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Third-party logistics (3PL) providers have been the cornerstone of retail supply chains for decades. 3PL providers are defined by the Council of Supply Chain Management Professionals (CSCMP) as “a specialized company that handles the outsourcing of much or all of a company’s logistics operations.”
Today, the term has become nearly synonymous with any company in the logistics industry that operates planes, trucks, or warehouses.
But the rapid growth of e-commerce has given rise to new services and business models, challenging the 3PL model. Traditional 3PL relationships are well suited to route orders from a factory to a distribution center to a brick-and-mortar store, but they’re typically ill-equipped to bring parcels to customers’ homes.
Historically, retail supply chains had a single destination: stores. And even the largest retailers only had a few thousand of them — Walmart operates 5,000 stores in the US and Puerto Rico, for instance — allowing retailers to rely on a handful of 3PL providers that had warehouses near their brick-and-mortar locations.
But the rise of online shopping has turned that model upside down. Now, retailers must deliver their products directly to the homes of the more than 300 million consumers in the US — and increasingly within only a few days — a far greater challenge than delivering directly to stores.
Meeting this challenge requires a higher number of supply chain partners than before, meaning products often change hands several times before they arrive at a consumer’s door. To effectively manage this complex new environment, some retailers are opting for one of two approaches to supply chain management: fourth-party logistics (4PL) providers or in-house supply chain management.
In Future Business Models in Logistics, Business Insider Intelligence details how the rise of e-commerce as a core consumer shopping channel has fundamentally transformed retail supply chains. We examine the primary two business models — 4PL and in-house supply chain management — and what’s driving retailers to adopt these new models. Lastly, we offer recommendations for how legacy 3PL providers can adapt to meet the changing demands of retailers in the age of e-commerce.
The companies mentioned in this report are: Accenture, Deloitte, McKinsey, CH Robinson, Penske Logistics, UPS, DHL, XPO Logistics, JB Hunt, Kuehne and Nagel, Amazon, Alibaba, and JD.com.
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