Much has changed since the release of the 2020 State of the Third-Party Logistics Industry Report in January. Social distancing, sheltering-in-place, and closures of non-essential businesses have transformed the lives for millions of Americans amid the COVID-19 pandemic. This “new reality” is reshaping the way we live, the way we work, and the way we shop. Moreover, consumer behavior is quickly evolving to embrace online shopping purchases—even with lengthened delivery times for non- essential items.
Ecommerce purchases and revenue have steadily climbed over the past few years. As we previously reported, 165 billion packages were shipped in the United States in 2019, raising environmental concerns as consumers continue to buy more online. Not surprisingly, ecommerce order growth is up 54% compared to this time last year, heavily stimulated by consumer buying shifts driven by stay at home orders.
With buying habits continuing to evolve, the logistics community must prepare to meet consumer demands. This is especially true for warehouses who want to take advantage of accelerating digital engagement for online shopping. With these trends becoming permanent fixtures, new technology, best practice workflows, and partnerships will be integral for supply chain industry key players.
This new normal only confirms the necessity for 3PLs to adopt ecommerce best practices to drive customer growth and satisfaction.
In March, retail sales declined 8.7%, with clothing and accessory stores seeing the biggest sales plunge at 50.5%. In fact, it is predicted that more than 15,000 stores could close in 2020, nearly double from the previous year, which reached historic highs of 9,300. In a recent survey of retailers, 50% expect business revenue to see significant downturns. And some big name retailers, such as J.Crew and JCPenney, already filed for bankruptcy.
With unprecedented changes in the logistics industry, 3PL warehouses must prepare to better serve ecommerce and omnichannel customers to succeed in this new and stimulating environment. To do so, they need to stay informed about the latest consumer and ecommerce trends to optimize warehouse operations and technology. With ecommerce sales predicted to reach $4.2 trillion in 2020, logistics businesses need a plan to diversify for ecommerce and optimize current warehouse management system (WMS) technology and workflows to remain competitive
Third-party logistics warehouses are also seeing increased competition from non-traditional players. This is especially true as 3PLs become less focused on industry verticals and private warehouses offer 3PL work to grow their businesses. The fact is - online shopping is not going away, as shown by the rise in sales of US Direct to Consumer (D2C) ecommerce to nearly $18 billion in 2020.
As consumers continue to develop their shopping behaviors, 3PLs must think ahead to attract new business—which should include ecommerce. Growing a warehouse’s ecommerce business results in higher order volume, more transactions, and shipping on carrier accounts for shipping margins, which means increased revenue.
As the ecommerce marketplace races to meet growing customer demands, 3PLs have become trusted partners for distribution and fulfillment for many brands. In most cases, consumers do not even realize that their online orders are fulfilled and shipped by 3PLs. This seamless experience is the goal of every third-party logistics warehouse.
For warehouses to meet these increasing expectations they must have great operations management, from real-time visibility of inventory, to shopping cart and EDI integrations, fulfillment, and shipping. Without the right WMS technology that utilizes best practices to increase efficiency, 3PLs will struggle to improve warehouse workflows and operations, leading to poor customer satisfaction.
Preparing for this abundance of new business requires the use of automation, trusted delivery partners, business intelligence (BI) and big data, and exceptional customer communication with access to inventory data 24/7.
The need to automate processes for warehouses serving multiple customers, especially those who offer ecommerce fulfillment, is one of the core requirements for successful logistics businesses. The coordination of people, products, and facilities requires a technology backbone that makes it easy for warehouses to manage inventory, automate routine tasks, and deliver complete visibility.
Without scalable WMS technology to create efficient operations and throughput, it is nearly impossible to meet ecommerce fulfillment SLAs—especially when tracking manually with Excel. From managing inventory, receiving orders, picking, packing, and small parcel shipping, 3PLs need reliable technology to deliver best practices.
3PLs using WMS software that can be integrated with other technologies, such as transportation management systems (TMS), will vastly increase warehouse productivity. In fact, 3PLs can save an average of 161 hours per month by removing manual order entry. Automation also saves warehouses on overhead, when considering the average cost of a mispick is $22. Implementing intelligent warehouse technology, such as mobile barcode scanning, coupled with best practice workflows and warehouse layouts for optimal picking processes, accuracy and efficiency for ecommerce fulfillment can be achieved.
