Sales and Fulfillment
3PL challenges and solutions: Navigating the new normal
The rapid growth of e-commerce is driving the demand for 3PL (third-party logistics) services worldwide. Fuelled by the COVID-19 pandemic, the global 3PL market, which was valued at around $1 trillion in 2020, is expected to cross the $1.75 trillion mark by 2026. In the new normal, 3PL has acted as the engine of the global economy, keeping the wheels moving for companies and customers.In such a scenario, the Live Enterprise concept enables 3PL service providers to respond and evolve to new business challenges as well as transform them to circular, demand-driven supply chains. Live Enterprise allows them to have a collaborative, cross-functioning, and seamless network in every interaction through digital tools.
However, growth in 3PL has also increased consumer expectations for on-time and accurate deliveries, thus presenting new challenges. As a result, the logistics strategies of global businesses will require pivoting to best practices and using expertise to meet new challenges thrown by the pandemic.
The 3PL challenges
The pandemic sparked a rise in e-commerce sales. Today, a record of 36.1% of all retail sales are taking place online, indicating a 77.6% increase compared with February 2020. For many businesses, agility has become the key. For many businesses, agility has become the key. Agility demands that all functions and processes of an organisation, as well as the insights generated, are visible through the entire cycle. But logistics operations are complex, which presents several challenges for 3PL and must be overcome to induce this sentient quality in fragmented supply chains
Poor end-to-end visibility:3PL operations suffered due to a lack of end-to-end visibility, especially in last-mile delivery due to COVID-19 lockdown zones and travel restrictions. These disruptions affected planning, predictability, and customer satisfaction.
Unpredictable demand surges:Unusual consumer behaviour during the pandemic lead to stockpiling, driving up sale volumes. Unplanned demand was a considerable challenge even for the biggest players in the e-commerce sector since high order volumes require prior planning, demand estimates, and resource allocation.
Last-mile logistics problems:Unpredictable customer behaviour caused an unsteady inventory management flow in the retail and CPG space. With issues related to low availability of finished goods and warehouse distances, there were delays in deliveries.
Warehousing challenges:Warehouses were in a bind as certain products witnessed huge demand, while the demand for other goods plummeted. Warehouses had to deal with reduced workforce, increased transport restrictions, and rising costs due to additional COVID-safety measures.
High re-opening costs:In the absence of risk assessment, businesses that rushed to reopen faced high, additional costs because they failed to account for customer behaviour and resulting supply chain challenges.
How 3PLs can overcome new obstacles
During a survey in 2020, 67% of 3PL providers cited finding or retaining customers as a challenge. To offer seamless operation to shippers and ensure efficient delivery of services to customers, here’s how 3PL providers can overcome the above challenges by leveraging the principles of Live Enterprise:
Revisit financial and marketing plans to deliver what the customers need. Businesses must pave the way for growth by focusing on their agility to move resources with the changing landscape defined by shifting demands.
Stabilise business processes and operations by becoming customer centric and improving communications. Businesses need a responsive operating model characterised by flexible task forces, which can quickly gauge changing internal and external needs. Reinforce seamless operational changes by leveraging best practices and rapid communication with employees and customers.
Redraw staffing models to create a flexible work environment that allows for quick decision making. Businesses need to emphasise on employees’ safety and educate staff on new norms, as well as have a contingency plan that adheres to the latest guidelines.
Embrace change to deal with labour, freight movement, remote working, and distribution chains. Warehouse automation can ease the storage and retrieval process and make space for social distancing, whereas omnichannel distribution can accelerate sales fulfilment. Using technology to monitor real-time inventory visibility is key to meeting orders efficiently.
Discover opportunities to bring value addition to your existing services. Apart from warehousing and transportation, the new normal will require 3PL operations to include value-added services such as light assembly, responsive customer service, and on-demand inventory visibility.
Key trends in 3PL operations
- Automation of workflow using technology will bring 3PL companies closer to their clients through greater collaboration electronically.
- Smarter, dedicated 3PL technology will address inefficiencies, save time, and improve ROI through dedicated transport management systems, warehouse management systems, freight tracking, and customer service.
- IoT and mobile applications will focus on flexibility and replace paper records, delivering processing orders and sales fulfilment seamlessly regardless of geographical location.
- Data analytics of ongoing and historical information will provide greater insight into building predictive business models for the future.
Improving 3PL efficiency with Infosys BPM
Infosys BPM provides end-to-end services from planning to execution across various functions for your 3PL and logistics operations. As a partner of choice for Fortune 100 enterprises, our vast domain expertise can provide concurrent support through technology solutions to keep you on top of new challenges in 3PL. Tap into our wide range of logistics management services.