Evolution of the 3PL Business Model: New Competition
Customers are demanding more responsiveness from companies, and companies are investing in alternative solutions to meet these needs while expanding and differentiating their services. These investments are typically significant, and companies are looking for additional ways to leverage the money they are spending to increase revenue streams. In some cases, companies are offering these services to new customers or competitors and may create a solution that can be spun off or provided as a service to others in a similar or even the same industry.
This is particularly true as customers continue to demand more from retailers and ultimately from 3PLs. It is likely that investments on both ends of the supply chain will be either shared across companies or developed into alternative service offerings for a wider customer base to improve the return on investment. If companies continue to creatively invest in omni-channel/fulfillment solutions and embark on new partnerships, these new solutions have the potential to alter the way existing 3PLs do business.
Supply Chain Risk Management
The risks associated with supply chains are evolving from a back-office concern to a prominent position on the boardroom agenda at an increasing number of organizations. Recognizing the importance of risk management is significantly enhancing the effective management of supply chains worldwide, and the development of processes, metrics and tools for supply chain risk management has become one of the highest priorities for supply chain executives at many organizations today.
Third-party logistics providers are showing a growing level of commitment to including risk management services among those they promote and provide clients. Given the current interest in risk management and the emphasis most 3PLs are placing on developing new products and services to create value for their customers, this appears to be a prime area for collaboration between 3PLs and their customers.
The Intensifying Truck Driver Shortage
New supply chain models and mobile devices are making just-in-time ordering and fulfillment all the more possible, but professional truck drivers remain one of the most critical links within the supply chain. As the economic rebound continues, freight demand is increasing as are concerns over who will deliver it. The impeding truck driver shortage in the United States has been an ongoing topic of conversation and academic concern for many in the supply chain for years, and the driver shortage is continuing to intensify.
If freight demand grows as it is projected to, the driver shortage could balloon to nearly 240,000 drivers by 2022. The impact the truck driver shortage will have on the supply chain is significant. Many manufacturers, distributors and other intermediaries operating private truck fleets are outsourcing their trucking to 3PL providers as a solution, but this may be just kicking the can down the road. It is likely companies will also begin making upstream adjustments, such as shifting distribution patterns, relying on intermodal transportation and shipping larger quantities at one time. Regardless, professional drivers remain vitally important to provide the last-mile delivery of goods.
Working Corporate Social Responsibility Into the Supply Chain
Corporate Social Responsibility (CSR), which comprises all facets of how companies should do business in a sustainable manner, is growing in importance. A growing number of companies are concerned not just with natural resources, but also human rights, labor practices, environmental impact, business ethics and corporate governance. The new world of CSR utilizes a proactive approach and includes a stronger emphasis on issue resolution, risk reduction and nimble reaction to problems, accompanied by innovation (e.g., green materials, carbon footprint optimization), capacity building, stakeholder engagement (internal and external), crisis management and media relations.
This has significant implications for businesses’ supply chains, including logistics and distribution operations, and there is increasing demand for better checks and balances on sourcing and manufacturing. CSR plays a role along the supply chain, all the way from material sourcing to production and global transportation. As companies increasingly embrace CSR, they are changing how they address talent management and the individuals who oversee sustainability.