Challenges in 3rd Party Logistics

Challenges and Trends in 3PL and Distribution

July 26, 2021 Blog

Logistics has historically played an important role in every economy and every business entity. The worldwide trend of globalization has led many companies to outsource their logistics functions to third-party logistics companies (3LPs). It helps them to focus more on their essential skills and, as a result, generate more income. The Third-Party Logistics (3PL) industry has expanded at a steady pace over the five years to 2021. Operators in the industry provide outsourced logistics services that include warehousing, forwarding, packing, consulting, order fulfillment, brokerage, and transportation documentation. Many supply chain companies work around the clock to overcome challenges in 3rd Party Logistics. These services are often customized according to the client and integrated into their operations accordingly.

Third-party logistic revenues have grown at a rate that is double the overall GDP of the United States! The Global Third-Party Logistics (3PL) market was valued at around USD 1trillion in 2020, and it is expected to reach more than USD 1.75 trillion by 2026, registering a growth rate of 8% during the period (2021-2026) (source: Meanwhile, behind all this growth, there are several challenges faced by the 3PL and distribution industry.

5 Major Challenges in 3rd Party Logistics and Distribution

  1. Lack of Good Reporting Systems

In a medium-sized 3PL business, it is an eventful task to keep track of all shipments that are sent. It is a painful task to have to ask suppliers about shipments to create a monthly statement. If a proper reporting system exists, these tasks will be highly simplified, but at the same time, mid-sized 3PL companies can only invest in a reporting system that is cost-effective and suits their operational policies.

  1. Increased Emphasis on Rules and Regulations

Since most 3PL companies ship goods to different countries, they must comply with the shipping rules of different countries and regions. Each country has its own set of laws and regulations and these companies must be updated with all the rules to keep trading hassle-free. Once again, it is a challenging task, especially for 3PL companies who are unable to access a suitable task force that can take care of different regulations.

  1. Lack of Collaboration

Transportation providers and carriers play an important role in supply chain operations, but the management often overlooks the mundane side of physical delivery and transportation. The lack of cooperation between shippers, carriers, and end customers may have a negative impact on the proper functioning of the supply chain.

  1. Meeting the Specific Demands of the Shippers

This is a huge difficulty for 3PL providers, as they may not be able to match the precise logistical needs of shippers in some circumstances. Shippers are frequently dissatisfied with some aspects of service, such as packaging, on-time delivery, and customer support.

  1. Lack of Infrastructure

In most developing countries around the world, this is a huge difficulty for 3PL enterprises. Poor road conditions, poor connection, insufficient air and seaport capacity, and a lack of developed modes of transportation such as trains, motorways, and an inland water transport system are just a few of the issues that may be encountered.

– Niranjan Kulkarni

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