The Evolution of the 3PL Industry: You’ve Come a Long Way, Baby
The logistics industry may have a robust and lengthy history, but the third party logistics (3PL) sector is less than 40 years old. Even on that shorter timeline, the evolution of the 3PL industry has grown over the years to meet better customers’ changing and complex demands. Today, these multifaceted, agile organizations provide a solid backbone for shippers of all sizes and across all industries.
The trend of outsourcing logistics services to third parties gained momentum in the 1980s. Some attribute this shift to the Motor Carrier Act of 1980, which deregulated the trucking industry and allowed warehousing companies to more easily move into freight management. When information technology (IT) emerged in trucking and warehousing between the ‘80s and ‘90s, the streamlining of logistics processes, communications, and supply chains became even more prevalent.
Global logistics gained popularity in the 1990s as companies expanded their product reach into quickly emerging global markets. As these new global trade zones presented new challenges for companies that were used to the domestic market, 3PLs stepped up to the plate to help. Supply chains continued to increase in complexity, which heightened the need for more efficient transportation management. Both domestically and internationally, 3PL providers offered more integrated logistics services to help shippers address those complexities.
As the 3PL industry continued to evolve, certain providers opted for specializations like cold storage and refrigerated transportation. Using their own temperature-controlled facilities, vehicles, and unique capabilities (i.e. SKU mixing and special pallet configurations), providers helped food manufacturers save money on fuel, labor, equipment, and overhead—all while reducing those customers’ carbon footprints.
In the early 2000s, rapid technological advancements—including the expansion of the Internet—compelled 3PLs to begin providing “connected” supply chain solutions. Using technology platforms to better integrate inventory management, transportation and logistics processes, and order management, 3PLs extended their technology infrastructures to their own customers. In turn, those customers could avoid having to make big investments in technology infrastructure, software, and IT personnel. It was a win-win for everyone involved.
The 3PL market is still in expansion mode. As of 2014, the 3PL market in the U.S. alone was worth more than $157 billion and growing at a rate of 7.4 percent. Using advanced technology (including logistics software), 3PLs like Hanson Logistics are providing supply chain solutions to an expanding array of companies. Customers gain greater visibility and control over their supply chains and reap significant cost reductions along with the ability to focus on their own core competencies.
We’ve enjoyed being your best frozen food 3PL partner over the last 11 years, and we look forward to watching the industry evolve for years to come.