COMMON LOGISTICS QUESTIONS
We know you may have many questions before outsourcing your supply chain to a 3PL. We've compiled a list to provide instant answers and will gladly answer any specific questions relating to your business when you contact us.
FULFILLMENT AND DISTRIBUTION
The advantages of having a single 3PL manage your warehousing and transportation include improved communication through a single point of contact, greater insights into inventory management and transportation data due to the fact that all your data is under a single data portal, and potential cost and service benefits through strategic supply chain solutions such as retail compliance processes, retail consolidation, and optimal load planning. By having a single resource or team to oversee your supply chain, you can ensure a streamlined approach to managing your supply chain operations.
A dedicated warehouse, also known as contract warehousing or contract logistics, involves a scenario where a single client exclusively uses a distribution facility. This dedicated space encompasses all aspects, including labor, value-added services (VAS), technology, and capital equipment, which are specifically allocated to the tenant. The primary advantage of a dedicated distribution center is its complete dedication to a single tenant. Contract terms for such arrangements typically span from 2 to 7 years.
Shared warehousing, alternatively referred to as multi-client or shared warehousing, is where multiple clients leverage the same distribution center and jointly utilize resources such as labor, capital equipment, material handling equipment, IT infrastructure, and other essential elements needed for an effective distribution and fulfillment operation. Shared warehousing solutions are typically tailored for mid-size businesses, with contract terms ranging from 2 to 7 years.
Public warehousing shares similarities with shared warehousing in that it also accommodates multiple clients within a single distribution facility. However, public warehousing solutions often feature short-term, month-to-month contracts. They primarily offer basic pallet in-out services, and pricing is usually structured based on a per-pallet cost. Public warehousing solutions are commonly chosen by small businesses and those with seasonal or fluctuating storage needs.
- Labor Management: One of the primary advantages is achieving cost savings through efficient labor management. Additionally, 3PLs can optimize labor resources by sharing them among multiple clients, resulting in further cost reductions.
- Space Optimization: You can adjust your network and have multiple distribution nodes to serve your customers. Additionally, a 3PL will help you reduce charges by optimizing space utilization.
- Enhanced Speed-to-Market: A 3PL can streamline your supply chain, reducing lead times and improving your ability to quickly reach your customer. This can be crucial for meeting customer demands and staying competitive.
- Optimized Shipping Costs: Through their network and experience, 3PLs can negotiate favorable shipping rates and optimize transportation routes, ultimately lowering freight costs for your business.
- Technology: Leverage leading supply chain technology from a 3PL that include warehouse management systems, order management systems, labor management system, transportation management systems that drive efficiencies to your operation.
The location of your warehouse or distribution center can make the difference between a satisfied customer and an unhappy one. Speed-to-market, fast shipping to your customers, reduced transportation, and parcel costs are all cost-saving measures that are critical factors to selecting the right location. One key factor to consider is the proximity of your warehouse to your manufacturing facilities. Being situated close to your manufacturing plants can provide significant advantages, such as minimizing lead times, reducing transportation costs, and streamlining the supply chain.
Additionally, it's crucial to assess access to transportation hubs, including ports. If your business relies on importing goods from overseas, distance to your primary port can expedite the movement of goods, reduce shipping costs, and enhance overall supply chain efficiency.
When working with a Third-Party Logistics (3PL) provider, they should help you evaluate all these factors and determine your optimal locations for your distribution centers. Ask your 3PL if they offer network analysis and supply chain design services, including location selection studies, which will provide an objective, cost-driven analysis and offer multiple location scenarios tailored to your specific needs.
A Third-Party Logistics (3PL) company specializes in warehousing, distribution, and transportation solutions. 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. Here are a number of ways a 3PL can help your business.
- Cost Efficiency: A 3PL can help your business control costs. By outsourcing logistics operations to experts who have economies of scale, you can reduce operating costs including transportation, warehousing and inventory, labor and technology investments.
- Scalability and Flexibility: As your business grows or experiences fluctuations with seasonal demand, a 3PL can scale their services to meet your needs. This adaptability enables your business to respond quickly to changing market conditions without the burden of substantial infrastructure investments.
- Expertise: 3PLs are logistics experts. They possess specialized knowledge and experience in supply chain management and execution. Expertise can extend to navigating complex regulatory issues, mass-retailer compliance, and optimizing your processes to drive cost and service advantages.
- Focus on Core Competencies: With a 3PL handling logistics, you can concentrate on your core business activities. This not only streamlines your operations but also frees up your time and resources for innovation and strategic growth.
- Improved Service Levels: Partnering with a 3PL can lead to improved customer service. They can offer faster and more reliable delivery options, ultimately enhancing customer satisfaction. Your 3PL can help you optimize inventory levels to reduce stockouts and excess inventory costs.
- Technology and Tools: 3PLs will have access to warehouse management systems (WMS), transportation management systems (TMS), order management, labor management and advanced technology solutions to drive efficiencies in your supply chain. They can also offer data analytics to provide insights into your supply chain performance, supporting data-driven decision-making.
- Reduced Labor Costs: Outsourcing logistics tasks to a 3PL simplifies administrative work associated with transportation, warehousing, and order fulfillment. This streamlining of operations can lead to increased efficiency and productivity.
- Competitive Advantage: Speed-to-market is another advantage of partnering with a 3PL. They can design an order fulfilment process to meets the demands of your customers and provide you with an competitive edge in delivering products quickly and efficiently.
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.
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.
Speed-to-market, speed-to-consumer, reduced transportation and parcel costs, relative proximity to your headquarters, and more. Location can deliver the difference between a satisfied customer and an unhappy one.
Many of the premier logistics cities in the US have competitive labor markets. Shared facilities allow for labor to be shared across clients and facilities. The benefits can be cost savings, the ability to quickly react to your increased demands, and more.
Transportation management services can bring significant value that cannot be discovered working directly with the carriers:
- 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.
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.
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.
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.