Unpacking the standards template6/27/2023 Forecasts suggest that there will be a shortage of around 190 million square feet of warehouse space within the next five years, which could lead to an increase in rental prices and put further pressure on 3PLs. The increasing scarcity of warehouse space is also contributing to costs. With the current pressure on wages and increased final-mile costs, logistics costs may increase to 15 to 25 percent of e-commerce revenues in the near future. According to McKinsey analysis, logistics costs currently represent 12 to 20 percent of e-commerce revenues, and this figure is likely to continue to grow. 5 Goldman Sachs Commodity Index (GSCI) Company filings. Logistics costs have risen by around 5 percentage points since 2010, primarily driven by the increasing complexity of e-commerce logistics, such as returns, the demand for faster fulfillment, and the need to increase capacity to meet rising demand. 4 “ How customer demands are reshaping last-mile delivery,” McKinsey, Octo“ Retail’s need for speed: Unlocking value in omnichannel delivery,” McKinsey, September 8, 2021. In fact, 25 percent of customers are willing to pay a premium for same-day delivery. At the same time, customers are expecting ever faster delivery times and delivery speed is a key differentiator. The explosive growth in e-commerce-by 25 percent in 2020-led to increased demand for 3PL services, but at the same time the costs to deliver these services have risen, and the e-commerce environment has become far more competitive.Ĭustomers are shopping online more, and for a greater number of categories than ever before, putting pressure on 3PLs to meet customer demand across product categories and requiring greater flexibility in warehouse inventory management, picking and packing. The changing e-commerce landscape is putting pressure on the traditional 3PL business model It concludes by offering approaches that 3PLs may consider when looking to implement a multi-client fulfillment model. It details the benefits of multi-client fulfillment by drawing on examples of how best-in-class e-tailers have organized their multi-client warehouses to meet customer demands, reduce costs, and generate value across their businesses. This article examines the fast-changing e-commerce landscape and the challenges that 3PLs face in this environment. However, successfully implementing and unlocking the benefits of this model requires changes to service offerings, commercial structure, warehouse operations, and technology. 3 Based on analysis of warehouse lease data and carrier rates. Analysis suggests that multi-client fulfillment has the potential to achieve cost savings when compared to dedicated fulfillment models. This article is a collaborative effort by Tom Bartman, Julian Dragendorf, Scott McConnell, John Murnane, and Isabelle Pan, representing views from McKinsey’s Travel, Logistics & Infrastructure practice.Īdopting a multi-client fulfillment model could help 3PLs address these pressures and allow them to stay competitive in an increasingly challenging environment.
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