Your Fulfillment Center and Transportation Questions Answered
This page is designed to help answer your questions. Outsourcing to a 3pl has a lot of questions you may be wondering, and we understand it's not easy. Reach out to us if you can't find the answers you're looking for.
Shared warehousing (also referred to as shared campus or public warehouse) refers to the allocation of capital and resources to various clients in a single warehouse. A dedicated warehouse is when one client operates out of a single (or dedicated) facility. In this scenario, the client pays 100% of costs (leadership, labor, Material Handling Equipment, and capital expenses)
When one third-party logistics (3PL) manages all your warehousing and transportation, this "integrated" solution allows for a single resource (or team) to manage your supply chain. This team approach can bring more open and clear communication, better visibility to your inventory and transportation, and can deliver cost and service advantages.
A third-party logistics (3PL) company specializes in warehousing, distribution, and transportation. A 3PL operates with the goal of maximizing cost savings to your supply chain and helping you grow and scale your business. A partnership with a 3PL will allow you to leverage their expertise while letting you focus on your core business competencies.
There are various ways a 3PL can improve your supply chain. They vary based on what you are in need of. A few to note: Cost savings through labor management and potentially sharing labor across clients, reduced space charges, improved speed-to-market or customer, improved shipping costs, reduced damages and accuracy issues, and more. In most cases, the provider's core competencies are storage, fulfillment, inventory management, and potential value-added services.
The location of your warehouse/distribution center can mean the difference between a satisfied customer and an unhappy one. Speed-to-market, fast-shipping to your customer, reduced transportation, and parcel costs are all cost-saving measures from the right location. A 3PL should help you determine an optimal location or if multiple warehouse locations would benefit your company. Ask your 3PL if they provide supply chain design, specifically location selection studies that will provide an objective/cost-driven analysis. This will provide multiple scenarios for location selection based on your primary needs.
Do we "fit" - culturally, values, relationship, and ambition. It's key to be aligned on what's important. With this, you likely will experience a 3PL that continuously improves and always has your organization at front of mind. You should ensure they have the capabilities you need and confirm they truly have experience with this. The location to where you believe you need to be may be important, are they located there currently? If they aren't asking questions and trying to dive into as much of your business as possible, you may get a transactional relationship that may not be everything you were looking for in the end.
You may ship business to business (B2B) and direct to consumer (DTC). If you integrate these different shopping methods (an omnichannel strategy) you can realize benefits from having one 3PL and a single distribution point. The biggest advantage is maximized labor usage. Order volumes can shift between retail and ecomm and having all fulfillment with one 3PL will allow for a flexible labor strategy to maximize efficiency. Furthermore, a single point of distribution will help improve inventory accuracy, increased fill rate percentages, and reduced backorders as all inventory is managed within one operation.
Your 3PL is managing and controlling your inventory which reflects sales and revenue for your company. You likely are reliant upon accurate, real-time visibility to make proactive decisions, and need to know where your items are at, when they are shipping, and how day-to-day operations are flowing. A WMS can provide this and allows for 3PLs to actively track KPI's which are critical for you in creating accountability of your 3PL partner. A WMS in most cases will allow for you to more accurately answer customer questions and stay ahead of any potential customer issues.
Ability to stack, stack height, pallet dimensions, pallet weights, inventory through-put, willingness to invest in capital, and your products value. Your 3PL should be able to assist you in recommending the right solution that fits your needs and provides the greatest value to your business.
Speed & Cost and what expectation have you created with your end customer. Based on the message you have conveyed to your customer, if they believe they will have your product within 2-3 days, you should choose a program and carrier that can meet this expectation, but be ready to pay a little more. Every carrier and parcel program has different advantages. Your 3PL may have a program you can participate in and receive speed and financial benefits from. You should ask.
One, talk with colleagues, friends, and network partners. If you have a relationship with someone who understands and has experience working with 3PL's, they likely aren't going to risk losing a relationship with you and are going to provide you truthful and honest direction. Two, the internet is a powerful tool. Search for providers, but put keywords in for what you are in need of. Once you narrow in on a few, you can dive into other sites. There are typically reviews, associate feedback, etc. You should spend time calling and talking with organizations. It takes time to find the right fit and it should, because you are putting your fulfillment and product in their hands.
Retail compliance can be challenging. Every customer has different requirements, regulations, paperwork, labeling, and more. You should work with your 3PL to ensure they have experience shipping to destinations and customers you are currently selling to. This in itself won't remove all chargebacks though. You should ensure your 3PL has all information and requirements that your customer is requiring and pass these to them regularly. In most cases, chargebacks are occurring based on a lack of knowledge and accountability or inexperience of your 3PL.
Freight consolidation is a natural driver of freight cost. The more freight that can be loaded into a trailer, the more cost-effective. Freight consolidation also ships more directly than LTL, which reduces touches (less cross-docks), which will reduce the likelihood for claims. Consolidation is also the "green & sustainable option." Trailers more fully loaded reduces congestion on our overcrowded highways.
Time, money, and potential. Integration maximizes time to the planning horizon, which will directly correlate with reduced cost and improved partner management. Integration eliminates blind spots. There are dozens of decision points in the supply chain process - collective alignment reduces mistakes in handoffs, enabling a constant flow of goods and information. Finally, end-to-end supply chain visibility of tracking and cost is only available through a very solid integrated solution between warehouse and transportation.
Parcel contracts and tariffs can be rather complex and sometimes overwhelming. An audit will allow you to better understand where your money is going while uncovering surcharges, fees, or other shipping inefficiencies that drive up shipping costs.
There are 5 big opportunities for value-added capabilities a 3PL can bring:
- Reduce cost through the scale of a leveraged contract with parcel providers.
- Improved options through rate shopping individual packages.
- Consolidated audit and reporting capabilities.
- Real-time tracking and alerts.
- E-mail / text customer notifications.
- One-click access to multiple carriers, services, and rates.
- Consolidated access to a portal that contains all freight shipments.
- Business intelligence and baseline information to ensure best in market costing.
- Tracking resources to perform exception management and increase on-time delivery and customer satisfaction.
Key ingredients include applying costs for inbound material, manufacturing, warehousing, and outbound transportation. Combining each of these without integrated systems and reporting can be very challenging. A great 3PL can align systems and processes to enable a true and verifiable cost-to-serve model. Beyond a one-time report, great system integrations can deliver a repeatable and sustainable model.
Insourcing a TMS is always an option - however, it can be costly to purchase, implement, and maintain. Over the last decade, dozens of niche providers of transportation services have evolved with technology. A one-time implementation will likely not deliver the breadth of services (tracking, rating, network capacity, automation) that you are targeting. 3PLs that have invested in the base TMS, outsourced specialization software and proprietary integration will have best-in-breed and current technology that can keep your company ultra-current on the cutting edge of managing your freight.