3PLs started out as a good idea. They began as a convenience. Today they’re a necessity.
As the title of this post states, 3PLs had modest beginnings. They provided transactional services. As such, 3PLs provided limited services. That meant they also delivered limited value.
Yet 3PLs have become critical partners that deliver unmatched, value-added services.
You might wonder why 3PLs’ evolution has been so dramatic. You might also wonder why the future of outsourcing to 3PLs continues to grow.
The answer lies in managing uncertainty, volatility, and complexity.
Over the years, however, 3PL services have become more and more sophisticated. Globalization and advances in technology led to this dramatic evolution. Then customer expectations further fueled the need for outsourcing.
Expert supply chain management proved to be the antidote to uncertainty and volatility. It also proved effective in addressing customer’s increasing expectations.
To better understand 3PL’s growth, we need to look at look at 3PLs’ origins. Then we’ll look at how they evolved to become indispensable.
Deregulation Gives Rise to 3PL Industry
In 1980, the U.S. Department of Transportation passed the Motor Carrier Act (MCA). The MCA deregulated transportation resulting in a massive increase of motor carriers. For example in 1980, there was an estimated 20,000 trucking companies. By 2019, that figure had exploded to 1.2 million trucking companies.
Along with the explosion of new companies came an expansion of logistics services. Those services included warehousing and transportation enhanced by information technology. Many of these new motor carriers originated from warehousing companies. That’s how the 3PL industry was born.
So, it all began in the 1980s with the MCA. As deregulation took hold the industry grew even more, first in the U.S. and then globally.
Emerging Global Demand Spurs Growth of Supply Chain Services
In the 1990’s, the growth of logistics service providers skyrocketed. China and India spurred that growth as they opened up to international trade. Cheap labor and plentiful resources acted like a magnet. That attracted the attention and investment of many 3PLs, further spurring growth.
Moreover, as 3PL outsourcing grew, that opened up opportunities for specialization. Thus niche markets developed as 3PLs specialized in serving single industries. A few examples are automobiles, construction, frozen foods, and furniture.
Specializing allowed 3PLs to compete based on expertise. It also facilitated both 3PL and U.S. business growth in international markets.
The achievements made in the 1990s served as a springboard for further growth in the 2000s.
New Technology Stimulates Even More Growth
We take it for granted today, but in the early 2000s, the Internet was coming online. As the internet’s and technologies’ capabilities grew, they also became more user friendly. As the speed and efficiency of computers, laptops, and mobile devices grew, 3PLs’ value grew.
Next, we saw demand for their services grow, as 3PLs became more effective and efficient. Use of these new tech tools demanded increased the need for expertise. And since 3PLs built that expertise, businesses outsourced supply chain management even more.
Logistics service providers now offered complex supply chain management services at reasonable costs. Replicating these capabilities would be cost prohibitive for most businesses. So this led to further growth of the 3PL industry.
New Roles Create Growth of Shipper – 3PL Partnerships and Value
As globalization and outsourcing increased, so did uncertainty, complexity, and volatility. Recall, one purpose of globalization was to bring the world closer together. Instead, due to trade wars, globalization became gnarled.
Also, recall the promise of technology/digitization was to simplify business. That included strategic planning, daily operations, and business intelligence. Instead, as technology solutions became more sophisticated, they became more complex.
Add to that the Covid-19 pandemic and the deregulation of transportation. Now we find ourselves in a much different world than we did 40 years ago. Over the decades as services expanded, so did outsourcing to 3PLs.
With the growth of outsourcing, we saw a transformation from the early days. In their infancy, 3PLs operated on a transactional basis. That is, they executed logistics tasks as a convenience for shippers. Shippers dictated tasks and standards, and 3PLs executed to those dictates.
But that changed – out of necessity.
Increased uncertainty, complexity and volatility demanded expertise only 3PLS could offer. Hence, shippers and other businesses formed deeper relationships – partnerships – with their 3PLs.
3PLs expanded their services beyond transactional tasks to conducting strategic business. This took place as shippers and 3PLs built a foundation of trust over time. As a result 3PL value-added services grew in scope and depth.
Included now we find 3PLs involved in all manner of logistics support – air, land and sea. Some examples are demand planning, end-to-end visibility, warehousing, packaging, integration, and business intelligence.
As you can see, 3PLs evolved from executing logistics tasks as a convenience. They now provide value-added services resulting in competitive advantage. Adding value to shippers top and bottom lines means having a deep relationship. Deep relationships foster partnerships that create extraordinary value through collaboration.
Shippers and 3PLs collaborate on strategic and operational matters. They work together to identify goals, set priorities and uncover hidden value. That’s where the 3PL logistics industry is headed. And it’s the perfect solution to navigating uncertain times.
How do You Plan to Navigate an Uncertain and Volatile Future?
Do you need help with managing your supply chain in today’s uncertain and volatile times?
Are looking to build a relationship with a reliable 3PL?
Perhaps you want to learn more about how a long-term relationship with a reliable 3PL can benefit you.
Whatever the case may be, why not contact Terra Worldwide Logistics today?
We’re no strangers to uncertainty and volatility. Despite the turmoil, we’ve succeeded by making our customers successful.
We’ve succeed because we always put the customer first.
That’s why we excel at meeting customer expectations.
If you think a close partnership with a 3PL could benefit you, then fill out this simple form.
We’ll contact you and look forward to answering your questions.