Ti recently ran a survey of 71 3PL professionals to gain a better understanding of the current state of the logistics market.

Are you currently experiencing increased pressure on margins?

Overwhelmingly, 90.0% of respondents stated that they were currently experiencing increased pressure on margins.

The main factor driving this increased pressure on margins is increased costs, with 41.0% of respondents citing this factor. This is followed by increased competition and stabilising consumer demand.

Given the current economic climate at the time of writing, these results are unsurprising; costs for 3PL’s have been increasing across the board as record-high inflation persists. 3PL’s are also having to contend with a new wave of fulfilment competitors chasing e-commerce market share – from single location warehousing companies that cater to fulfilling orders for online retailers and Amazon preparation and fulfilment services, to multi-location providers offering on-demand warehouse solutions.  Furthermore, consumer demand is flattening, particularly following the post-covid normalisation of e-commerce and persistent macroeconomic challenges.

Looking forward, global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023 as the rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. However, although economic risks into 2023 remain tilted to the downside, a stronger boost from pent-up demand or faster falling inflation remains entirely plausible. Economic activity may also be aided by China’s economic reopening, although severe health outcomes in Asia’s largest market could hold back recovery. As such, the majority of respondents believe pressures will intensify over the next 12 months, with a negative impact on margins.

Survey respondents were also asked to outline their key investment focuses in the next 12 months. Key focus areas for 3PLs included technology, automation, and digitalisation. In a climate with increasing competition and shifting consumer demands, technology and digitalisation investments will continue to offer a competitive advantage for 3PLs. GXO serves as a prime example of this, having centred its unique value proposition around the fact that its operations are highly automated. Furthermore, it is believed that somewhere between 60-80% of warehouses are not automated, meaning there is still massive room for technology adoption. Particularly as visibility becomes increasingly vital across the supply chain, technology spending is sure to increase in the coming years.

Author: Nia Hudson

Source: Ti Insight

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