Extensiv’s annual 3PL Warehouse Benchmark Report finds 70% of 3PLs face higher labor costs

Extensiv, a provider of omnichannel software solutions for warehouse, inventory, and order management, has announced the results of its fourth annual Third-Party Logistics (3PL) Warehouse Benchmark Report. The report is said to be the industry's only benchmark report focused exclusively on the 3PL warehouse industry.

This year's report revealed record fulfilment times (54% fulfilling in less than one hour), more available warehouse capacity (65% operating under 90% capacity), and a more tempered outlook for 2024. 

The Third-Party Logistics Warehouse Benchmark Report aggregates data from more than 240 3PL warehouses and provides insight on more than 30 industry-specific topics. The report builds on prior data and provides year-over-year changes and trends to help warehouses understand market growth opportunities and industry challenges.

 Key takeaways from the 2023 report include:

●  Growth Slowing. While a majority of 3PLs still show positive order and profitability growth, a larger group of 3PLs are now seeing flat or declining profits as the economy fluctuates. Although approximately a third of 3PL respondents showed more than a 25% increase in order volume growth year over year and 42% indicated an increase of up to 24%, 22% of respondents either remained the same or saw a decline. The number of 3PLs with no change or declining order volumes more than doubled in 2023 compared to 2022.

● Available Capacity. More warehouses report being under capacity or under-utilized than in the prior three years, opening up the opportunity to bring on more clients, diversify services, or partner with other 3PLs to create geographically dispersed 4PL fulfillment networks. In 2021, 55% of warehouses operated at 90%+ capacity, growing to 59% of 3PLs in 2022. In 2023, the percentage of warehouses operating at 90%+ capacity nearly halved to 33%. This available capacity will lead to more aggressive customer acquisition efforts in 2024.

● Expensive Labor. Although companies report slightly more availability, the workforce comes at a higher cost this year, leaving 3PLs to focus on ways to optimize worker productivity and time to contribution. Seventy percent (70%) of respondents cited increased labor costs over the last year, and over half (53%) indicate that labor makes up more than 40% of overall business costs.

● Cash Flow. With lengthy invoice creation cycles, high-interest rates, and customer time to payment slowing, 3PLs are seeing more pressure on managing cash flow and less ability to invest for the future. Those who experienced high profitability growth capitalized on process efficiencies and, on average, were 187% more likely to spend fewer than 8 hours monthly on billing and invoicing.

● Faster Fulfillment. This year showed the fastest time to fulfill versus any previous year, highlighting the need for brands to expand shipping cut-off times for end consumers. Seventy-six percent (76%) of all orders were fulfilled in less than three hours, and participants who reduced fulfillment time to 90 minutes or less were, on average, 1.5 times more likely to experience high and medium profitability growth.

Other key areas of the report include an outlook for 2024, as well as trends and metrics related to growth opportunities, technology adoption, reporting and analytics, and billing and invoicing. Despite increased concerns about growth amidst increasing labor costs, cash flow constraints, and rising pressure around fulfillment efficiency, 3PLs are approaching 2024 with innovation and optimism.

“Although some 3PLs have seen headwinds in 2023, 86% still consider adding new customers as their top opportunity in 2024,” said Rachel Trindade, chief marketing officer at Extensiv. “Given pressures related to warehouse capacity and increasing consumer expectations for fast and free delivery, we’re not surprised that the percentage of 3PLs looking to leverage a 4PL network increased by 82%. As broader economic and market concerns continue to loom, respondents’ top challenges of managing costs (48%), finding new customers (36%), operational efficiency (32%), and finding and retaining workers (32%) speak to the ongoing disruption–and opportunity—for 3PLs as they look to the future. With this newest edition of the 3PL Warehouse Benchmark Report, Extensiv equips 3PLs with core benchmarks for planning and best practices to position themselves for growth and profitability as they head into the new year.”

To see more critical 3PL trends, download the 2023 Extensiv Third-Party Logistics Warehouse Benchmark Report here. For additional insight, listen to an on-demand discussion of the results.

Extensiv, formerly 3PL Central, partners with warehouse professionals and entrepreneurial brands to transform fulfillment operations. The company has a network of more than 1,500 connected 3PLs and offers a suite of integrated, cloud-native warehouse management (WMS), order management (OMS), inventory management (IMS), and integration management software.