The world of 3PL warehousing is quickly evolving. What was required for your 3PL customers last year may not be what they need this year. How does the supply chain and logistics industry meet these new complex challenges head-on while keeping up with customer needs, maintaining efficient operations, and staying competitive? It may seem simple but many 3PL warehouses may not know where to start - The answer is leveraging the right technology.
Implementing new warehouse technologies isn’t something for the “big guys” anymore. It is a necessity for all 3PL warehouses looking to grow their businesses and offer meaningful ways to better serve their customers. Whether it be through providing more visibility into their inventory, offering more value-added services for them to succeed, or keeping up with wherever the market is going.
In our 2019 State of the Industry Report, we will be focusing on the year of 3PL Warehouse Operations and how leveraging technology will play a crucial role in overcoming five challenges across the warehouse.
People are the best asset for every warehouse looking to expand in 2019, with an expected rise in headcount of 33% this year. What is your 3PL doing to attract, develop, and retain your workforce? 1
With enormous growth opportunities for the 3PL industry, the ability for warehouses to attract new talent will remain extremely competitive throughout the year. This is especially true with the rise of ecommerce and omnichannel fulfillment which can be labor intensive for smaller to mid-sized 3PLs, pressuring them to hire more workers. The market will also continue to see larger warehouses or Amazon fulfillment centers investing in staff and offering more hourly pay than smaller 3PLs, compelling warehouse staff to switch, and warehouses to raise wages.
Hiring isn’t the only issue. Warehouses also need to have a plan for how to retain qualified workers - especially after they have trained team members on the ins-and-outs of warehouse operations and technologies.
How do 3PL warehouses not let the shortage of qualified workers be a burden to their businesses?
3PL Operations Managers must find ways to increase speed, accuracy and productivity without hiring new workers. Additionally, they need to find ways to improve the learning curve for existing employees and new hires without impacting the bottom line. This scenario is all too real for many 3PLs looking to expand their value-added services to increase customer satisfaction without dipping into warehouse profits.
3PL warehouses aren’t the only players in our industry who will be faced with enormous challenges and opportunities in 2018. Just about every major retailer in the world is now feeling the pressure to offer omnichannel purchasing options. And once again, this is being driven by the escalating demands of today’s consumer expectations.2
Ecommerce and omnichannel sales in the United States continue to surge. In 2018 alone, these channels grew by nearly 14% to $506 billion3. For 3PL warehouses looking to expand into these marketplaces, there is ample opportunity for growth. However, it can present some operational challenges if your warehouse is not set-up to accommodate ecommerce specific workflows.
In many cases, 3PLs find themselves entering into this elusive marketplace not as a growth strategy but due to customer demands. In many cases, it will require investments in technology and equipment but it can lead to extreme growth opportunities as well.
Whether your warehouse needs to evolve to ecommerce or omnichannel services due to “luck” or through strategic insight, how do you maintain operational efficiency in this new paperless world of online buying?
Fulfilling ecommerce and omnichannel orders requires a 3PL warehouse to flawlessly automate labor-intensive tasks while offering data accuracy for high volume orders. These include:
Gen Z has arrived! Over 3 billion strong4 with $100 billion+ in purchasing power – and they will change how your customers do business forever5. To learn the five must-have integrations your 3PL needs for ecommerce fulfillment, check out our blog.
Moving forward, 3PLs must continue to adapt to the change presented by the growing ecommerce market. Capitalizing on innovative ways to address the notable transformations and challenges that ecommerce presents will continue to ensure a successful and relevant logistics management company. By embracing the various modifications in supply chain management that ecommerce brings about, 3PLs can continue to serve retailers in these modern times.6
The economy is still growing, but experts see uncertainty ahead for shippers and 3PLs, caused by tightening transportation capacity, the electronic logging device (ELD) mandate, and the service demands of the Amazon era. You used to ship high volumes of goods on a low frequency, and ecommerce has flipped that to low volumes on a high frequency.7
3PL warehouses have always been at the mercy of issues over which they have no control. Fuel prices, labor costs, facility rental rates, weather events, and increased competition. In some cases, it can also be a customer who is demanding more for less.
To ensure a 3PL’s profitability doesn’t dip during non-peak seasons, they need to have billing procedures and workflows not only in tiptop shape but also automated. Without automation, billing can be laborious when managing multiple customers and, in many cases, 3PLs are already under billing for services they are providing for their customers.
