3PLs join the race to automate

IN TODAY’S tight labour market, the fallback position for third-party logistics providers (3PLs) of meeting increased demand by hiring more workers is no longer feasible. Instead, as traditional barriers fade away, they are increasingly turning to automation, which can help boost productivity in order to deal with the more labour-intensive nature of e-com logistics, as well as rising consumer expectations in terms of delivery speed and convenience.

Traditionally, investment in automation has been hard for 3PLs to justify due to relatively long payback periods. 3PLs needed clients to commit to contracts of five years or more in order to consider investing in warehouse automation on their behalf. But now changes in the logistics landscape are leading 3PLs to automate their intralogistics – either for their clients, or for themselves in order to pitch an enhanced customer experience and secure competitive advantage. For example, DHL Supply Chain recently announced a $15 million agreement with Boston Dynamics for robotics solutions at DHL warehouses across North America.

This change of attitude among 3PLs has been made possible by developments in the market for logistics automation. Firstly, automated technologies are more scalable and flexible than ever before. Modular automation solutions – such as AMRs – can be more easily applied to a 3PL’s future customers, mitigating the investment risk. Secondly, innovative financing models are facilitating change. Automated systems can be leased rather than purchased outright. In this way, the 3PL can minimise the risk faced in an economic downturn. On the other hand, if things are looking up, the 3PL can lease additional capacity. The recent launch of a pay-per-pick AutoStore service is a great example and several AMHSA members offer RaaS (Robotics as a Service) models.

Growth in the 3PL market is being driven by e-commerce, as many e-tailers tend to rely on 3PLs to manage their supply chains. With figures from the global e-commerce platform, Shopify indicating that global e-commerce sales are expected to total $6.3 trillion this year, up from $5.7 trillion in 2022, things are only going in one direction. As such, increasing demand for automation from 3PLs has the potential to account for a significant portion of logistics automation sales over the coming years.

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