No one saw e-commerce at this scale coming this quickly. Even with vaccines and eventual “herd immunity,” many workers won’t be returning to offices in previous numbers. Many brick-and-mortar businesses won’t, apart from essential safety stocks, be ordering full truckloads of palletized inventory shipped to centralized facilities as they did pre-COVID-19.

Many more supply chains will move goods in a continuous flow, pulled by demand rather than pushed out the door for storage and distribution over time. Orders will originate with many more customers, in smaller sizes and quantities, for time-definite delivery.     

Now third-party (3PL) and fourth-party logistics (4PL) providers find themselves thrashing in the deep end of the pool, with sophisticated big-box and brick-and-mortar retailers that are heavily invested in online fulfillment. At the same time, major parcel carriers, local and regional less-than-truckload (LTL) providers and last-mile delivery services are engaging directly with innovative e-retailers through carrier or customer portals. 

Where’s the sweet spot for logistics providers, in either traditional freight or omnichannel parcel? How do they gain and hold market share in this kind of environment? The key may be a new set of mainly technology-based capabilities for managing multi-shipper, multi-carrier and multi-region supply chains, whether across U.S. states or in the fast-growing cross-border e-commerce segment. 

“3PLs were set up to operate in a certain way — they get the order data, plan through the pick operation, and two or three days later the item ships,” explains Mark Picarello, managing director of parcel-shipping software provider Pierbridge Inc. “Now they have to ship the same day, with specific delivery requirements, using different carriers and modes. They have to manage packing for sustainability, in addition to making sure they get the best transportation cost, and that contents don’t shift and get damaged. They have to manage all of those aspects and do it quickly.”

Market trends are moving just as fast: Retail research firm Coresight Research reports more than 8,700 brick-and-mortar retail closures in 2020 versus 3,300 openings, and another 10,000 closures forecast for 2021. Digital Commerce 360 highlights a 44% jump in e-commerce sales in 2020, largely COVID-19-related, capping off a long-term growth trend since the great recession of 2008-09. Sales have risen from $523 billion to $861 billion over 2018-20, while the e-commerce share of total retail sales has grown by half, from 14% to 21%.

3PL relationships with retail customers are also evolving as requirements change or new opportunities open up, Picarello says. In addition to traditional business handling fulfillment out of their D.C.s, asset-light 3PLs are now turning to cloud-based platforms as an infrastructure for supporting clients with visibility, exchanging order data, and even leveraging freight from multiple customers to simplify carrier deliveries at better rates. 

“Historically they might have tried to do it with a single customer,” he adds, “but because of the increase in parcel and the ability to do that last mile to the consumer, they’re now looking across their customers to be able to consolidate shipments on a truck and drop-ship into a particular location, rather than shipping them parcel direct, to save themselves and their customers money.” A non-asset 3PL customer in Canada, for example, has onboarded 15 of its shippers onto the platform and monitors their combined activity to leverage favorable negotiated 3PL rates with carriers. 

Some Goods Never Rest

Another critical piece of 3PL infrastructure is access to a true warehouse B2C fulfillment operation. Traditional warehouses have grappled with how to move a continuous, cross-docked flow of smaller items and orders in large volumes through a conventional warehouse management system (WMS). Often the process entails deconsolidating pallets and cartons, staging the contents in open bins, deploying an A.I.-optimized “wave” pick configuration with more workers than usual covering zones within aisles, and optimizing packaging to take less time, use less cardboard, and reduce dimensional weight to keep parcel freight cost low.

Retailers, 3PLs and independent warehouses face a similar dilemma: uncertainty about where to direct future investment. B2C fulfillment is by far the fastest-growing segment of their businesses, particularly as the pandemic continues, but is still typically less than 20%. Traditional B2B warehousing has been volatile during COVID-19; the long-term trend has been a decline relative to e-commerce. Yet signs of pent-up consumer demand and restocking, with $1.9 trillion in stimulus funding on the way, suggest a partial return to normal. Will more people return to the workplace or keep working from home? Will more physical stores reopen or be repurposed into fulfillment or in-store pickup centers?

Grafting e-commerce, shipment visibility and other features onto a legacy WMS can be a seven-figure proposition, involving multiple partners, in some cases taking months to deliver, says Martin Hespeler, vice president-sales (Americas) for Melbourne, Australian-based Microlistics Warehouse Management Systems. (It’s a unit of logistics software solutions provider Wisetech Global, of which Pierbridge is also a part.)

The Warehouse Comes of Age

Hespeler contends that an explosion in new transportation and technology options presents important opportunities for retailers and 3PLs going forward. Independent grocers, for example, could leverage tech efficiencies and their combined buying power through a 3PL to compete in more categories with national chains. Similarly, he cites a recent Amazon decision to open niche regional D.C.s in the southwestern U.S. to meet e-commerce demand for fitness watches, apparel and other gear, arguing that retailers could instead use the regional expertise and D.C. capacity of a 3PL.

At the other end of the transaction, the last mile is becoming even more competitive for all types of deliveries. Apart from a wide choice of new local and regional couriers, there are creative internet startups like Atlanta-based Roadie, a crowd-sourced same-day delivery service. Such service options will have growing importance for smaller competitors against Walmart, for example, which now manages last-mile costs by paying store associates extra to deliver orders along their routes home from work.

“In the old days, only a limited number of large carriers handled parcel delivery and consolidation,” Hespeler says. “Now the supply chain has matured to where the shipper has many options, and because of this bypass the retailer is able to keep costs lower and offer a better deal.”  

Freight Without Borders

Shipment visibility becomes all the more critical when supply chains cross borders. As COVID-19 prompted sheltering in place in 2020, luxury and other brands that had resisted e-commerce succumbed, while logistics competition and payments innovation extended shopping aisles and time-definite delivery worldwide.

A 2021 market outlook report by fintech research firm Kaleido Intelligence shows cross-border e-commerce transaction volume growing to $26 billion in 2020, from $22 billion in 2019. Kaleido forecasts 14% annual growth in regional growth in cross-border sales through 2025, versus 9% growth for domestic e-commerce. Europe and Latin America are the strongest intra-regional markets, with cross-border transactions accounting for more than a third of total online sales. China is expected to remain the largest source market, including to mainly domestic markets such as Japan, Germany and the U.S. Online marketplaces like Amazon, eBay, AliExpress and Mercadolibre made up 70% of total cross-border sales in 2020, relative to individual retail shopping sites.

Multi-carrier shipping platform SmartFreight, another Wisetech company serving the Australian, New Zealand, U.K., EU and South African markets, saw firsthand the full impacts of global events during the past year. “First Brexit hit, then COVID hit,” recalls company national partnership manager James Kinniburgh. “Stores were shut, yet people were spending. Australia, New Zealand, Ireland, South Africa were all closed; no one was shipping anything. No one knew what to do or how their systems were going to work.” 

Then, just as abruptly, markets rebounded, as e-commerce and volume orders for medical and cleaning supplies, household and personal care items, electronics and home furnishings exploded. Australia and New Zealand came back more quickly than other countries due to their dispersed populations and the success of their COVID-19 treatment programs.

“Suddenly we were seeing huge pent-up demand and consumer confidence,” Kinniburgh says. “Large clients had put everything on hold for 18 to 24 months, and now needed capacity to move product, operating efficiency, and space to store it all.” 

As 3PLs explore strategies to manage multiple shippers and carriers across multiple regions in their omnichannel B2C services, it will be visibility, convenience and consumer choice over the end-to-end move that determine competitive advantage. Technology will be a core feature, with the broadest, most scalable and affordable options now found in the cloud.