Business intelligence and big data are all about recognizing patterns to make your ecommerce 3PL more efficient. When looking to increase sales, boost profits, and provide superior customer experience, the data collected will help provide guidance on where logistics businesses must focus to improve to produce better results.
Historically, third-party logistics warehouses have been slow to adopt new technologies. As shared in the 2020 State of the Third-Party Logistics Industry Report, 85% of supply chain and logistics professionals expressed that they felt the industry lagged in digital maturity, while about half stated they aren’t implementing new technologies. Yet, in a recent study, 95% of shippers and 99% of 3PLs agree that analytics are a necessary element of 3PL expertise. However, only 26% of shippers and 27% of 3PLs are satisfied with current analytic capabilities.
Adopting new technologies to collect big data for business analytics is still a relatively new mindset for logistics warehouses. But with 3PLs at the epicenter of the supply chain ecosystem, there is ample opportunity to accelerate data analysis as the main proprietors of data creation. The ability to harness the power of big data will create value for warehouses who capture useful data to analyze and grow ecommerce fulfillment businesses.
Amazon paved the way for the expectation of 2-day shipping. Then came one-day shipping and even same day delivery. Last year, the company spent nearly $17 billion on their delivery infrastructure. But with the rise of ecommerce in the past few months, Amazon has been overwhelmed with surging orders. By mid-March, Amazon made the decision to prioritize household and medical supplies, slowing deliveries of many non-essential orders, testing the patience of many consumers, and creating additional opportunities for 3PLs to fill the fulfillment void.
For many 3PL warehouses, the ability to offer on-demand or same day delivery has been used to combat a historically competitive marketplace. For warehouses to make these add-ons a reality for consumers, they must find the right delivery partners. Players like FedEx, UPS, and USPS offer limited same-day delivery services that many warehouses already use. However, the ability to use more nimble and responsive partners to handle small and local orders can be a big advantage for 3PLs looking to increase ecommerce fulfillment.
Regardless, the most important thing 3PL warehouses must consider is whether or not they have the technology and workflows in place to meet delivery expectations post COVID-19.
For third-party logistics warehouses, reputation is everything and customers are king. 3PLs should always stay interested in learning the most efficient ways to better to serve their customers. Warehouses who want to succeed need to commit to customer satisfaction.
For 3PLs looking to shift to ecommerce, communication is key for operational excellence. How well you communicate with customers will determine the likelihood of them continuing to grow their business with your 3PL. Warehouses should set expectations up front, provide ongoing updates, and continue to manage expectations throughout the entirety of the relationship. Overall, improving the customer experience will pay dividends in loyalty and satisfaction.
Reporting is also a must when looking to diversify for ecommerce. The ability to quickly share relevant data with customers and consumers will not only save your warehouse team hours of answering phone calls and emails, it will increase efficiency and visibility across the entire business. Key reports for ecommerce include batch picking, advanced shipping notifications (ASN), on-hand inventory, cycle-count, and shipping notifications. Proper reporting will maximize relationships and eliminate time and resource waste.
As the logistics and supply chain industry learns how to navigate this rapidly evolving ecommerce environment, 3PLs must be ready to take advantage of this revenue generating opportunity. Ecommerce growth is not a fly by night fad. It has been solidified as a new logistics reality. Third-party logistics warehouses looking to diversify for ecommerce fulfillment must stay ahead of the curve with comprehensive warehouse technology and best practices in order to satisfy customers.
Refusing to adapt to the new reality of ecommerce has consequences. Retailers who avoid selling online, such as discount stores and grocers, are struggling stay afloat as they compete with stores who have optimized for online ordering, curbside pickup, and delivery.
As 3PL warehouses think about how to attract new ecommerce business, it is clear that that they must have the right technology, deep partnerships with delivery partners, the ability to analyze data trends to optimize operations, and offer exception customer service and visibility.