If, like most manufacturers or wholesalers, your core strengths lie somewhere other than order fulfillment, seek a partner to help scale your process when there are significant demand fluctuations.
As you evaluate potential providers of fulfillment services, the primary emphasis should be on trust and transparency. A manufacturer shouldn’t be burdened with knowing exactly how to implement complex fulfillment operations; rather the distribution center operator or third-party logistics (3PL) provider should be a trusted source on shelf-life considerations, market fluctuations and an emergency Plan B.
A 3PL should be able to set expectations for how products will be handled, what kind of emergencies can crop up and how they can be addressed. In the end, ROI expectations should be set, measured and evaluated continuously.
The need for fulfillment scalability has probably never been greater. Consumer demands have fluctuated wildly since the pandemic set in, and though conditions have stabilized somewhat, no one is expecting a return to anything like what was considered “normal” before the Coronavirus disease (COVID-19).
Even the term “scalability” means different things to different people. Generally, it is best defined as being able to respond to unpredictable volumes. But, make sure you are on the same page with your partner about critical definitions.
If you don’t feel your organization is well prepared for continued unpredictability, the first question to ask is, why—what is the root cause?
Together with the right 3PL partner, you can determine if the challenge is centered around unreliable inbound transportation to your facilities, highly variable order demand, less-than-optimal inventory management, facility design/size, labor availability, labor cost or a combination of factors.
Your partner should create an environment in which you can maintain sharp focus on making and/or sourcing product without undue distractions from unpredictable fulfillment issues.
The search for a 3PL can be daunting. A good way to start is to engage with a consulting group or trade organization to lead an RFQ/RFP process to gather information and attract proposals from pre-qualified providers.
Look for a 3PL that not only has the capabilities you have identified, but that can also analyze your needs and develop insightful plans. In today’s environment, those plans will likely include recommendations for appropriate investments in fulfillment flexibility. Because that’s such a big challenge right now, it’s doubly important to spend the time to develop the best possible solution.
Despite all the volatility of the past two years, it still makes sense to plan for normalized volumes and then develop mechanisms to quickly identify when volumes are shifting from the norms.
The best level of investment for developing and implementing scalability capabilities is one you can afford. A risk/benefit analysis will help define the investment that your enterprise can handle. The analysis might uncover some level of variation you can’t afford to prepare for. Maybe you can live with a short-term peak that slows down order fulfillment to rates that aren’t optimal but are at least acceptable.
The key tool that most 3PLs will employ to help manage scalability is a warehouse management system (WMS). Many systems offer advantages that include order batching and zone picking; workflow management; and guardrails to maintain efficiency. On the hardware side, robotics and automated guided vehicles (AGV) can be integrated with WMS to quickly augment labor shortfalls that can occur without much warning.
Investments in equipment should generally be limited to cover your current operations, rather than overspending on machines that could sit idle most of the time. Robots and AGVs have evolved to incorporate sophisticated systems that make it both easy and safe for them to operate along with warehouse labor.
A key benefit that a 3PL can provide is the optimum utilization of both equipment and labor in a shared distribution center environment. The goal is to match the needs of fulfillment operations with other users of the facility who have complimentary peaks and valleys. As an example, if products are most in demand during the winter holidays, the shared facility can flex both equipment and workers with a client that experiences heavy volumes fulfilling orders for consumers of outdoors products that are popular in the summer.
This is where a high level of trust is necessary, so be sure your 3PL won’t allow the transfer of any proprietary information between shared facility users.
To be effectively managed, this activity must all be measured. Look to a 3PL for key measures, including facility utilization rates and available capacity. Performance measures should be monitored continuously. If you operate in a LEAN or Six Sigma environment, incorporate measures of hourly production. Once you have these measurements in place, it will become easier to forecast future needs.
When properly designed and implemented, systems can meet some of today’s dynamic labor environment, but there are limitations. More than ever, workers are picking the employers they want to work for, rather than the other way around.
Be proactive and create a workplace environment that is attractive, rather than tolerable. If you don't, you may find yourself in a deteriorating situation that won’t attract the quality of workers you need, or even any workers at all.
Again, a 3PL can be a big help here with robust training that is both fast and safe. The provider’s flexibility should also extend to the workforce by giving employees a choice in the shift they work, and even understanding that sometimes there are reasons beyond a worker’s control that prevent them from achieving 100% attendance or on-time performance.
Be willing to accept reasonable variances from employees and you might be surprised at how much more productive and reliable they become over a longer term, rather than facing the expense and disruption that comes with a high churn rate in labor force.
Another benefit that doesn’t have to be expensive is to make the work environment as pleasant as is practical. Improved lighting, better environmental controls and clean, attractive break rooms mean more to workers than you might anticipate.
Careful planning, finding the right partner, making reasonable automation investments and attracting and retaining good workers will take some time, but that shouldn’t prevent you from getting started. The efforts will be worthwhile when they result in an order fulfillment process so nimble that you can react to changing conditions to keep sales volumes growing and customer satisfaction high with a process that makes a positive return on the investment.
Source: Supply & Demand Chain Executive