What will 3PLs look like in the future? What capabilities will 3PLs have? How will they change?
To divine the future, we can get some help from, Wayne Gretsky, “The Great One”. In revealing the secret to his success, Wayne Gretsky stated: “… you need to go where the puck is going to be.”
Likewise, we’ll follow his advice in this blog post by looking at where the industry will be.
We won’t focus on where the industry is or where it had been.
We already did that in the blog post: “The Evolution of 3PLs: From Their Humble Beginnings To Becoming Critical Industry Partners”.
That post looked into the past. This post will look to the future.
There are four major trends shaping the future of the industry:
- The rise risk management
- The move to specialization
- The growth of innovation
- The increase of competition
Starting with the rise of risk management, we’ll drill down into each one of these major trends.
The Rise of Risk Management in the Face of Increasing Uncertainty, Volatility, and Complexity
Tomorrow, as well as today, businesses must address known and unknown risks.
So what’s the difference?
In the future the frequency and impact of risks will increase. That’s already showing up in data we track today. As industry turmoil increases, businesses must treat risk management as a core competency. Likewise, businesses must also treat supply chain risk management as a core competency.
Companies that integrate them have the opportunity to make competitive gains. Integration is necessary as each plan affects the other. Integration will show its value both during and after crises.
Integration will help identify gaps in operations and supporting supply chain processes. As a result, continuity of operations (CONOPS) will grow in importance. Rather than shunting CONOPS to the side, it will increase in strategic significance.
These trends will take hold because they will move beyond containing costs alone. Tomorrow, risk management and CONOPs will contribute to profits. As businesses learn to capitalize on risk events, we may see CONOPS as a potential profit centers.
3PLs will also help generate new growth. 3PLs will grow while competitors struggle to survive as they fail to tackle risks in a strategic manner.
3PLs, work with uncertainty, volatility, and complexity daily. Hence, they are naturally-suited to address risks in a strategic manner. Consequently, 3PLs will likely adapt to this trend better than most businesses.
The Emergence of Increasing Specialization
As risks are on the rise, so too are 3PLs’ capabilities. It should be no surprise, advances in technology are contributing to specialization. Some examples affecting supply chains are drones, electronic vehicles, online retail sales, among others.
Along with new technology adoption, comes the need to train personnel on how to use them. The learning curve for some technologies will be steep, making development of in-house capabilities unrealistic.
Besides training time, rate of adoption, and maintenance, new technologies may be cost prohibitive. Given these barriers, it only makes sense to outsource to more technically savvy 3PLs. Hence the mere advancement of technology fosters specialization in the 3PL industry.
Another factor contributing to outsourcing to 3PLs is the need for operational efficiency. Technology will pave the way for precise execution and waste reduction. The drive to achieve end-to-end visibility and a no-waste mentality will continue to pervade business. In fact, technology will make waste reduction easier.
Yet mastery of the enabling technologies will likely require a steep learning curve. Again this may make outsourcing a popular option. Thus, 3PLs that master new technologies will add value to their services.
For example, technology has shown it can reduce planning cycles from 13 weeks to between 10 and 15 days. That’s a reduction of up to 90%! Reducing planning cycles that dramatically will become the norm rather than the exception.
Industry Innovation: The New Operating Normal
Innovation will be key to creating of resilient and agile supply chains. (Innovation will play a greater role in how 3PLs operate and deliver services. Innovation will be a built-in a capability among leading edge 3PLs.
Innovation represents the new frontier in delivering competitive advantage. Recall, we viewed supply chains as cost centers. Now they’re seen as profit centers. That change in view is now underway.
Innovation will grow because it offers a way 3PLs can deliver value-added services. Innovation will likely play a major role in achieving supply resiliency and agility. Providing those capabilities will improve both strategic advantage and competitive advantage.
Some other examples of innovative solutions include developing dynamic planning to support real-time operations: data-based decision making to support strategic and operational decisions.
Again, this will foster the no-waste culture that’s with us today. But tomorrow that capability will become sharper and more prevalent.
Finally, innovation will help balance cost and customer service with greater precision and effect. In the future, shippers will get ever closer to getting what they need, when they need it. And 3PLs will provide those services at industry competitive prices.
This may sound like Nirvana. But innovation will bring 3PLs and shippers closer to that reality.
Also, 3PLs will be able achieve these gains as they work ever more closely with their customers.
Increased Competition: The New Industry Standard
Increased competition will pressure 3PLs to focus on improving customer service. Competition will be global. So no business will escape the market’s competitive forces.
That said, 3PLs that treat supply chain risk management strategically will weather these competitive pressures better than most. Also, 3PLs that specialize and innovate will fare better than their competition. These value-added services are a clear departure from providing transactional services.
Nevertheless, all 3PLs will operate in a full-on competitive environment. Increased competition will force companies to become more customer centric. And they will spend more resources on personnel acquisition, retention, and training.
Shippers will find keeping up with changes to supply chain management cost prohibitive. Money saved here will allow shippers to dedicate resources to their core competencies. So, outsourcing to 3PLs will be the logical course of action.
Lastly, leading 3PLs will move well beyond providing transactional services. As competition increases, 3PLs will leverage their expertise to help shippers penetrate new markets. This will help generate future growth and profits.
The Future of 3PLs – The Way Ahead
Looking into the future, 3PLs will look much different than they do today. Our industry has always been rife with change. That will remain the same. But now change is accelerating at a pace never seen before.
The four trends discussed above are massive in scope and scale and powerful in effect.
To survive, businesses must adapt or die. Businesses that fail to do so will falter in the onslaught of these four trends.
To thrive you must get ahead of these major trends.
As a result, we can expect the changed industry to have winners and losers.
Partnering with the right 3PL may make the difference between winning or losing.
As the economy returns to a more normal operating level, now may be the right time to partner with a reliable 3PL that’s prepared to thrive, notwithstanding these trends.