As companies across all sectors make the push to digital, and online shopping becomes more common, 3PL businesses are beginning to feel the pressure. Experts believe that over the next few years, the total number of 3PLs across the country will shrink – mainly due to mergers and acquisitions.
According to Load Delivered Logistics CEO Robert Nathan, logistics is no longer focused just on pushing goods from distribution centers to big box stores. The logistics dynamic is being shifted to now include going directly to consumer homes, he explained to Fleet Management.
“E-commerce is creating this whole new dynamic in transportation that many traditionally-structured 3PLs are having a hard time adapting to; especially those focused narrowly in scope on full TL and LTL delivery networks,” Nathan said.
The CEO added that he predicts that by 2020, the top 200 3PLs in the U.S. will have plummeted to about 50.
The Consolidation of 3PLs
This trend has already begun to take shape. Companies are merging and buying one another out.
Jett McCandless, founder and president of logistics consultancy Carrier Direct, recently spoke to Forbes about the changing 3PL industry. According to him, consolidation is becoming a bigger trend. Specifically, there are becoming fewer, larger players.
“Consolidation is real,” McCandless told Forbes. “Companies that were excited to be small have acquired a more corporate environment.”
McCandless added that most of the recent 3PL deals have involved private equity, including venture capital funds. Investors are drawn to the industry’s growing level of sophistication, he explained, and the roots of many smaller 3PLs were in transportation and warehousing. As those same companies expand their offerings to include full-service supply-chain management, their level of expertise rises accordingly.
Technology: Friend and Foe?
As e-commerce continues to grow in popularity, how can technology also be a benefit to these 3PL companies? According to Nathan, both large and small companies can remain major players if they know how to play to their strengths and properly integrate new systems.
“Technology is what will make a 3PL more agile, especially in terms of e-commerce; it’s what will allow a 3PL to integrate with an online shopping cart,” Nathan said. “Six to eight years ago this kind of technology and this kind of shopping pattern didn’t exist – and it’s why traditional logistics services won’t necessarily provide the right solutions.”
Furthermore, Nathan explained that large companies will grow by providing more omni-channel services in more markets. Smaller organizations should focus on providing more niche services, he said. Essentially, those firms can rely on technology – not manpower – to create the necessary logistics solutions.
Last week PYMNTS.com discussed what companies should consider when choosing a fleet management company. Fleet managers must determine if they can find better solutions for their businesses and put in the extra work to find them. The same can be said for the 3PLs. Determine what is the best solution, and then find a way to integrate the changing technologies to ensure a stable future.