3PLs can profit from technology-driven shift in manufacturing strategy

© Kirill Ivanov

3PLs could see higher profit margins from the manufacturing sector this year – but while this will be a consequence of a shift in manufacturing strategies, providers will need to adapt quickly to the changes.

A white paper published recently by transport management company Cerasis suggests that more manufacturers will outsource more transport to 3PLs in a bid to increase efficiency and reduce costs.

“Strategies will focus more on consumer demand and experience, efficient workflows and partnerships with entities that may have previously been considered competitors.

“For example, more manufacturers are likely to begin the process of outsourcing services and transportation to 3PLs. In turn, this will dramatically reduce overall transportation costs for individual manufacturers, as well as reducing costs by increasing profit margins of national carriers, 3PLs, regional carriers and even local delivery services.”

The paper also notes that one of the key changes will be reshoring, with, in the US, a particular focus on factory shifts following new strategies from the Trump administration. This in turn will lead to a need for more truck drivers and procurement professionals – as well as greater demand for supplies into the US.

“Reshoring is expected to be a major driving force and one of the most important of the 2018 manufacturing trends,” says the white paper.

“Companies move operations that were previously moved overseas back to the US, and companies have already focused on the new administration’s legislation, especially the new tax bill, as a catalyst to move operations back to domestic grounds. As reshoring continues, more supplies will be needed, which has major implications for procurement professionals, as well as increased demand for new talent and more truck drivers.”

Another key factor for the supply chain industry in 2018 will be collaboration.

Not only has the e-commerce world driven demand for greater collaboration between retailers and between delivery companies, but manufacturers are also likely to seek partnerships, in a “new standard”.

“From 3PL partnerships to more information exchange between procurement and manufacturers, collaboration will effectively reduce costs, increase productivity, boost efficiency and reduce errors.”

Errors, notes the paper, must become a thing of the past.

“In today’s world, the slightest misstep will have extreme consequences, resulting in lasting harm to shipper reputations, manufacturing quality and customer service.”

Outside of direct impacts on the supply chain, there are wider trends which the logistics industry could see this year from their customers.

Innovation, in part driven by falling energy costs, new technology and reduced regulations, especially in the US, will see manufacturing change and adapt quickly to new ideas. The ‘Amazon effect’ will be particularly noticeable.

The paper says: “Any conversation about trends in American manufacturing for 2018 would be incomplete without touching on the growing importance and impact of ecommerce.

“Experts predict Amazon will be included in all retailers’ e-commerce business plans in 2018, whether those plans include selling products through the Amazon marketplace or identifying ways to compete with Amazon’s business model. Similarly, consumers will begin looking for other ways beyond basic browsers to make purchases … meaning a significant number of manufacturers, distributors, and retailers will be forced to begin reinventing omnichannel order fulfillment strategies.”

It adds: “Manufacturers will need to expand existing technologies to keep up with consumer demand. In addition, technologies will need to integrate to take advantage of the industrial internet of things, otherwise known as Industry 4.0. While the role of automated technologies will also be part of these trends in American manufacturing, considerations in automated manufacturing technology includes hundreds, if not thousands of smaller factors.

“Over the next two years, manufacturers are set to invest more than $250bn in Industry 4.0, and the use of technology to improve manufacturing will only increase.”

Robotics, blockchain and 3D-printing are also on the cards for this year, with the latter likely to have the greatest effect on the logistics industry, “serving as a bridge between traditional shipping operations and manufacturing itself”.

Blockchain is expected to help track data, boost customer service and reduce errors. Global spending on robotics, meanwhile, will be more than $67bn by 2025, with this year seeing the first real return on the investment.