THIRD-PARTY LOGISTICS
Top trends in the 3PL industry in 2023
By the Amazon Multi-Channel Fulfillment team
January 13, 2022
The third-party logistics (3PL) industry is in the midst of a golden age, as an ever-increasing number of companies around the world are opting to outsource elements of their logistics operations – including order fulfillment, inventory management, and warehousing and distribution – to 3PL providers.
According to a recent report, the size of the 3PL market – which currently stands at $992 billion – is forecasted to reach $1.4 trillion by 2026, representing a compound annual growth rate (CAGR) of 9.2%.
What is driving this steady, significant surge in demand for 3PL services? One of the main factors is that businesses today are faced with unprecedented supply chain challenges and complexity – and consequently are looking to engage 3PL partners who can help them streamline their end-to-end logistics operations and cut operating costs.
By partnering with a 3PL provider, your business can get access to logistics experts who have their fingers on the pulse of the latest trends and technologies in the supply chain space and who are constantly coming up with innovative ways to tackle the logistics challenges in today’s changing business landscape.
As we enter into 2023, we wanted to hear from a few of those logistics experts to get their thoughts on the state of the 3PL industry this year. We asked six team members from Multi-Channel Fulfillment (MCF) – a 3PL service that enables businesses to leverage Amazon’s fulfillment network to deliver their off-Amazon orders – the following question: “What’s the most interesting and important trend in the 3PL industry in 2023?”
Here’s what they said:
According to a recent report, the size of the 3PL market – which currently stands at $992 billion – is forecasted to reach $1.4 trillion by 2026, representing a compound annual growth rate (CAGR) of 9.2%.
What is driving this steady, significant surge in demand for 3PL services? One of the main factors is that businesses today are faced with unprecedented supply chain challenges and complexity – and consequently are looking to engage 3PL partners who can help them streamline their end-to-end logistics operations and cut operating costs.
By partnering with a 3PL provider, your business can get access to logistics experts who have their fingers on the pulse of the latest trends and technologies in the supply chain space and who are constantly coming up with innovative ways to tackle the logistics challenges in today’s changing business landscape.
As we enter into 2023, we wanted to hear from a few of those logistics experts to get their thoughts on the state of the 3PL industry this year. We asked six team members from Multi-Channel Fulfillment (MCF) – a 3PL service that enables businesses to leverage Amazon’s fulfillment network to deliver their off-Amazon orders – the following question: “What’s the most interesting and important trend in the 3PL industry in 2023?”
Here’s what they said:
Flexibility
“As we kick off 2023, we are continuing to see economic headwinds and uncertainty in the broader business world, and this is causing many companies – who want to continue to provide excellent customer service and maintain their growth and market share – to shy away from making major capital investments in their logistics infrastructure and resources.
“Instead, these companies are looking for flexible logistics solutions – so that they can increase their capacity without increasing capital expenditure – and 3PLs are poised to provide those solutions. Amazon, for example, offers an array of flexible logistics solutions that companies can pick and choose from, depending on their business needs, utilizing the vast Amazon network.
“In today’s challenging and uncertain business environment, flexibility is king. By allowing you to leverage their logistics network and resources (and not having to invest in your own), 3PL providers like Amazon can give your business the flexibility it needs to scale.”
“Instead, these companies are looking for flexible logistics solutions – so that they can increase their capacity without increasing capital expenditure – and 3PLs are poised to provide those solutions. Amazon, for example, offers an array of flexible logistics solutions that companies can pick and choose from, depending on their business needs, utilizing the vast Amazon network.
“In today’s challenging and uncertain business environment, flexibility is king. By allowing you to leverage their logistics network and resources (and not having to invest in your own), 3PL providers like Amazon can give your business the flexibility it needs to scale.”
Karl Hemmelgarn
Sr. Technical Business Development Manager, MCF
Sr. Technical Business Development Manager, MCF
Globalization
“In 2023, I predict that we will see an increase in the number of companies that begin operating on a global scale. This strategy can bring many benefits including risk mitigation across diverse markets, new revenue potential, and competitive advantage.
“While there is great opportunity in global expansion, it also comes with challenges like managing a complex supply chain and increased operational costs (for things like cross-border shipping). Partnering with the right 3PL to support growth across geographies effectively and efficiently will remain critical. In a recent survey we conducted, 14% of Amazon sellers were considering changing 3PLs to help support their expansion into a new market.
“Globalization will not be limited to just large businesses. With the support of a 3PL’s existing infrastructure, there is an opportunity for small- and medium-sized businesses to test out sales channels in new international markets with minimal operational investment. In 2023, companies of any size can successfully enter into new markets with support from a 3PL with a global footprint, like Amazon Multi-Channel Fulfillment, to manage their global supply chain.”
“While there is great opportunity in global expansion, it also comes with challenges like managing a complex supply chain and increased operational costs (for things like cross-border shipping). Partnering with the right 3PL to support growth across geographies effectively and efficiently will remain critical. In a recent survey we conducted, 14% of Amazon sellers were considering changing 3PLs to help support their expansion into a new market.
“Globalization will not be limited to just large businesses. With the support of a 3PL’s existing infrastructure, there is an opportunity for small- and medium-sized businesses to test out sales channels in new international markets with minimal operational investment. In 2023, companies of any size can successfully enter into new markets with support from a 3PL with a global footprint, like Amazon Multi-Channel Fulfillment, to manage their global supply chain.”
