For over 20 years, Armstrong & Associates and Penn State’s John Langley and his associates have examined the logistics service provider (LSP) industry. They have become the “go-to” experts for the latest LSP trends and innovations. Two years ago, however, there was a new entry into the field of LSP research – 3PL Central: and they recently issued their 2022 report on trends and conditions in the industry. The report is focused solely on the LSP industry and does not include proprietary or private warehouses.

The research covers more than 30 industry-specific topics, but I will try to summarize the most important. The findings were divided into five major categories.

• Growth Opportunities
• Labor Shortage
• Space Limitations
• Technology Integration
• Success Management

The current environment indicates that the average individual LSP serves 3.5 industries, up from last year, and an indication that they are expanding their offerings. Pharmaceuticals and nutraceuticals showed the greatest growth.

While B2B is the major fulfillment activity, there is a continuing shift to B2C and eCommerce.

Inventory handling, order picking, packing, and shipping are still the primary services, but it was interesting to note that both returns management and repacking and refurbishing have grown, no doubt a product of increased eCommerce activity.

Growth Opportunities

Much of the Covid-generated eCommerce carried over into 2021, and nearly 85% of the respondents experienced volume growth. Those LSPs offering omnichannel fulfillment saw nearly 92% growth, ECommerce definitely is the key driver in growth, and diversification has become critical. New customer acquisition has been dramatic in many cases.

Good performance and customer loyalty have been key factors in growth, with 76% of the new business coming from referrals, The majority of the respondents consider the acquisition of new customers the single largest 2022 opportunity. They see their biggest challenges as operational efficiency, managing costs, and finding and retaining workers.

Labor Shortage

Fifty percent of the respondents cite labor as 40% or more of total costs. 18% say it is as much as 60-75%. Hiring and controlling turnover are major challenges. The labor shortage is well known and there is no need to repeat it here. However, with the anticipated increases in business, LSPs will face increasing difficulties in maintaining adequate staffing.

Space Limitation

Warehouse vacancy rates are at all-time lows and LSPs are struggling to maintain adequate facilities. When warehouse space is available, it has become more expensive. Many warehouses are at 80-85% space utilization and are finding drops in efficiency, 55% of the respondents are operating above 90%, compared to 50% last year. Along with labor, space will continue to be problematic for most LSPs.

Technology Integration

As the industry continues to grow, technology will become increasingly important. This year, warehouse management systems*, barcode scanning, and order management systems were the most frequently implemented technology. Other investments were in TMS, Median Yard Management, and 5% were installing robotics.

Success Measurement

Metrics and measurements are key to managing a successful business, and this is particularly true with LSPs. The report lists 9 key metrics, with the three most important being revenue generated, order volume, and worker productivity.

In closing, the report suggests that the outlook for 2022 “remains optimistic for both customer acquisition and order volume growth.”

One of the curses of the internet is that we are inundated with ads, white papers, and podcast announcements; and it is difficult to keep up with the things in which we are interested, let alone those things we don’t really need to know. I recommend we devote a few minutes to this report. It is much more informative than last year’s and should hold interest for both LSPs and their customers. The entire 34-page report may be found on the 3PL Central website.

*The report contains a considerable amount of helpful information on WMS.