Supply chain disruptions will ease by mid-2022, logistics report says

Supply chain disruptions are expected to continue as demand remains strong, but should begin to moderate by mid-2022, according to a recent State of Third-Party Logistics report.

the 3PL Central report shows that the ports of Los Angeles and Long Beach, which handle 40% of shipping containers entering the United States, operated nonstop to reduce supply chain bottlenecks. Meanwhile, third-party logistics companies have faced significant challenges in meeting demand, including port bottlenecks, labor shortages in warehousing and transportation, and consumer expectations. for faster shipping – often referred to as the Amazon effect.

“In 2021, supply chain disruptions cost the world an average of $184 million, with the United States topping the list with an average of $228 million,” the report said.

According to insurance company Euler Hermes, logistics bottlenecks affect 25% of global trade volume. However, issues are expected to improve by mid-2022 as inventory levels return to pre-COVID levels, consumers begin to shift to sustainable consumption, and shipping capabilities begin to ramp up. increase, according to the 3PL Central report.

More than 41% of businesses that experienced supply chain disruptions received customer complaints and more than 36% lost revenue, according to the report.

According to the report, third-party logistics companies looking to increase their profits should consider multi-channel distribution to stay competitive. Omnichannel fulfillment is a strategy of having a unified approach to managing inventory and order fulfillment from a variety of sales channels.

Prior to the pandemic, third-party logistics warehouses were focused on diversifying fulfillment for e-commerce, especially business-to-business vendors looking to participate in the boom in online shopping. This surge is expected to continue through 2022, with retail e-commerce revenues reaching $502.5 billion.

The report notes, however, that many third-party logistics companies have been slow to adopt a comprehensive omnichannel approach. B2B fulfillment remained the largest type of fulfillment at 72% for third-party logistics companies, with e-commerce at 68% and business-to-consumer fulfillment at 56%. But 22% of companies cited omnichannel as a type of fulfillment. Yet 92% of companies that offered omnichannel fulfillment increased their order volume in 2021.

The report also showed that many warehouses have stepped up their efforts for e-commerce, which is important in omnichannel distribution.

According to a survey by McKinsey & Co., consumers care about delivery costs, speed, delivery control and returns. Additionally, 85% of consumers prefer to interact with omnichannel brands that have both digital and physical channels.

According to 3PL Central, a third-party logistics warehouse will be the most important asset for companies looking to implement or improve an omnichannel fulfillment strategy. Third-party logistics companies can help customers with omnichannel fulfillment through delivery choices, technology, and reverse logistics.

By 2027, same-day delivery is expected to reach $20.36 billion, according to 3PL Central’s report. Third-party logistics companies can prepare for this by offering various delivery options, including online purchase, in-store pickup; direct delivery; and buy in store with delivery from the warehouse.

According to the report, third-party logistics customers are turning to their warehouse for help with electronic data interchange for compliance issues and chargebacks, inventory management and order management tracking systems, shopping cart integrations, warehouse management system software, and technology to automate processes and workflows.

Third-party logistics companies that offer full omnichannel fulfillment must have seamless reverse logistics processes to facilitate the return of items regardless of how a customer received them, the report says.

The rise of e-commerce has led companies to outsource their logistics operations and, according to the report, users of third-party logistics said that 40% of their total logistics costs could be attributed to outsourcing in 2021. Next six years, the global third-party logistics market is expected to be valued at $1.1 trillion as online sales continue to increase. It’s an expansion opportunity for the 20,605 third-party logistics companies in the United States, according to the report.

As their customers grow and demand increases, companies can turn to fourth-party logistics, which are networks that provide visibility into their customers’ entire logistics journey. Fourth Party Logistics can offer many of the same services as Third Party Logistics, but is often the only point of contact for customers, can provide additional insights into data analysis throughout the supply chain , can work directly with manufacturers or suppliers and manage larger distribution networks. , says the report.

Many third-party logistics companies are looking to collaborate with other warehouses to integrate operations and establish a fourth-party logistics network, according to the report. This can include the use of multi-warehouse distribution or other carriers and transport networks, offering integrated technologies for better understanding of day-to-day operations and greater growth opportunities. Third-party logistics companies are looking to partner with each other, and according to an Inbound Logistics report, 54% of companies cited fourth-party logistics or partnerships with major logistics providers as a strategic initiative.

Still, third-party logistics networks are new territory for growing third-party logistics companies looking to expand, according to the 3PL Central report. However, many warehouses are operating at capacity, with US vacancy rates below 3.6%, and facing labor issues.

Third-party logistics companies can use third-party logistics networks to help customers with their relationships and provide supply chain resilience. The report shows that 98% of third-party logistics companies said they had successful relationships with shippers who said they had 90% successful relationships with companies. According to the report, effective relationships can lead to reduced costs, improved service and additional data to contribute to customers’ long-term goals.

Companies that have a network that provides additional space for inventory overflows, fulfillment centers close to customer “hot spots,” or access to additional supply chain analytics can help minimize supply chain disruptions, according to the report. It can help businesses expand or try new markets.

According to the report, 84% of companies have implemented warehouse management system software as the most implemented technology for businesses. They said it was installed to enable real-time inventory tracking and management. The report shows that the warehouse management systems market is expected to reach $8.1 billion by 2028, from $3 billion in 2021. Consumer demand and e-commerce are driving the systems boom.

According to Gartner, by 2025, 80% of all business-to-business sales will be digital, as e-commerce expands beyond business-to-consumer distribution.

3PL Central also highlighted the importance of the Internet of Things (IoT), which refers to any technology, from mobile scanners to warehouse management systems, connected to the Internet. The top three reasons third-party logistics companies invested in IoT were to increase workforce productivity, improve real-time decision making, and create a competitive differentiator.

“Technology is a requirement to deliver smart data analytics and automation – especially for (third-party logistics companies) looking to build smart warehouses to tackle persistent labor shortages,” says the report.

According to DHL, “5G is set to revolutionize supply chains around the world as the industry transitions to a data-driven mindset.” It is also expected to be able to monitor transactions in real time, including the location and status of shipments.

Technology can help third-party logistics companies meet demand, scale operations at lower cost and share partnership benefits with customers, according to the 3PL Central report. The report also shows that 73% of third-party logistics users said companies provide new and innovative ways to improve logistics efficiency. And 64% of users said companies had reduced their overall logistics costs.

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