That said, what can warehouses do to increase profits with automated billing practices and ensure growth in 2019?
A Warehouse Operations Manager’s number one priority is to run an efficient business that is also highly profitable. They must be able to accurately track daily tasks and value-added services being provided – and bill them properly per customer. This can be extremely difficult in a paper or Excel-based environments which don’t offer automation for different customer workflows or billing schedules. Manually updating billing can take weeks. Growing warehouses need to easily bill customers and receive payments quickly.
Amazon’s ecommerce sales in the U.S. reached a staggering $258.2 billion in 2018. That means the company is expected to capture nearly half of the U.S. ecommerce market.8
The lucrative fulfillment industry has attracted a host of new entrants, from lean startups to pop-up fulfillment services to hungry new 3PLs. But the obvious risk for today’s warehouses is Amazon.com. Their relentless innovation and aggressive cost-cutting will continue to force retailers, shippers, and 3PLs alike to dramatically increase their efficiency to remain competitive.
“The Amazon Effect”, which is the ongoing evolution and disruption of the retail marketplace for both online and physical outlets9, continues to impact the logistics industry as consumers now expect a frictionless and immediate buyer's journey - all for less money. While this can pose a threat to some warehouses, it can also be a driving force for warehouses looking to expand their ecommerce services. In order to take advantage of these growth opportunities, warehouses need to be prepared for the digital transformation and integrations of systems to help make customers happy.
How do today’s 3PL warehouses, looking to partner or compete with Amazon.com, build a collaborative technology backbone to help better serve their customers?
Warehouse Operations Managers must be able to help customers compete, or in some cases work together, with Amazon – without raising warehouse prices. 3PLs need to be able to adapt without the risk of losing customers to a lower-priced competitor. Therefore, it is imperative that 3PLs serve their customers wherever, and however, they sell – online stores, marketplaces, retailers, etc. - and connect to those systems for order, inventory, and shipping management.
A lot of what’s going on in the 3PL business is because of the Amazon effect, because customers are so reluctant to pay for shipping and expect two-day service for free.10
Supply chain used to be a function. Now it is a value-add, and it is fundamental to your customer's experience. It has gone from a box hitting a location to delivering an outcome.11
Enabled by mobile shopping, lower costs, and infinite options, today’s consumers are king. Meaning every retailer has to do whatever they can to keep them happy – or risk losing valuable customers.
The ability to offer full transparency and open communication starts with the flow of data available to warehouse customers. Today’s Operations Managers not only need to pay attention to operational data and tasks happening on the floor but also what data is being delivered to customers from office staff.
With 3PLs quickly moving away from paper-based and often error-prone reporting, the need to develop and implement a plan to share data with customers isn’t simply creating a solution for today but a long-term plan that requires insight and warehouse technology collaboration.
How are 3PL warehouses building their digital strategies with full visibility in mind for their customers?
Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create raving fans.12
Today’s 3PLs must ensure their warehouses deliver a higher level of visibility to customers. This entails data reporting and analysis, automatic notifications of key events, and a permission-based web portal. Warehouse operations need to commit to delivering complete visibility to their customers and, in some cases, the consumer to offer peace of mind when tracking every order, item, transaction, or notification. Offering real-time information to customers, available to them 24/7, will set a 3PL apart from the competition and help attract and retain customers.
Unlocking the data already available in a 3PL’s WMS and other systems will become a requirement to offer customer satisfaction, more efficient operations, and the ability to grow faster.
Success in 2019 is imminent for 3PLs when leveraging a technology backbone for warehouse operations. Letting customers manage and market their business, 3PLs to focus on fulfillment, and WMS partners to manage technology creates a scalable solution for success. Today’s warehouses need to quickly transform paper-based, error-prone businesses into service leaders who can focus on customer satisfaction, operate more efficiently, and grow faster. Using a cloud-based WMS that helps warehouse operations teams automate core workflows and integrate with other systems, and those of warehouse customers, will set a warehouse apart and drive growth opportunities not only in the near future but for long-term success.
If you’re interested in learning how 3PL Central can help your warehouse implement a comprehensive WMS platform and share our expertise in building best practices across the warehouse, reach out for a demo.