivery times and costs. IoT and connected devices provide real-time tracking and monitoring, offering greater transparency and control over shipments.
Blockchain technology in logistics is also enhancing security and traceability, particularly in industries where provenance and regulatory compliance are critical. As a result, the adoption of these technologies is allowing 3PL providers to stay competitive in an increasingly complex and changing market while also driving growth and customer satisfaction.
Collaboration is Expected to Grow
Relationships among companies, even competitors, are changing in the industry. To achieve cost and service improvements, 41% of shippers and 81% of 3PL providers value collaborative relationships with other companies.
Shippers continue to rely on the information processing services that 3PL companies provide. The ability to provide these services is viewed as a necessary core competency.
Growth of E-Fullfillment Should Increase
Increasing development of Omni-channel retailing will lead to increased growth of e-fulfilment warehousing specialty operations. Multiparty third-party warehouse courier operations can substantially reduce the cost of deliveries. A continuing interest in e-marketing, where the marketers themselves have minimal logistic support is driving up the market for 3rd party logistic services.
Robotics Will be Used More Frequently
Robotics is perhaps the most important area of new technology in third-party logistics. Robots are having a rapidly increasing part to play in large third-party logistics operations. As vision systems and robotic arm technologies advance, more human beings will be taken out of the process of carrying the loads. Robots will decrease the need for warehouse labor to near zero in 2016. New robots can lead to something that is starting to get close to a “lights-out warehouse” operating 24/7.
Investment in this kind of robotic technology is more likely to occur in large third-party operations where demand dictates high efficiency. Amazon Robotics (also known as KIVE systems) is among the major research and development laboratories that have been developing the kind of sophisticated robotic technology to redefine logistics in large-scale warehouses.
In one facility in Seattle, squat orange-wheeled robots move stocked shelves to the workers instead of having the employees seek items among long aisles of merchandise. “Pickers” at the facility stand in one place and wait for robots to bring the 4X6 foot shelving units to them, sparing the employees from having to walk as much as 20 miles a day as they did under the old system.
Each robot investment has been shown to represent a long-term expense reduction and improved efficiency. The typical one-time cost of a “Sawyer” robot is about $25,000, about the equivalent of the annual salary of a starting employee. Within 40 years the robot will save the company $1 million.
High-Tech Warehousing Will Be the Norm
Warehousing and storage systems are becoming increasingly automated. This trend will accelerate in 2016. Using Radio Frequency ID systems and other electronic labelling technology will continue to improve accuracy and speed. Mobile storage systems, movable racks and systems that move pallets are reducing labor costs. Motorized mobile bases are electronically powered and guided by rails in the floor. New warehouse structures (rack supported buildings) are being built with the rack systems integrated into the actual construction, utilizing height rather than land mass.
Natural Gas Conversion Could Impact Fleets
Large third-party logistic fleets are quickly converting to natural gas fuel. This is certainly a trend that will accelerate in 2025. The increased production of domestic natural gas fuels is making this alternative fuel the choice of increasing numbers of logistics fleets.
Upgraded Logistics Software Will Improve Performance
Supply chain software is developing very quickly with new front-end interfaces that make them easier to use. The software is functioning more and more like social media, enabling groups to interact and solve problems. The programs are integrating real-time analytics into their operation, which makes decision-making easier. Alongside supply chain software, other shipping software will play a vital role in logistics.
As an example, fleet maintenance software assists in fuel and equipment management, GPS tracking, and even provides valuable tools like free preventative maintenance schedules. Logistics professionals will target every area of the supply chain in order to improve performance and reduce costs.
What Technology-Driven Strategies are Improving 3PL Services?
As the logistics industry continues to change and improve, technology-driven strategies are playing a bigger role in enhancing 3PL services. Here are some of the most effective strategies that are currently improving 3PL operations:
- Automation and Robotics: Implementing automated systems and robotics in warehouses and fulfillment centers to simplify the operation process and reduce labor costs.
- AI and Machine Learning: Using AI and machine learning for predictive analytics, demand forecasting, and improving supply chain decisions in real-time.
