The logistics industry is transforming at a record pace to match the growing customer expectations. Nowadays, online shoppers abandon carts if retailers don’t offer same-day shipping or multiple pickup options. Manufacturing companies are outsourcing last-mile delivery to third-party logistics providers to gain a competitive edge in the industry.
The global 3PL industry is expected to reach US$1.75 trillion in 2027, owing to the rising need for supply chain resilience. If you want to start your 3PL business in 2024, it’s time to understand the industrial insights to beat your competition.
Let’s start by revealing the dominating industrial trends.
Trends to Watch Out in 3PL Industry
Instant gratification is the foundation of every customer experience. Speed of delivery and discounted shipping matters for the buyer so before starting your 3PL business, understand the market trends below.
1. The Modern Consumer is Different
Gone are the days when a great product led to increased sales. Buyers are taking control of online shopping, dictating terms on the how, and when of order fulfillment. Fast, free, and location-specific delivery impact purchasing decisions.
Beyond 2024, 3PL business models have to rise to the occasion, working with brands to align end-to-end logistics services. But, this is just the tip of the iceberg. Most consumers are changing their consumption patterns to live sustainably. Businesses with recycled packaging and electric delivery fleets will foster brand royalty in the coming decades.
2. Technological Boom
The post-pandemic world is uncertain with numerous supply chain challenges and labour shortages. To offset these problems, the 3PL industry is shifting towards AI technology for faster flow of goods and services. Automation and robotics across fulfilment operations are enhancing the throughput capacity of warehouse workers.
Backed by data-driven analytics, these robotic technologies use ML algorithms to automate manual tasks like picking, sorting, and packaging. Moreover, many RAAS companies are collaborating with 3PL businesses to offer robotics as a service. The result is:
- Improved warehouse efficiency
- Flexible and scalable as per the supply-demand curve
- Enhanced worker safety
- No upfront costs and reduced allocation for worker training.
- High-precision tasks with great accuracy reduce fatigue and strain-related accidents.
Hurry, you have reached the last major trend of the 3PL industry.
3. Robust Supply Chain Network
Globalisation has exposed companies to many risks including extreme weather conditions, supplier disruptions, political, and social upheavals and labour shortages. This calls for a resilient, global supply chain network to prepare, adapt and, recover from unexpected events.
How will 3PL business providers overcome these risks? It’s simple, they need to channel their inventory operations in the right direction. Integrating data-driven predictions and real-time analysis will help them identify weather patterns, and shopping fluctuations, positioning brands at the centre of the customers’ hearts. Companies need to coordinate and balance their excess inventory as per order demand and logistics operations.
3PL service providers have to optimise order tracking, inventory management, and asset allocation to eliminate over and understocking. Additionally, diversification is required to manage distribution networks spanning multiple countries.
Let’s move to the basics of a 3PL business plan.
3PL Business – The Core Functionalities
You are aware of the dynamic trends in the 3PL industry. Each 3PL business has different services to offer to its target audience, but 3 critical functions remain the same in every niche.
1. Warehousing and Storage Facility
The significant aspect of a company’s distribution network is inventory. When the stock is stored incorrectly, without considering the customer demand, it leads to spoilage and obsolescence. Poor storage hits product delivery frustrating customers. Moreover, Improper inventory counting can clog capital, creating friction between the brand and its suppliers.
The best 3PL businesses leverage automation and business analytics to create precise inventory counts throughout the period. They allocate sufficient space for storing client inventory according to the demand forecast. With safety and refrigeration facilities, effective utilisation is done to eliminate shrinkage and holding costs.
2. Order Fulfillment
Storing inventory is the first stage of the product lifecycle. Most 3PL providers also offer end-to-end shipping services for brands. They pick products as per order of preference, pack them together and ship them to the final destination. The work is done in collaboration with transport carriers to reach remote locations, minimising distribution costs.
A 3PL business is responsible for correct order fulfilment, eliminating delays and paying for any incorrect orders that go out the door.
Let’s look at the final function of 3PL service providers.
3. Inbound Inventory
This is a crucial element of supply chain management, helping brands shift their goods from wholesalers/manufacturers to the 3PL’s warehouse. Companies schedule their inventory to ensure they have adequate stock to meet seasonal demands throughout the year.
All 3PL service providers help their customers minimise stockouts and revenue loss by stockpiling items at the right moment. The third-party team offloads products and scans them into inventory software to keep track of the product location, and quantity.
Next, let’s move to the steps you need to start your 3PL business in 2024.
Steps to Establish 3PL Company
Before venturing into the vast 3PL space, identify a roadmap of all the critical steps.
1. Plan and Research Ahead
Starting 3PL for small businesses/large companies is a daunting task. It’s about evaluating the battlefield and creating an appropriate course of action. Every industry has its unique challenges and opportunities.
- Identify your interests and expertise. Do you prefer eCommerce stores selling perishable products or heavy goods industries?
- Measure your competition, and analyse their product pricing, warehouse structure and inventory storage fees.
- Understand their market value, USP and specific strengths and weaknesses to identify potential gaps.
Once the research is done, your 3PL business needs proper licenses taking us to our next point.
2. Licensing and Permits
The supply chain industry has stringent regulatory standards, which are necessary to streamline operations. Even a small error can cause drastic problems, disrupting the flow of goods. Familiarise yourself with the legal requirements for starting a 3PL business in your region.
Understand warehouse insurance, trucking insurance, risk and compliance management to control your business.
Okay, you’ve accessed all the necessary permits, licenses, and regulations. Let’s move to infrastructure.
3. Logistics Infrastructure
If there’s one thing that makes or breaks a 3PL service business, it’s location. Find a suitable place for your fulfilment centre which is close to a transport hub with fast connectivity and easy storage access.
Additionally, investing in automation is your top priority. Choose the best 3PL software for small businesses/large companies to track and streamline communication across multiple entry/exit points. Connect with potential clients to help them automate their supply chain operations.
4. Hiring, Training, and Collaboration
Start reaching potential clients, asking them to generate leads for your 3PL business. Collaborate with fleet management system providers, shipping lines, and airlines to boost your operational capacity.
Furthermore, hire logistics experts to drive your business growth. Ensure your staff is adequately trained in supply chain standards to better understand client’s requirements. Remember to train them on sustainable logistics to propel your business in the right direction.
With that, you are ready to launch your 3PL company. Let’s quickly explore the FAQs section of the blog.
FAQs – 3PL Business
How do 3PLs make money?
3PL service providers are logistics experts handling the supply chain operations of a brand. The company pays fees for services like picking, packing, and shipping of goods. The amount is determined based on the volume of orders shipped in a particular period.
Is Amazon a 3PL?
Yes, Amazon offers supply chain services to retailers selling their products on the platform. They help you get products from manufacturers to customers worldwide.
Is 3PL a good business?
While the need for a resilient supply chain is increasing, 3PL services mostly operate on a profit margin of 5-10%, depending on seasonality, and industry trends.
Conclusion
Starting a 3PL business requires thorough planning, research, and setting up a robust infrastructure. While it needs significant capital, time, and regular investment, taking calculated steps will help you put your best foot forward.
Are you looking to streamline your inventory management process? Connect with Qodenext to boost your operational capacity today.
