Large companies doing DIY deliveries and the effect is has on 3PLs
Many large companies, such as Amazon and Wal-Mart, are creating programs to do their last mile deliveries of some products in-house and it has the potential to be a major disruption to the logistics and retail industries.
This is especially a potential game-changer for smaller 3PL providers like On Time Logistics that are trying to compete on a larger scale. We see both potential disadvantages and advantages to larger retailers like Amazon trying to DIY their last mile deliveries.
Potential Disadvantages for 3PLs
3PLs may lose business
We don’t see this being a huge issue yet, but with larger retailers doing more of their own deliveries, there is a strong possibility that the regional 3PL companies will lose business because their biggest client was one of the larger retailers that turn to DIY logistics.
False expectations for pricing
If you are an Amazon Prime member, you are familiar with the free two-day delivery they offer. Because this delivery is paid for in advance, it often seems like other delivery services are overpriced to some consumers. As Amazon increases its delivery options, they will be trying to compete on prices and economy of scale may allow them to offer services as a lower rate than what most 3PLs are able to provide—even if the 3PL rate is reasonable and even discounted.
Amazon as the ‘guinea pig’
When big companies like Amazon try new ideas, this allows them to be the guinea pig so to speak. Smaller companies can learn from the mistakes and also learn what was done well. Larger companies like Amazon and Walmart are more able to absorb the costs of a failed venture than a smaller logistics provider.
New challenges for 3PL providers
The new standard for delivery is providing new challenges for 3PL providers. Small 3PL businesses are given the chance to utilize their specific niche services and shine in a time where the need for them is high. This is giving them the opportunity to provide better services to consumers and help smaller companies tackle the Amazon effect.
Also, as a counter idea to the smaller 3PL companies losing Amazon business, the rise in interest from smaller retailers in adding delivery services so they can compete with Amazon provides new potential customers.
Let us help
According to Supply Chain Dive, the three things to look for in a third-party logistics provider is experience, technology and culture. Here at On Time Logistics, we work hard to provide excellent and efficient services to our clients.
If you are looking to compete with Amazon and need a reliable 3PL, contact OTL today and let us help you!