Executive Briefings

How 3PLs are Responding to the 'Amazon Effect' and Other Market Trends

The Amazon effect is raising consumer expectations for delivery services - expectations that logistics providers are struggling to meet without degrading margins, says Robert Lieb, supply chain management professor at Northeastern University. Lieb discusses this and other trends revealed in the annual survey of global 3PL CEOs.

Amazon has really ratcheted up consumer expectations in terms of service, but it is doing so without charging customers the true costs of that service, says Lieb. “Clearly, Amazon is not covering its transportation costs,” he says. “The shortfall is dramatic, but Amazon appears willing to pay the costs at this point in order to increase market share.”

Trying to compete with these service levels while still protecting operating margins has thrown certain parts of the logistics industry in turmoil, Lieb says. “The Amazon effect is putting more pressure on logistics companies to look at faster means of delivering products, but that has implications for transportation, warehousing and inventory costs.”

Competition from Amazon also may force logistics companies to consider options for same-day service, Lieb says. “The questions will be whether they can offer such a service in the market and still make money.”

A quarter of 3PL CEOs interviewed in this year’s survey say Amazon is operating like a 3PL and 70 percent say they consider Amazon a marketplace competitor, says Lieb. “Amazon is a force they have to deal with.”

Overall, 2014 has been a very good year for 3PLs, Lieb says. The CEO survey reveals that 3PLs in North America expect to see annual revenues increase by more than 10 percent in each of the next three years. 3PLs in the European market project increases of 7 percent per year, while logistics providers in the Asian Pacific marketplace anticipate growth rates in excess of 16 percent each year over the next three years, he says.

To view the video in its entirety, click here

Amazon has really ratcheted up consumer expectations in terms of service, but it is doing so without charging customers the true costs of that service, says Lieb. “Clearly, Amazon is not covering its transportation costs,” he says. “The shortfall is dramatic, but Amazon appears willing to pay the costs at this point in order to increase market share.”

Trying to compete with these service levels while still protecting operating margins has thrown certain parts of the logistics industry in turmoil, Lieb says. “The Amazon effect is putting more pressure on logistics companies to look at faster means of delivering products, but that has implications for transportation, warehousing and inventory costs.”

Competition from Amazon also may force logistics companies to consider options for same-day service, Lieb says. “The questions will be whether they can offer such a service in the market and still make money.”

A quarter of 3PL CEOs interviewed in this year’s survey say Amazon is operating like a 3PL and 70 percent say they consider Amazon a marketplace competitor, says Lieb. “Amazon is a force they have to deal with.”

Overall, 2014 has been a very good year for 3PLs, Lieb says. The CEO survey reveals that 3PLs in North America expect to see annual revenues increase by more than 10 percent in each of the next three years. 3PLs in the European market project increases of 7 percent per year, while logistics providers in the Asian Pacific marketplace anticipate growth rates in excess of 16 percent each year over the next three years, he says.

To view the video in its entirety, click here