3PL Threats: 5 Challenges Third-Party Logistics Providers Will Face in 2023
Third-party logistics and e-commerce order processing have experienced explosive growth over the past few years. However, like all booming sectors, the 3PL industry has its challenges.
Below, we’ve identified five of the most likely threats to 3PL providers in 2023. Prepare for these challenges, and you’ll be well-placed to sail through the coming year while others get caught up in the choppy waters.
Lack of Space
With growth comes expansion, meaning more warehouse space will be needed to meet the 3PL industry’s exponential growth. The problem is that inflation has sent property prices and rental rates soaring, so securing that space might be tricky for 3PL providers experiencing growth.
A 3PL company may have enough room when starting out, but business growth may lead to ever-increasing space demands. As a result, we expect to see such companies explore unconventional ways of maximizing and increasing storage space. For example, fulfillment warehouses and distribution centers may add more floors or use vertical racking.
Recruitment is another mountain to climb in this sector, as dedicated workers can be difficult to come by. Currently, there aren’t enough qualified candidates to support the industry, which might cause even more problems in the future.
The Rise of Online Shopping
As e-commerce drives more demand for products and services, it will put more pressure on the logistics industry. Online shopping makes things convenient for the consumer, but it also compels them to want more variety and options.
Customers expect orders to be tracked, shipping to be free, and returns to be quick and easy. All of this will put a strain on 3PL providers, fundamentally changing the whole sector and demanding more out of them.
As international shipping regulations get tougher each year, 3PL companies that operate internationally must work harder to stay abreast of these changes. It’s no small feat to stay on the right side of the law when the rules are constantly changing.
In addition to complying with the law, the requirements set out by shippers are not exactly the easiest to adhere to either. For example, they might require a particular type of packaging or expect deliveries to occur in a specific window of time.
As shippers become more demanding, 3PL companies will have to jump through more hoops.
Adoption of Technology
Every industry in the world is being forced to embrace technology. It’s projected that robotics and Artificial Intelligence will play a larger role in third-party logistics and e-commerce order processing moving forward.
We may also see sensors, digital management systems, and machine learning play a pivotal role in the industry. These factors are bound to make operations more efficient and effective.
As exciting as this is, it also calls for a lot of monetary investment, which may be an obstacle to some companies. On top of that, it could also mean bringing tech-savvy staff on board or training recruits, which isn’t a walk in the park.
Winds of Change
The 3PL industry is going through some positive changes as one of the fastest-growing sectors in the world. But some of those changes will present new challenges for which providers need to prepare.
The year 2023 will call for providers to toughen up and get creative to survive the industry’s evolution. By embracing the changes instead of fighting them, fulfillment companies should have a fighting chance of coming out on top while improving customer satisfaction.