Remember that iconic scene from The Matrix where Morpheus offers Neo the choice between the red pill and the blue pill?
Well, businesses are faced with a similar dilemma when it comes to logistics operations.
Will you continue down the same path, blindly accepting high costs and inefficiencies because it’s what your business has been “accustomed” to and you don’t want to acquire further expenses?
Or do you take a chance on the red pill and explore the world of 3rd party fulfillment, where cost optimization and operational efficiency reign supreme?
You may be wondering how this is possible since you’ll eventually be “shedding out more cash” because of a 3PL logistics company provider.
In this blog post, we’ll be your Morpheus, offering 10 proven ways that a 3PL ecommerce fulfillment provider can help you lower logistics costs and boost profitability.
Seeing 3PL logistics operations in a whole new light:
1. Leverage Automation to Streamline Your Logistics Operations
In today’s fast-paced business landscape, companies can use automation to streamline logistics operations and improve efficiency. Warehouse automation systems such as AS/RS and conveyor belts, as well as route optimization software and machine learning algorithms for data analysis, can help businesses optimize their logistics processes, reduce costs, and improve customer satisfaction. Amazon, UPS, and DHL are real-world examples of companies that have successfully implemented automation to improve their logistics operations.
According to Reuters, Amazon’s use of robots in its warehouses has allowed them to reduce delivery times by 50% and increase productivity by 3x.
According to DHL, their use of machine learning to analyze shipment data has reduced transportation costs by up to 20%.
2. Warehousing and Distribution Services Without Upfront Costs
Shared warehousing and distribution services provided by a 3rd party fulfillment allow businesses to share the costs of facilities and resources with other clients, resulting in significant cost savings, particularly for small and medium-sized businesses.
For instance, Flexport’s new warehousing and distribution service allows businesses to access shared warehouse space and distribution networks without any upfront costs. Fulfillment & Warehousing Solutions also offers shared warehousing and distribution services across the United States, enabling businesses to store and ship their products with no upfront costs.
According to a report by the 24th Annual Third-Party Logistics Study of 2020, 66% of 3PL users and 93% of 3PL providers agreed that 3PLs offer new and innovative ways to improve logistics effectiveness, including no-cost warehousing and distribution expenses. In addition, 94% of shippers surveyed believed that a 3PL logistics company could provide access to technology, expertise, and scale that they couldn’t achieve on their own.
3. Zero Labor Costs
Outsourcing logistics operations to a 3PL logistics company can help businesses avoid labor costs associated with managing logistics operations in-house. 3PL providers can offer end-to-end logistics services, including inventory management, order fulfillment, transportation, and distribution, without requiring businesses to invest in additional staff or infrastructure.
Armstrong & Associates’ report indicates that the worldwide third-party logistics (3PL) market had a worth of $802 billion in 2016, and it is projected to grow to over $1.1 trillion in revenue by 2022. This highlights the growing popularity of 3PL providers as businesses look for cost-effective ways to manage their logistics operations.
In addition, a study by Capgemini found that 83% of surveyed businesses reported cost savings as a key benefit of using a 3rd party fulfillment provider.
4. Reduce Warehousing Expenses by Utilizing Cross Docking
Cross docking is a logistics technique that allows goods to be moved directly from the receiving dock to the shipping dock without being stored in a warehouse. By reducing the amount of time inventory spends in storage, cross docking can significantly reduce warehousing expenses. When combined with a 3rd party fulfillment provider (3PL), businesses can further optimize their supply chain and reduce costs.
Some real-world examples of businesses that have successfully implemented cross-docking with a 3PL include:
Walmart: Walmart is a leading retailer that has been utilizing cross docking since the 1980s. Walmart uses a network of 150 cross-docking facilities across the United States to reduce inventory storage and handling costs. The company also partners with 3PLs to manage its cross-docking operations.
Procter & Gamble: Procter & Gamble is a multinational consumer goods company that has been using cross-docking since the 1990s. The company uses cross-docking to reduce inventory storage and handling costs, improve inventory management, and increase efficiency in its supply chain.
5. Minimizing the Need for Rework
Imagine you’ve just received an imported shipment of products, but they need to be reworked or repackaged before they can be sold.
You have 2 options: you could send them all the way back to their origin for these services, (which is super costly and a waste of time). Or, you could work with a 3PL ecommerce fulfillment center that specializes in rework services and get the job done quickly and cost-effectively. This way, you can save money and time, and get your products out to customers faster!
6. Enhance Supply Chain Visibility
By leveraging the technology, expertise, and resources of a 3PL logistics company, businesses can gain greater transparency and traceability in their supply chain, which can lead to improved efficiency and reduced costs.
Here are some ways that enhancing supply chain visibility is possible with a 3PL:
Real-time tracking: 3PLs can provide real-time tracking and visibility of shipments throughout the supply chain. This can help businesses identify and address any delays or issues before they become major problems, reducing costs and improving customer satisfaction.
Collaboration: 3PLs can facilitate collaboration and communication between different stakeholders in the supply chain, including suppliers, manufacturers, distributors, and customers. This can help businesses improve coordination and reduce lead times.
7. Special Discounted Rates for Bulk Carriers
Because a 3PL logistics company has thousands of customers, they can negotiate bulk discounts from shipping carriers like UPS, USPS, FedEx, and DHL. This means that businesses can enjoy better rates for expedited shipping, 2-day shipping, international shipping, and other services. And the more packages a business ships, the better the rates can become, which ultimately helps to reduce logistics costs.
Some ways that additional bulk carrier discounts are possible with a 3PL include volume discounts, carrier partnerships, and mode optimization.
8. Seamless Growth Through Scalable Logistics
Seamless growth through scalable logistics means adapting logistics operations to meet changing customer demands while maintaining efficiency and cost-effectiveness. To achieve this, businesses can partner with a 3PL logistics company to outsource their fulfillment operations. This frees up time to focus on other important tasks and automates many of the manual tasks involved in shipping and logistics. This is like having a lemonade helper who manages inventory and logistics, allowing you to focus on making and serving lemonade.
9. Vendor-Managed Inventory
Vendor Managed Inventory (VMI) is a concept where manufacturers outsource warehousing services to a 3PL logistics company. The 3PL provider stores and delivers goods to the manufacturer only when required, reducing clutter in production spaces, cutting costs, and increasing supply chain efficiency. This approach can be more cost-efficient than building an in-house logistics system and is like hiring a professional organizer to declutter your home.
10. Optimized Transportation Logistics
Think of a 3rd party fulfillment provider as a seasoned travel agent who can help you plan and book your dream vacation. They have a vast network of transportation options, including planes, trains, and automobiles, and can manage different modes of transportation to suit your needs. Just like how a travel agent can help you find the best deals on flights and hotels, a 3PL can articulate shipments and package design to help you cut down on costs.
But that’s not all – a 3PL ecommerce fulfillment center is also like a weather forecaster, always keeping an eye on the changing tariffs and regulations that can affect transportation costs. This is something that companies from different sectors might not be aware of. With a 3PL ecommerce fulfillment center, you can rest assured that you’re getting the most efficient and cost-effective transportation management possible.
Conclusion
Logistics operations can be a significant cost center for businesses, but with the right approach, they can also be a source of serious competitive advantage.
By partnering with a 3PL ecommerce fulfillment provider that meticulously ticks out all the boxes of your business needs, your firm can greatly improve logistics processes, reduce costs, and improve profitability.
So, don’t be afraid to take the red pill and explore the world of 3PL logistics operations. It is the next brilliant key to unlocking your business’s full potential in a smart and savvy way.