Contract Logistics Were Made for Manufacturing Supply Chains

Automotive or industrial manufacturers who stop to ponder the changes to their supply chain over recent years will surely wonder how their world has changed so quickly—and so drastically.

There’s no sense lamenting the Amazon effect or the post-pandemic supply chain—and there’s no future in avoiding the new realities of manufacturing logistics.

Managing a manufacturing supply chain promises to remain an odyssey as technology evolves, customer expectations remain high and the disruptions keep coming.

Considering today’s great challenges and all that is required to achieve a competitive advantage, the power of partnership is more important than ever. In fact, going it alone can actually be a disadvantage.

In many ways, third-party logistics (3PL) providers and contract logistics were born for this point in history.

ODW Logistics finds itself at the epicenter of the challenges automotive and industrial manufacturers encounter today in their supply chains and our team is convinced of the value 3PL partners provide.

Support your industrial company's growth with comprehensive logistics solutions.

Whether you are working with a 3PL or currently slugging your logistics out alone, here are ten ways 3PLs are uniquely prepared to help—and in many ways, more necessary for success than ever.

1 - 3PLs Give You the Advantage of Leading-Edge Logistics

Manufacturers excel at making products. Finding efficiencies, innovations and cost savings within their production lines is their area of expertise.. They’re constantly reading up in the trades for inspiration and talking with vendors and experts as well as privately musing about solutions to their challenges.

It’s the same way with 3PLs, only their world is supply chain. You know lean practices as they apply to manufacturing, 3PLs know it with regards to inventory management and fulfillment. They’re good at it for the very same reasons manufacturers are good at what they do: specialization.

With all the changes going on in supply chain in the past years, 3PLs have the capacity to consider and plan for challenges—today’s and tomorrow’s—because it’s their job. Running a successful supply chain today requires the right combination of experience and resources.

With supply chain making up so much of cost of goods sold today and so much riding on delivering a positive customer experience, it is crucial to have premier supply chain practices in place. Manufacturers who can’t attain that level of proficiency, need to partner with experts who can help them.

A 3PL’s resources, standing in the market and knowledge enable manufacturers to operate in a more streamlined and efficient manner at a better cost than they could do themselves.

Transform your supply chain into a driver of value.

2 – Don’t Labor over Today’s Workforce Challenges

Manufacturers are acutely aware of the difficulty in finding labor for production lines today.

Recruiting and retaining workers requires fine-tuned strategy, continuous effort and investment. Furthermore, their training and the way in which they are deployed are distinct.

Warehouse labor and fulfillment associates are deployed differently. Labor levels can fluctuate, so a combination of temps and staff workers may be required. Warehouse workers require different skills and have a different pay scale than factory workers. Oftentimes manufacturers who don’t know this will end up overpaying.

It’s just plain hard to hire for positions often viewed negatively where workers perform in dark, dingy plants doing labor-intensive tasks. It can be difficult to locate the right talent pools to keep pace with warehouse needs.

Finding warehouse workers is hard and getting harder. According to Supply & Demand Chain Executive, the warehousing sector will have 2.1 million unfilled jobs by 2030.

For these reasons, many manufacturers are considering moving out of that function so they can focus on more specialized functions.

A 3PL knows how to recruit in that space because they work there every day.

3 – Look Outside to Feed Data Needs

Data feeds decision-making in today’s most advanced supply chains. Clean, current information drives enterprise resource planning (ERP) systems, but having a good source for information on inventory levels, order status and delivery ETAs is required.

A warehouse management system (WMS) is an important example. Being able to leverage a 3PL’s WMS is a benefit to manufacturers who can compile inventory data to make the right decisions and strategize. A 3PL’s transportation management system or order management system can provide additional data.

A 3PL can bring legacy systems like these and experience making data-based decisions to help manufacturers manage details of their supply chain for optimal performance.

Grow your operations with next-level warehousing and fulfillment services.

4 – 3PLs Provide the Means for End-to-End Solutions

Hand-offs in the supply chain add time and risk. The fewer players and more control a manufacturer can exert over every stage of the supply chain, the better.

3PLs are set up to provide end-to-end control through the streamlined processes they’ve developed, established partnerships they have and technology they employ to integrate it all.

Contract Logistics Begin and End with Manufacturers’ Needs

• Inbound of raw materials
• Vendor managed inventory
• Sequencing and product staging
• Line-side assembly services
• Just-in-time and lean logistics solutions
• Packaging, labeling, and delivery execution

For a manufacturer that wants to zero in on their core manufacturing strengths and not dilute their efforts managing their supply chain, a 3PL can be an invaluable means to that end. Their capabilities are comprehensive and customizable.

See how contract logistics can help you scale your business. 

5 – Automation You Can Leverage

With today’s labor challenges, automation is a must for any manufacturer that wants to add certainty to their fulfillment capabilities. Automation decreases warehouse and fulfillment operations’ reliance on human labor. It makes them less vulnerable to fluctuations in labor availability.

