By Patrick Burnson, Executive Editor ·
January 6, 2020
As noted in our three-part feature on outsourcing, E-commerce has become a growth driver in all 3PL segments and working with or against Amazon remains a hot topic, notes Evan Armstrong, president of A&A.
The consultancy estimates 2018 U.S. e-commerce logistics costs were $141.6 billion, with no immediate signs of a slowdown.
“E-commerce presents many opportunities for 3PL providers, and is also bringing omni-channel business with it,” says Armstrong. “Furthermore, it can result in higher margins for 3PL providers, and its volatile volumes play well for non-asset-based companies.
According to Armstrong, manufacturers and 3PL providers continue to strategize on how to work with or against Amazon, while some are following FedEx’s challenges after its recent decision to discontinue direct business with this mega 3PL.
“Another move to watch is Amazon’s purchase of customs broker and technology startup, INLT,” he says. “The addition of INLT allows Amazon’s marketplace to more effectively navigate customs clearance on international shipments.”
“The start of 2019 was soft for International Transportation Management (ITM),” says Armstrong. “Both air and ocean forwarding from China to the U.S. has decreased due to increased political tensions. It has also negatively impacted intermodal rail.”
He adds that within all ITM, “conservative shipper behavior” has led to an increase in air freight forwarding.
“Companies are waiting until the last minute possible before importing goods,” says Armstrong. By way of summary, here are a few other observations he wishes to share for the new year:
*Tariffs have led to some supply chain shifts to Southeast Asia (Vietnam, Taiwan, and India) and western Europe.
*Large companies like Samsung or Yeti can quickly pivot their supply chains from China to Vietnam. But heavily integrated supply chains in China, or smaller competitors are at a disadvantage. It’s harder for them to identify a new supplier and then design and test the potential supply chain.
*Inter-Asia is experiencing growth from China to Southeast Asia. Multimodal capabilities have become critical.
*While Southeast Asia is a growth opportunity, Mexico and Canada could become long term beneficiaries in the tariff disputes.
Shippers are looking for facilities in Vancouver and Toronto, Canada to side-step issues between China and the United States.
“One final note on risk mitigation is that 3PL providers can add value by proactively helping shippers address the negative tariff impacts,” concludes Armstrong.
January 6, 2020
About the Author
Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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