The Opportunity for 3PL Providers to Transform Shipper and Carrier Partnerships with AI

Written by Puneet Mehta on Mar 23, 2022

As consumer behavior rapidly changed during the pandemic, accelerating the shift from in-person to online shopping and the expectation for speedy shipping, the Third-Party Logistics (3PL) industry has boomed. 63.5% of shippers now outsource their warehousing activities to 3PL providers1, 81% outsource domestic transportation2 (which is the most common services outsourced1), and 44% outsource freight forwarding3. 3PLs are an essential component of moving goods through the supply chain and ultimately, moving the economy forward. 

The 3PL market was valued at around USD 1trillion in 2020, and is expected to reach more than USD 1.75 trillion by 20264. In 2020, C. H. Robinson5 and  XPO Logistics generated over 16.2 billion U.S. dollars in revenue alone6, and this is on the rise. In February 2022, XPO Logistics reported its highest quarterly revenues ever7.

3PL is a large business, and with that, it has become an aggressive and highly competitive one. With 58% of shippers indicating that they are increasing their use of outsourced logistics services8, capturing this growing market and deepening partnerships with shippers and carriers are top-of-mind for both enterprise and small 3PLs. 

The evolving 3PL competitive landscape and the increasing role of customer experience

The domestic freight industry is complex. According to a description from one account, “Truck freight is also one of the least efficient industries: It’s chaotic, highly fragmented, regional, and, plainly, a logistical nightmare9.”

There are currently 1.6 million carriers, 95% of which operate 10 or fewer trucks, 3 million drivers, and an estimated 100K shippers9. Moving goods through the supply chain is only made more complex by factors such as an industry-wide driver shortage, global supply chain shortages, rising end-customer expectations for quick delivery, and different requirements for vehicles such as refrigeration or flatbed.

To power this industry, smaller, more specialized 3PLs are competing with the likes of FedEx Supply Chain Services, UPS Supply Chain Solutions, Amazon Marketplace and Walmart Marketplace. And while getting costs down is crucial, customer experience is now becoming an important competitive differentiator.

Changing CX expectations of shippers and carriers

Expectations for good customer experiences are high across every industry, and shippers and carriers are no different. In addition to efficiency and lower rates, customers in this industry expect effortless, personalized interactions, proactive care, and 24/7 support, just like customers of an airline, meal-kit, grocery delivery or eCommerce company.

Research has shown that 73% of shippers interact with their 3PL on a daily or hourly basis8. Given that there are at least 100K shippers as mentioned previously, the number of contacts from customers 3PLs are getting is mindblowing. Couple this with the rising expectations and the workforce shortage in the wake of the great recession, and it’s clear that 3PLs can no longer rely on a human-only workforce. The need to adopt tools like conversational AI to scale personal 1:1 interactions will be the key to competing on customer experience.

The new standard for customer experience and the impact of AI

To capture the loyalty of in-house logistics personnel at fleet operators and the growing number of enterprise and small shippers, 3PLs can leverage AI to automate interactions across the entire journey. Some of the most promising applications of AI for 3PLs include:

  • Quote Automation: Historically matching carriers with shippers was a very inefficient process often conducted over the  phone or email and populating data including truck type, origin and destination, and seasonality in excel sheets. The process of providing quotes, though, is evolving. In fact, in its earnings release, XPO Logistics reported that “70% of its brokerage orders were created or covered digitally10.” 3PLs can leverage AI-powered assistants to provide immediate quotes on email, in-app or via chat and match shippers with carriers in seconds with zero human effort. These virtual agents can also answer questions that arise during the process to increase conversion rates.
  • Shipping visibility: AI-powered assistants can pull real-time status and location of shipments, 24/7, and identify any threats to promised delivery and pick-up times.
  • Proactive care: By tapping into back-end systems, conversational AI agents can anticipate issues and proactively communicate with both shippers and carriers before they even know an issue exists. If a shipment is delayed, for instance, 3PLs can automatically alert businesses which items failed to ship the previous day and why, which helps foster a partnership based on trust.
  • Driver assistance: AI agents can communicate with drivers in real-time to provide updated route information. If the driver experiences an issue, they can chat with an agent for roadside assistance, troubleshooting, and more.
  • Business planning and operations: AI agents can forecast future orders, manage deliveries and schedule pickup and drop offs. These agents can also send invoices, respond to questions and provide information on billing.

AI Agents will drive the 3PL industry forward

The burgeoning eCommerce market is becoming more diverse. Each company has its own needs and requirements, offers personalization to their customers, and expects the same type of treatment from the businesses that it does business with.

Simply coordinating shipments over phone and email is no longer a viable option. It will be the 3PLs that have an advanced technology stack, including AI-powered virtual agents, that will build those all-important long-term, profitable relationships with both shippers and carriers. With AI-powered agents streamlining processes and automating mundane tasks, the human workforce will be able to manage more complex issues and tasks, providing the best possible customer experience.

Discover the return on investing in AI for customer service for your 3PL business! We’ve crunched the numbers for you – check out our ROI calculator to learn more.