- Real-Time Data Analytics: Utilizing real-time data analytics to monitor and improve supply chain performance, ensuring more accurate and efficient decision-making.
- IoT and Connected Devices: Integrating IoT devices for enhanced tracking, monitoring of shipments, and better inventory management.
- Cloud-Based Platforms: Adopting cloud-based platforms to enable seamless collaboration and data sharing across the entire supply chain, improving visibility and coordination.
- Blockchain Technology: Using blockchain for enhanced transparency, security, and traceability in supply chain transactions.
- 5G Connectivity: Employing 5G technology to boost communication speeds and reliability, particularly in real-time tracking and communication with clients.
- Sustainability-Focused Technologies: Incorporating eco-friendly technologies and practices to reduce the environmental impact of logistics operations, such as optimizing transportation routes to minimize fuel consumption.
What are the Challenges of Implementing 3PL Technology?
Implementing third-party logistics technology can offer significant benefits, but it also comes with several challenges that businesses need to address for a successful transition. Here are seven significant challenges that companies often face when integrating the best logistics technology:
- Integration with Existing Systems: Ensuring that new 3PL technology is compatible with existing ERP, CRM, and other business systems can be complex and time-consuming.
- Data Security Concerns: Safeguarding sensitive customer and business data while implementing and operating 3PL technology requires robust security measures and compliance with regulations.
- High Initial Costs: The upfront investment in 3PL technology, including software, hardware, and training, can be substantial, making it a barrier for smaller businesses.
- Change Management: Transitioning to new technology often requires a cultural shift within the organization, with employees needing to adapt to new workflows and processes.
- Vendor Reliability: Choosing the right 3PL technology provider is critical, as unreliable vendors can disrupt service and support.
- Scalability Issues: Some 3PL technologies may not easily scale with a growing business, leading to potential limitations as the company expands.
- Ongoing Maintenance and Upgrades: Regular updates and maintenance of the 3PL technology are essential to keep it running smoothly, but they can also add to the operational burden and costs.
Embrace the Cutting-Edge Technologies that are Reshaping the Industry Today!
The latest advancements in logistics technology are not just enhancing efficiency; they are revolutionizing how businesses operate. Embracing these latest innovations unlocks unprecedented levels of performance, improved operations, and better service to your customers.
We specialize in helping businesses like yours seamlessly integrate these transformative technologies into their logistics operations. Whether you’re looking to enhance your supply chain, improve real-time communication, or adopt sustainable practices, we have the expertise and solutions to guide you every step of the way. Contact us today to discover how we can help you stay competitive in an increasingly tech-driven industry.
FAQs About Third-Party Logistics Technology
How is Real-Time Tracking Enabled by 3PL technology?
Real-time tracking in 3PL technology is enabled through the integration of GPS, RFID, and IoT devices that provide continuous updates on the location and status of shipments. This allows businesses to monitor their supply chains more efficiently, improving visibility and responsiveness to any issues that arise.
How Secure is the Data Handled by 3PL Technology?
3PL technology employs advanced encryption protocols, secure access controls, and compliance with industry standards such as GDPR and CCPA to ensure the security of data. Regular audits and monitoring are also conducted to protect against breaches and unauthorized access.
How Does 3PL Technology Support Sustainability Efforts?
3PL technology supports sustainability by improving routing, reducing fuel consumption, and improving warehouse efficiency, which minimizes the carbon footprint. It also enables better inventory management, reducing waste and the environmental impact of overproduction.
What Types of 3PL Software are Commonly Used in the Industry?
Common types of 3PL software include Warehouse Management Systems (WMS), Transportation Management Systems (TMS), and Order Management Systems (OMS). These platforms help improve operations, manage inventory, and optimize transportation logistics.
How Can 3PL Technology Help Reduce Costs?
Third-party logistics technology reduces costs by improving operational efficiency, improving transportation routes, and reducing errors in order fulfillment. Automation and real-time data analytics also allow businesses to make the best decisions, leading to cost savings across the supply chain.
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