The advantages of automation are so great that every manufacturer needs an automation strategy to ensure production lines stay up and service level agreements are met with customers.

The challenge is that warehouse and fulfillment automation is often alien to manufacturers. Manufacturers who know factory automation can encounter a steep learning curve when it comes to automating their warehouse systems.

3PLs are on the leading edge of automation like conveyance, robotic arms, cobots, drones and automated storage and retrieval systems that can bring efficiency and accuracy gains. 3PLs provide manufacturers with the opportunity to leverage the latest without creating a system themselves—and often without having to bear the full weight of a CapEx investment.

Find automation solutions that increase labor productivity and decrease risk.

6 – A 3PL Expands Your Braintrust

The ability to bolt a team of logistics experts onto your team is invaluable. There are no learning curves and no beginner’s mistakes.

An experienced 3PL brings the wisdom of having worked on numerous other companies’ logistics challenges. They have built custom plans for other companies before yours. Their experience is yours to benefit from.

Even with the pace of change today, 3PLs have likely seen it all—even if it was just the day before—with another customer.

Seamless integration relies on leadership that knows the big picture as well as the precedents in the industry.

Logistics experts at a 3PL have the confidence to design and execute an end-to-end solution that leverages their knowledge, partnerships and resources in every stage of the supply chain.

The payoffs are operational efficiencies and supply chain visibility that would be hard, if not impossible for manufacturers to achieve on their own.

7 – 3PLs Do More than Transport and Store

3PLs can be a life-saving partner for labor-strapped manufacturers or companies responding to a surge of orders. Some third parties can perform kitting like creating subassemblies. An example is adding hoses to a water pump that is then ready to be installed on an engine. ODW does this for one automotive manufacturer. All that their final production team has to do is pick up the subassembly and connect the hoses.

There are many other line-side assembly tasks that can be outsourced. Basically any type of service that can be performed safely and within the technical capabilities of a warehouse associate are possible. The 3PL then tenders those goods to wherever the next step in the supply chain journey is.

That includes sequencing when something like an engine manifold needs to be put in the right order as the assembly line consumes them.

The availability of such services gives manufacturers invaluable flexibility to respond to challenges and opportunities.

8 - 3PLs Bring Inventory Integrity through Processes

Manufacturers obsessed with manufacturing standards are naturally hesitant to relinquish control that may compromise their product in any way. They need the right quantity of inventory delivered at the right time in the right manner in order to keep production lines going and ensure quality.

3PLs ensure inventory integrity through proven rigid processes and systems that can support the management of inventory controls. This is as much a factor of having the right processes and systems as it is having the right people performing them.

With a transparent and closely aligned 3PL partner, a manufacturer can ensure a 3PL’s leaders and floor level associates that manage inventory understand their role and responsibility in the whole supply chain. By training 3PL employees to the manufacturer’s standards, a third party can function as an extension of the manufacturer’s operations. The same KPIs can be achieved with the benefits of outsourcing.

Explore why inventory control is essential.

9 – Real-Time Supply Chain Visibility Is a Real Possibility

APIs (application programming interfaces) are advanced conduits of communication that many 3PLs employ to provide immediate access to all information as it happens in real-time. They are a prime example of leverageable technology manufacturers can benefit from by partnering with 3PLs.

APIs enable companies to make manufacturing adjustments based on real-time audited inventory. A company can look into their inventory that a 3PL is holding for them and say with confidence that they have enough parts to make ten cars for example.

APIs inspire confidence during production planning which inspires speed. The steps right before the parts hit the line are critical and the accuracy of API information enables decisive action and streamlined communication. As the 3PL gets raw material on the front end, they can validate it's been received, that the quality check is good and it's in the inventory.

On the back end, manufacturers can track orders and leverage transparency that fosters outstanding service to customers and their customers’ customers. Through API-enabled visibility, a car-buyer could conceivably track the progress of their car through production and all the way to the dealership.

3PLs improve each shipper's supply chain visibility in five ways. Find out what they are.

10 – Scale a Supply Chain with Ease

Partnering with a 3PL for support logistics can help manufacturers grow their supply chain without pains.

Adaptability and speed are an asset in today’s B2C-oriented supply chain. Having the capacity to outsource kitting, quickly expand vendor managed inventory or packaging could significantly increase profitability and productivity. 3PLs are the conduit to these quick moves and more.

Manufacturers can expand inventory by leveraging a 3PL’s warehouse space or expand their territory by leveraging a 3PL’s distribution network.

A 3PL’s resources enable manufacturers to scale quickly, only pay for the services they need and avoid major investments in warehouses, labor or automation.

There’s No Comparison to the Power of a 3PL Partnership

Are all 3PLs created equal when it comes to scaling or any of these other benefits? When it comes to contract logistics for manufacturing, vertical experience matters – especially when it comes to the automotive sector.

Talk to an ODW Logistics team member about your unique challenges, and be sure and read what to look for in a 3PL partner in the next article in this series.