The growth of online shopping, direct-to-consumer shipping, and multi-channel distribution demands have led to big changes in the 3PL industry – to the point where many industry observers, such as Robert Bowman in a recent article for Forbes, noted that the number of 3PLs overall is shrinking due to a rising trend of mergers and acquisitions. And though the number of 3PLs is declining, the competition is fiercer than ever with greater pricing pressures and increased expectations to handle more complex services: In response to demands such as direct-to-consumer shipping and value-added services related to multi-channel needs, 3PLs must be able to support piece/picking/shipping rather than case-level picking and shipping. To stay ahead, you need to prove to customers that you are more than a commodity business, especially in the age of multi-channel operations.
Being everywhere and everything for a customer doesn’t even necessitate owning physical locations and infrastructure, as growth in 4PLs would suggest. For companies with well-developed logistics processes that have maximized their value in terms of control and scale, the 4PL model provides an opportunity to expand that value by playing on a much larger field, providing a customized solution that fits specific customer needs and can accommodate cultural or regional differences. Whether a 4PL or 3PL, successful companies are those that have a strong supply chain software infrastructure that allows them to be everywhere and everything to their customers.
Where do you start?
As a 3PL offering warehousing and distribution services, having a strong warehouse management system (WMS) can be a competitive advantage that helps you secure new customers and keep them long-term, with the ability to adapt to their needs and provide value-added services.
In addition to best practices for receiving, put-away/flow-through, inventory management, order processing, replenishment/ pick/pack, loading and shipping, and more, let’s look at specific ways a flexible WMS can deliver value to a 3PL’s omni-channel operations.
On-board new customers – fast
The process of taking on a new customer doesn’t need to be a hassle. Workflows can be very different for different industries and customers, but a flexible WMS can help you on-board a new customer in days, not months. A configuration wizard is one way that makes it easy to configure the data elements for your new customer by applying preset rules by industry, plus the rules unique to that particular customer, such as billing specifications. Now, you can manage even the most complex distribution requirements and enforce the exact supply chain processes your customers require.
Manage all types of customers – and keep your sanity
Getting fulfillment right is much more mission-critical in a multi-channel setting compared to a traditional brick and mortar setting because it represents significantly higher costs: up to 18-20 percent of online-order revenue, which is about four times the proportion for traditional channels.
These higher stakes mean you’re expected to perform different tasks based on specific industries and customers. For instance, your retail customer may want you to capture style, color and size item attributes. Your food customer may want to know lot number and “best before” dates. Ensuring the accurate tracking and handling of each demand can be a full-time job itself.
A WMS makes this process easier by allowing for dynamic item configuration on a client-by-client basis, giving you the ability to have any number of customers tracking multiple inventory attributes. It can even enforce the exact supply chain preferences that each of your customers require – down to their customer’s and supplier’s levels.
Just as important, a WMS can help accurately and efficiently track all billable activities in the warehouse, leading to easier invoicing and a real-time view of a customer’s account. And because labor is such a significant cost, a WMS can manage workforce efficiency by tracking productivity against industry standards. This gives you a better understanding of where your labor costs are, not only for developing employees but for billing customers more precisely to deliver better profitability.
Your services aren’t a commodity – so prove it
In today’s market, you know you can’t survive without distinguishing yourself and you need to prove it to your customers by providing extended services that require infrastructure to support the diversity of products, clients and needs. But the challenge becomes finding the most cost-effective technology infrastructure that can adapt to the expanded range of services you provide, tracking various types of inventory and item attributes.
With a WMS, you can create new offerings and workflows to provide value-added services relevant to a multi-channel market, including greater inventory visibility; the flexibility to dynamically schedule deliveries and select shipment methods; manage delivery directly to the customer along with back-end tracking and reporting; and seamless management of online orders and returns alongside existing retail channels. Instead of customizing a solution you have, a flexible WMS lets you meet customer needs for quality, safety and traceability/genealogy.
The future of 3PL services
3PL services will continue to evolve to meet clients’ needs and the shifting economics and politics of the marketplace. With the right investments in technology now and by keeping an eye on future needs, you can make business more attractive to current and potential clients by on-boarding them quickly, managing them accurately and by offering value-added services. This proactive response to the marketplace will help your 3PL stand out in the industry –without forgetting the importance of your bottom line.
Chuck Fuerst is the director of product strategy at HighJump Software. He has more than 15 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a bachelor’s degree in marketing management and innovation from Concordia University.