“Self-driving vehicles will automatically choose the most efficient route. Artificial intelligence will dramatically improve logistics.” ~Dave Waters
Third-Party Logistics (3PL) has suddenly gained a lot of traction, in fact, as per a recent report by Statista, revenue in the 3PL market is projected to touch US$287.30bn in 2023. And, it is expected the annual growth rate of its revenue (CAGR 2023-2027) to be 2.51%, resulting in a projected market volume of US $317.30bn by 2027. The market value of 3PL Providers have seen a change due to rapid escalation in the eCommerce market and globalization, which is hugely dependant on logistics and supply chain services for market domination. To save money and time, and to scale higher levels, even small businesses need to have seamless integration of business operations. Rather, in today’s world it does not matter if the business operations are outsourced or are managed in-house, the thing which matters is syncing of operations for bringing transparency and integrated flow of data for predicting demand trends.
Supply chain management is inclusive of warehouse management system (WMS), inventory management, operation management system (OMS), transportation management system (TMS) and 3PLs (third-party logistics partners). The volatility and inclusivity of variety in purchasing and consuming power of end-consumers are forcing retailers to go for supply chain management optimization, for which they even take help of the third-party logistics providers. It reduces costs and brings repeat customers.
What is 3PL?
In simple terminology, 3PL means involvement of third-party logistics provider for carrying out logistics processes for a retailer or a business. Companies outsource logistics work as warehousing, transportation, inventory management and picking & packaging to 3PL for cutting cost and for optimizing supply chain management. Even labelling as well as responding to multiple sale-points in real-time is outsourced for enhancing customer relationship as 3PLs are equipped with state-of-the-art robust supply chain management system.
During pandemic logistics was majorly hit and companies were thrown off the hook, order fulfillment was delayed and many eCommerce businesses experienced a pause, especially the start-ups. Post pandemic merchants are finding ways for supply chain optimization for stability and for taking the business to the next level. A strategic 3PL partner provides a wide range of operations for order fulfillment, reducing cost and increasing efficiency. Many medium-sized enterprises who cannot afford warehouse and its management; depend on 3PL partnership for cutting-edge warehouse management system. With automation taking the front seat in business operations, many startups go for 3PL fulfillment partners for logistics and supply chain management services.
Challenges for 3PL Providers
3PL Providers as fulfillment partners have many clients, each with different business model but with same objective of reaching out to their end-users. A contract with third-party logistics partners is signed to achieve the goal of fulfilling orders at the low cost and in minimum time. Since, 3PL providers handle numerous clients, they face a multitude of challenges.
• Lack of information about stocks: In the age of blockchain, dependence on manual efforts for sorting and tracking stocks can slow down logistics operations.
• Lack of end-to-end visibility: 3PL firms handle a number of businesses with varied needs and expectations. If firms do not have system to track and trace a client’s requirement in real-time, it can lead to disruptions and loss.
• Fuel costs: The firms face the challenge of rising fuel cost. With tracking system in place, shipment cost can be brought down.
• Inventory management: 3PL firms face this challenge as they are responsible for several businesses, and integration of data is a must.
• Transportation Regulations: If 3PL providers do not have a system to get information on shipment movement, then it is tough to advise on transportation regulations of different regions and show routing options.
How a WMS Optimize Supply Chain Management for 3PL Providers
Warehouse Management System allows insight into inventory, prepares for stock-outs or overstocking, helps in reducing shipment costs and provides real-time visibility for improving logistics services offered by 3PL Providers.
• Real-time visibility: Since 3PL partners are part of supply chain optimization for businesses and as they are answerable to several businesses with different interest. These firms need real-time visibility into inventory. A WMS system uses scan-based technology and is an automated process. The moment a request is generated for a business, through an automated flow-chart, information reaches in real-time and shipment can be managed by taking proactive steps.
• Efficiency in collaboration: With well-integrated automated supply chain system, 3PLs can aim to improve collaboration with their clients. The collaboration helps in better management of unforeseen events, stays connected with suppliers, shippers, and other stake holders for review and practical approach.
• eCommerce order fulfillment: With WMS in place, 3PL Providers are quite helpful in demand shifts. It is easy to meet customer delivery options for 3PL clients. Closest warehouse can be identified and from picking to last mile delivery can be achieved at the shortest time.
• Optimization of workers: Finding new talent is a task, with warehouse management system 3PLs can automate working and information about product and its shipment can be shared without mistakes and manual interference.
• Improved insights and better scope for in-depth analysis: WMS can identify profit making SKUs before the trend phases out. It can analyse market demand and distribute stocks accordingly for improved consumption and higher ROI for their clients.
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