A recent review of global logistics activity in 2013 indicates to analysts at Tompkins International that this sector is poised for “aggressive” growth in the U.S., due in part to the relocation of manufacturing sites from Asia to North America – particularly Mexico – along with the rise of simpler and less expensive cloud-based computing options for managing logistics operations.
“Cross border trade with Mexico has been on the rise [and] the same can be said of Canada,” Valerie Bonebrake, Tompkins’ senior VP, explained to Fleet Owner. “We have seen Target, Nordstrom, and others enter the market [as] the combined output of the NAFTA region is $17 trillion. Thus 3PLs are broadening their services to capture these markets.”
She added that while global gross domestic product (GDP) is expected to expand by 2.2% and less than 2% in the U.S., Tompkins believes 3PL growth will be three to four times GDP, or 7% to 10% for 2013, based on the trends it’s seeing.
Another main driver for this growth trend is the application of cloud-based transportation management systems (TMS), Bonebrake said.
“This capability is now affordable for mid-sized companies [and] while some may choose to adopt the technology, others see more value in pooling their freight to leverage greater buying power,” she noted.
“In many cases, even if the actual freight cost is the same, the added benefits of access to talent, access to truck capacity, carrier management (safety, insurance, etc.), freight audit and payment and reporting, make outsourcing an attractive option,” Bonebrake pointed out. “Also, as companies experience downsizing and/or retirement of experienced freight shipping experts, then transportation management becomes less of a core competency.”
Chris Ricciardi, chief product officer for cloud-based software developer Logistical Labs, told Fleet Owner that the ability for carriers, 3PLs and shippers to engage in more “social collaboration” is also helping drive the adoption of more cloud-based systems.
“In the past, there used to be a lot of email exchanges that contained valuable information about loads, lanes, pricing, etc., that never entered the ‘formal’ stream of communication between shippers and carriers,” he said. “For example, weather patterns could mess up OTR [over the road] transit times yet that information never could be formally entered into the logistics discussion. Now such information can get put into the system to allow for more intelligent decision making.”
Ricciardi added that not having to investment in costly servers or other information technology (IT) infrastructure also helps shippers, carriers and 3PLs alike get up to speed faster on cloud-based systems. “It allows them to start mining ‘big data’ quickly, especially in terms of benchmarking their costs and analyzing pricing,” he said.
Tompkin’s Bonebrake added that the emerging markets across the globe are complicating supply chains and thus increasing the need for logistical expertise – driving logistics growth, especially where 3PLs are concerned.
“Shippers are looking to leverage fewer relationships globally,” she said. “When it’s tough to get funding for technology projects, headcount, or new facilities, shippers often turn to third parties to meet their needs. For example, retailers scrambling to figure out how to best adapt to changing channel requirements are turning to third parties for technology, fulfillment services, and final mile delivery.”
Yet Bonebrake also believes that such benefits may never materialize as the logistics sector continues to suffer from what she calls a major “talent shortage.”
“Access to good talent continues to be the number one concern of CEOs,” she explained. “If you extend this all the way to the [truck] driver, the aging workforce is also a challenge. In addition to talent gaps, LSPs [logistics service providers] need to differentiate themselves better with target marketing, services/solutions and their value propositions, industry specialization, and innovation.”
She also noted that as mid-market traffic managers retire, non-asset transportation brokers such as are stepping in. “These companies are growing at record pace [with] contract logistics outsourcing, including fleet and warehousing also on the rise.”
Bonebrake stressed, too, that for a 3PL to be successful over time, they must have a well-defined and well-executed strategy that is focused on the customer and flexible enough to adapt to a rapidly changing environment. “Maintaining the status quo is not an option,” she pointed out.