3PL Services – Procurement Best Practices & Sourcing Strategies

DESCRIPTION

Global Market Overview:

According to comprehensive research by ELINT Market Research, the global Third-Part Logistics (3PL) market witnessed exponential growth, crossing USD 1131.9 Billion by 2023. The trend indicates the positive outlook and role played by the sector in a seamless flow of supply chain operations. ELINT’s research predicts a bright future for the global 3PL market, with an estimated CAGR of 7% to 9% from 2023 to 2026.

The freight forwarding sector has emerged as a leading contributor to the overall growth of the 3PL market, and the latest research projects to register a 3% to 4% growth by 2023. However, the progress is hampered by hurdles caused by recent geopolitical tensions, further leading to rate spikes for fuel and labor in several regions. In addition, the research also indicates that the global industry for freight forwarding is likely to exhibit a CAGR of 4% to 5% from 2022 to 2026.

Market Definition

Third-party logistics (3PL) refers to outsourcing logistics and distribution activities to diverse industry companies. In addition, such organizations offer a range of services based on the demand of businesses across the globe. The services range from transportation, freight forwarding, warehousing, distribution, and overall management of the supply chain. Moreover, it enables businesses to concentrate on their core expertise while capitalizing on the reliability of specialized logistic service providers.

Market Drivers

Several factors complement the overall trend and growth story of the 3PL market. Some of the notable drivers include:

• Global Collaboration:

  In a connected world, several countries are witnessing a rise in international trade, supporting global market growth. As businesses aim for regional expansions, the growing demand for logistics solutions that offer reliability and cost-effectiveness is the center point of the talk. Here, 3PL providers come into the picture, providing required services and support to ensure seamless management of complex global trade.

• E-commerce Surge:

  The rapidly growing e-commerce spectrum has completely changed the retail landscape, exhibiting strong growth. E-commerce businesses often rely on 3PL services to manage the challenges of order completion, inventory management, and final delivery.

• Technological Breakthroughs: Logistics operations are witnessing ease in operations due to technologies such as, IoT, AI, and blockchain. 3PL providers make use of advanced systems to gain a significant competitive advantage.

Market Challenges

Despite all the positive outlook of the growth, the 3PL market also faces some hurdles that emphasize strategic adaptation. Some of the common challenges include:

• Technology Adaptation Costs: Although technology brings significant advantages, the integration costs for such advanced technologies to fit into the current logistics systems become pivotal. Small-scale 3PL providers might face difficulties in attracting investments.

• Security Concerns: As we rely more on digital stuff and sharing data, the worry about cyber threats and data leaks is real. 3PL providers have to make sure that sensitive info stays safe and sound.

Market Opportunities

The 3PL market provides lucrative innovation and opportunities to stay relevant and competitive.

• Supply Chain Adaptability: Recent global events, notably the COVID-19 pandemic, highlighted the vital role of supply chain adaptability. The world has witnessed a growing need for robust services that cover overflow planning, in-budget delivery, and proper risk management, offering significant opportunities for 3PL providers.

• Customization and Flexibility: Advanced levels of customization and higher reliability in solutions often play a vital part in improving overall customer satisfaction. 3PL providers bringing tailored and reliable solutions position themselves as preferred partners for businesses with varied logistics needs.

3PL Market: Segmentation

The global 3PL market can be segmented based on end-use, services, transport, and regions.

• End Use: As per the end-use industry, the comprehensive research divides the global market into automotive and manufacturing.

• Services: According to service type, the latest research classifies the market into ITM (Integrated Transportation Management), DTM (Dedicated Transportation Management), and VALs (Value-added Logistics).

• Transport: As per the transport type, the research study segments the global industry into airways and roadways.

• Regions: Based on the geographical arena, the research divides the global market into regional outlooks, such as North America, Latin America, Asia-Pacific, Europe, and the Middle East & Africa.

Profit Margin Dynamics:

According to the research study of the initial quarter of 2023, most businesses with reliable services experienced a surge in their profit level, ranging from 5% to 10%. In addition, recent research also projected that the profit ratio will go upward in the coming years owing to increasing demand and rising charges from suppliers. Moreover, the global industry is successfully managing hurdles to sustain for a longer duration. All these factors make it ideal for all stakeholders, giving them much-needed opportunities to make positive returns in the competitive industry.

Buyer Power Dynamics:

On the other hand, buyer power indicates the landscape for business-supplier. The North American region is considered between medium levels, needing a proper balance and firm collaboration to ensure mutual growth. For the Europe region, buyer power also ranges from medium-low levels, indicating a balanced partnership that requires active contributions. In the Asia Pacific region, buyer power is rated on the medium level, highlighting the role of managed collaborations. Stakeholders should hold this medium buyer power factor and plan effective strategies for mutually beneficial collaborations.

Supplier Power Dynamics:

In the global 3PL market landscape, supplier influence is moderate across North America, Europe, and Asia Pacific. It indicates a necessity for great collaboration and balanced teamwork to build strong partnerships. Stakeholders of the Asia Pacific region need to devise strategies to successfully deal with this moderate supplier power level and ensure successful long-term partnerships. Stakeholders from the European region should benefit from this balanced supplier power to build successful partnerships.

Contract Structure and Pricing Models:

3PL agreements are designed based on contracts and pricing models. It offers businesses the much-needed flexibility to deal with the dynamic changes in the market. Contracts usually span 1 to 3 years, enabling businesses to suit the constantly evolving market. Flexibility is crucial for companies trying to devise strategies with the changing demands.

Leading Players from the 3PL Market   

The 3PL market is under continuous transition, stability, and growth phases, primarily driven by different technological innovations and strategic expansions across regional markets. Some of the leading players: Sinotrans​, XPO Logistics​, UPS Supply Chain Solutions​, C.H. Robinson, Kuehne + Nagel​, CEVA Logistics​, DSV-Panalpina-GIL (Air & Sea)​, DHL Supply Chain & Global Forwarding​, DB Schenker Logistics​, Nippon Express​, Kintetsu World Express, Toll Group​, CJ Logistics​, Expeditors​, DACHSER​, Geodis​, Yusen Logistics​, Mainfreight​, Hellmann Worldwide Logistics​, Damco International​, Hitachi Transport System​, Bolloré Logistics​, Kerry Logistics​.