Abigail Gordon
Manager, Account Representative, MCF
Manager, Account Representative, MCF
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End-to-end solutions
“In the past few years, we’ve all observed unprecedented supply chain volatility, disruptions, and delays – and a growing number of companies are now looking for end-to-end supply chain solutions to help them handle these unpredictable supply chain dynamics. McKinsey recently released a survey showing that 67% of businesses have implemented solutions to enhance end-to-end visibility, and businesses that have increased end-to-end visibility are two times less likely to report being impacted by supply chain challenges.
“This makes it increasingly important to find a 3PL that can provide a portfolio of integrated, end-to-end, physical and digital supply chain solutions. Unfortunately, though, there are only a handful of 3PL providers out there that can offer this. One of the 3PLs that can is Amazon Supply Chain, which has a suite of solutions – including Amazon Multi-Channel Fulfillment, Amazon Freight, and Amazon Global Logistics – that can optimize your end-to-end logistics operations from the manufacturing plant all the way to customers’ doorsteps. These solutions empower businesses to improve end-to-end visibility and control, helping them stay ahead of today’s rapidly-evolving supply chain challenges.”
“This makes it increasingly important to find a 3PL that can provide a portfolio of integrated, end-to-end, physical and digital supply chain solutions. Unfortunately, though, there are only a handful of 3PL providers out there that can offer this. One of the 3PLs that can is Amazon Supply Chain, which has a suite of solutions – including Amazon Multi-Channel Fulfillment, Amazon Freight, and Amazon Global Logistics – that can optimize your end-to-end logistics operations from the manufacturing plant all the way to customers’ doorsteps. These solutions empower businesses to improve end-to-end visibility and control, helping them stay ahead of today’s rapidly-evolving supply chain challenges.”
Tom Gilbert
Sr. Product Manager, MCF
Sr. Product Manager, MCF
Fast ship speeds are getting faster
“This year, we will continue to witness fast ship speeds act as a major factor in online shoppers’ purchasing decisions – and consequently ship speeds will continue to be a priority for ecommerce businesses. During the initial growth of ecommerce, Amazon reshaped customer expectations for fulfillment times by introducing 2-day and 1-day shipping. Now, consumers are demanding even faster delivery, and recent research reveals that 41% percent of global shoppers expect to receive their online order within 24 hours.
“To meet these expectations and maintain a first-class customer experience across various sales channels, businesses should actively invest in their shipping and tracking capabilities, whether managing their fulfillment in-house or outsourcing it to a 3PL.
“Working with a 3PL can help companies meet the growing needs of customers for fast, reliable shipping. Amazon Multi-Channel Fulfillment, for example, can deliver orders as fast as 1-day, and businesses can also leverage Buy with Prime to offer fast, free delivery for Prime members on their direct-to-consumer store.”
“To meet these expectations and maintain a first-class customer experience across various sales channels, businesses should actively invest in their shipping and tracking capabilities, whether managing their fulfillment in-house or outsourcing it to a 3PL.
“Working with a 3PL can help companies meet the growing needs of customers for fast, reliable shipping. Amazon Multi-Channel Fulfillment, for example, can deliver orders as fast as 1-day, and businesses can also leverage Buy with Prime to offer fast, free delivery for Prime members on their direct-to-consumer store.”
Gabriel Bang
Account Representative, MCF
Account Representative, MCF
Data analytics and intelligence
“Last year brought a lot of challenges for ecommerce businesses including inflation, increased cost to serve, margin pressures, and capacity issues – and as we move into 2023, these challenges persist. One of the keys to managing these challenges and meeting customer expectations for ecommerce fulfillment is the use of data.”
“Data analytics and intelligence can provide valuable insights for ecommerce businesses – helping them forecast inventory levels and order volumes, streamline the order fulfillment process, and reduce operational and overhead costs. Additionally, ecommerce businesses must be able to serve up the right data to customers, letting them know the status of their orders at all times.
“3PLs have an important role to play in providing data analytics and intelligence for ecommerce companies – and this will continue to be the case in 2023. 3PLs can help these businesses integrate their various back-end systems – such as warehouse management systems, enterprise resource planning systems, and order management systems – and ensure real-time data is being surfaced through APIs to key internal stakeholders as well as customers. This will help improve visibility, on-time performance, and overall customer experience, leading to increased repeat customers and reducing operational costs such as customer support”
“Data analytics and intelligence can provide valuable insights for ecommerce businesses – helping them forecast inventory levels and order volumes, streamline the order fulfillment process, and reduce operational and overhead costs. Additionally, ecommerce businesses must be able to serve up the right data to customers, letting them know the status of their orders at all times.
“3PLs have an important role to play in providing data analytics and intelligence for ecommerce companies – and this will continue to be the case in 2023. 3PLs can help these businesses integrate their various back-end systems – such as warehouse management systems, enterprise resource planning systems, and order management systems – and ensure real-time data is being surfaced through APIs to key internal stakeholders as well as customers. This will help improve visibility, on-time performance, and overall customer experience, leading to increased repeat customers and reducing operational costs such as customer support”
Alistair Prophet
Head of Enterprise Acquisition, UK & EU, MCF
Head of Enterprise Acquisition, UK & EU, MCF
Conclusion
For companies across the business spectrum, 2023 is set to be a year of unprecedented supply chain challenges and opportunities. Although there’s no crystal ball that can tell us exactly how this year will play out, what we can say with certainty is that having a 3PL partner that can help your business navigate today’s supply chain landscape will be critical.
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