The art of designing and managing supply chains, facilities, warehouses, transportation and distribution for organizations that don’t specialize in logistics management, contract logistics encompasses a broad range of services that allow companies to do what they do best: grow their own businesses.
By offloading some or all of their logistics operations to a reputable and reliable third party, companies are free to focus on this important task without worrying about whether their products get to end customers safely, securely and on time. More companies are engaging contract logistics providers to help them achieve these and other goals.
Here are six contract logistics trends that all shippers should be watching in the year ahead:
- More companies are realizing the value of contract logistics. Citing Ti’s Global Contract Logistics 2022 Report, AJOT says the global contract logistics market expanded by 8.7% in 2021 and that the sector will post a compound annual growth rate (CAGR) of almost 5% over the next four years. The boost in e-commerce orders is a key market driver, according to AJOT, which also points to the post-pandemic manufacturing recovery and uptick in overall global trade as two additional drivers of the contract logistics market growth. In its own report on the contract logistics sector, Allied Market Research says the market generated $243.6 billion in 2021 and that it’s expected to reach $505.3 billion by 2031.
- Contract logistics providers continue to expand their menu of offerings. With deep expertise in contract logistics, companies like DB Schenker continue to expand the menu of offerings that shippers can choose from. For example, DB Schenker covers all stages of the supply chain—from supplier to customer delivery, reverse logistics to aftermarket support and healthcare services to cloud logistics. The company works to deliver relevant, efficient solutions that also incorporate the latest logistics and transportation technology.
- And, they’re also expanding geographically. Knowing that their customer bases are evolving and moving into new geographies, contract logistics providers are continually finding new ways to help support that expansion. One example of this is DB Schenker’s new site in Prague next year. According to AJOT, the highly-automated fulfillment warehouse will expand the company’s logistics capacities and shorten delivery times for shippers. Along with retail operations, the new distribution center will also manage B2C e-commerce activities, including an extensive value added services area addressing the demand for personalized products requested by consumers. “DB Schenker has experienced outstanding success since its entry into the Eastern European market,” DB Schenker’s Ingo Brauckmann told AJOT. “The new automated fulfillment center, will enable us to expand our capacities and improve our performance, thereby setting the stage for further growth in the region. We are now ready to expand and improve the services we offer to our rapidly growing customer base.”
- The trend of nearshoring. After a few years of so many challenges that have affected manufacturing offshore more and more companies are embracing ‘nearshoring’, which involves producing items closer to home, and is a reversal of the decades-long trend of offshoring manufacturing, often halfway across the world. This also links to ‘reshoring,’ where companies relocate production to their own nation.
- When customers want to simplify their logistics, contract logistics providers are there to answer the call. A recent Accenture survey found that 91% of logistics providers understand that their customers want end-to-end logistics services handled by a single provider. By their very nature, contract logistics providers serve as a single point of contact for all things related to logistics—and more. As they rethink their logistics setups and begin planning for the future, more organizations may seek out ways to shed the hassle, cost and complexity of their logistics operations and turn to contract logistics providers for help.
- As supply chains are reimagined, more of them may incorporate contract logistics services. Many companies have spent the last few years putting out daily fires and focusing on the roadblocks standing in their way. Now, more of them are broadening their horizons and thinking more strategically about their futures. “More and more companies are beginning to rethink and reimagine their current supply chains—seeking new strategies and frameworks to enable the next 10 years of growth,” Accenture’s Mike Reiss points out. “This [is a pivot] from a necessary set of functional capabilities, sometimes loosely stitched together, into a new strategic competitive advantage that’s laser-focused on the customer, resilient and sustainable by design.” As more companies rethink their logistics setups and find new ways to manage them, expect to see more contract logistics providers stepping in to help.
These are just some of the key trends that are expected to help shape the contract logistics space in 2023 and beyond as more companies outsource their logistics functions to reliable, reputable third-party providers.