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The 3 Shipping Challenges Confronting 3PLs Today

Third party logistics is changing. While yesterday’s 3PL firms were likely shipping bulk freight across state lines, today’s 3PL firms are shipping parcels worldwide on tight timeframes–putting more carrier services into play than ever before.  Pitney Bowes projected parcel shipping volumes would hit 20 billion parcels by 2025, and this was before the COVID-19 outbreak drove consumers online in record-breaking numbers.  Unfortunately, these increases in shipping volumes, carrier services, and parcel destinations complicate traditional 3PL operations, where business processes and technology were originally built to optimize large freight orders.  Three common challenges include:

1. Meeting New Customer Demands

Traditionally, 3PLs sent large freight loads such as cases and pallets to a retail store for distribution. They often worked with just a few carriers to manage these shipments, which meant negotiating rates and tracking delivery events was easy.

In this model, product distribution looks like this:

traditional 3PL shipping

Alternately:

alternative 3PL shipping

Now, however, many 3PL businesses are recognizing their shipping profile has pivoted, not only in retail but also in manufacturing, where shipping directly from a warehouse to a customer has become the norm.  This significantly alters the shipping landscape.  Suddenly, fewer movements are necessary to get a product to a customer, though most of the movements are performed by the 3PL:

new 3PL shipping

2. Managing Returns

Customer behavior is changing in other ways that impact 3PL operations.  Specifically, returning products has become a common customer practice, and customers are comfortable either dropping products off at carrier storefronts or the post office, or scheduling at-home pick-ups.  The customer’s expectation is that these products will quickly reach the 3PL warehouse for efficient processing and a subsequent refund or exchange.  This means 3PLs now have to have practices in place to manage the inbound shipment with their parcel carriers.

In addition, one of the biggest challenges for 3PLs with returns is that while 3PLs often secure very low rates with parcel carriers, there are some 3PL customers who have equally–if not better–rates, and these customers want their 3PL to use their own carrier account.  For most 3PLs, managing customer carrier accounts alongside the 3PL carrier accounts is difficult.

3. Staying Competitive

3PLs are now facing competition from their customer base.  Sometimes referred to as “Amazonification,” customers have realized how critical logistics is to their business and are therefore bringing their shipping operations in-house and even turning shipping into a profit center within the business.  To continually position their services as an attractive option, 3PLs have to hold carriers accountable for providing value: on-time delivery at the lowest possible cost.  However, they may lack the tools and technology necessary to aggregate and normalize carrier performance data, increasing the risk of a sub-optimal transportation mix.

Prime 3PL Operations for Success and Solve Shipping Challenges

The best way to prime 3PL operations for success and solve shipping challenges in this new shipping environment is to implement the right multi-carrier shipping software.  A cloud Transportation Management System (TMS) for parcel shipping enables a 3PL to manage their own carrier contracts as well as their customers’ carrier contracts in one system.  It increases a 3PL’s carrier service choices, including multi-carrier services from popular parcel carriers such as FedEx, UPS, and the USPS, in addition to regional parcel carriers and same-day courier services such as Deliv and Shipt.

ebook logistyx quadrant Choosing a TMS for Parcel ShippingReal-time rate shopping between multi-carrier parcel shipping and multi-carrier LTL shipping based on variables like cost, transit time, and business rules, reduces transportation spend, and by automating both inbound and outbound fulfillment processes–ensuring that all carrier requirements for rating, labeling, and document printing are met–more orders get out the door with less labor.

In addition, a TMS for parcel shipping enables 3PLs to easily use “zone skipping” to improve customer service and decrease transportation costs. Zone skipping occurs when multiple customers’ orders are consolidated for the first leg of the delivery journey and then inserted into a parcel carrier network for the last-mile delivery. This is especially beneficial for cross-border shipping because it significantly simplifies end-to-end logistics and decreases customs clearance costs.  The approach also provides greater flexibility since 3PLs can select local carriers in different countries and regions that have optimal delivery networks for serving their customers.

Finally, a TMS for parcel shipping also ensures 3PLs have the right mix of carrier services in their transportation strategy from the onset.  The software aggregates and normalizes shipping data across carriers, so 3PLs know when deliveries moving to a particular region, customer, or via a particular carrier are not meeting service levels. 3PLs can hold carriers accountable for failing to meet expectations and wield hard data to back up rate negotiations,  and they can consolidate carriers to ensure they get the best possible price.

Do you have the right shipping technology in place to solve shipping challenges and prime your 3PL operations for success? Contact a Logistyx expert to learn more.