Increased online shopping is likely to continue as a feature of consumer behavior even after the restrictions put in place due to the pandemic ease. 2 Even as brick-and-mortar sales are recovering, e-commerce is here to stay. Online shopping has seen consistent growth over the last few decades. The effects of the COVID-19 pandemic have amplified this trend, with consumers around the world taking more and more of their shopping online. However, as e-commerce expands quickly, 3pl fulfillment services businesses are starting to feel the strain as they deal with complicated client demands, rising prices, and heightened competition.
It may be possible for 3PLs to deal with these constraints and maintain their competitiveness in a setting that is becoming more difficult by implementing a multi-client fulfillment model. Comparing multi-client fulfillment to dedicated fulfillment models, analysis indicates that multi-client fulfillment has the potential to be less expensive3; however, putting this model into practice and realizing its advantages requires adjustments to service offerings, business structures, warehouse operations, and technology.
This essay looks at the rapidly evolving e-commerce sector and the difficulties that 3PLs encounter there. By using examples of how best-in-class e-tailers have set up their multi-client warehouses to satisfy customer expectations, cut costs, and create value throughout their organizations, it explains the advantages of multi-client fulfillment. The article offers strategies for 3PLs to take into account when putting into practice a multi-client fulfillment model as a conclusion.
The old 3PL business model is under threat due to the evolving e-commerce landscape.
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- The demand for 3PL services increased as a result of the rapid expansion of e-commerce—by 25 percent in 2020—but at the same time, the price to deliver these services has climbed and the e-commerce market has become much more competitive.
More consumers than ever are making purchases online across a wider range of product categories, placing pressure on 3PLs to meet customer demand across all product categories and necessitating more flexibility in warehouse inventory management, picking, and packing. Delivery speed is a crucial differentiation at the same time as buyers want ever faster delivery dates. In actuality, 25% of consumers are prepared to pay more for same-day delivery.
Since 2010, logistics costs have increased by about 5 percentage points, primarily due to the growing complexity of e-commerce logistics, including returns, the need for quicker fulfillment, and the requirement to expand capacity to keep up with demand.5 According to a McKinsey analysis, logistics costs currently account for 12 to 20% of e-commerce revenues, and it is anticipated that this percentage will rise in the future. In the near future, logistics expenses may reach 15 to 25% of e-commerce revenues due to the existing pressure on wages and rising final-mile costs.
The rising cost is also a result of the shrinking availability of warehouse space. Within the next five years, there is expected to be a shortage of about 190 million square feet of warehouse space, which could raise rental costs and put more pressure on 3PLs.6 Labor is also in short supply, as demand has grown by 12 percent a year since 2015. The COVID-19 pandemic made the labor scarcity worse, which led to post-COVID-19 wages in transport and logistics being four times higher than they were before the epidemic, compared to two to three times for the entire private sector.
A number of new participants are also entering the e-commerce business, including marketplace providers that offer fulfillment services and new technology-driven competitors. As a result, end-to-end solutions that provide “click-to-door” services must now compete with 3PLs. The delivery experience of clients is a crucial success component, so 3PLs are under pressure to match the products of these new rivals.
