The Amazon Effect continues to put pressure on the third-party logistics (3PL) industry. Consumer expectations for order fulfillment are sky high as they demand multiple shipping options, often for free, and as fast as same day delivery. Though Amazon is a channel for order fulfillment through FBA, you must be ready to compete with them as well. Competing with Amazon is no longer a luxury–it is a necessity for your customers who want to stay relevant in the ecommerce space.
However, although the tech giant conditioned consumers to expect a high degree of flexibility, choice, efficiency, and cost-savings with online shopping, Amazon is not the only company that can offer these benefits to consumers. To help your 3PL and your customers compete with Amazon, consider these three tips.
1. Leverage relationships with shipping carriers and other 3PLs
Famous for their 2-day shipping with Amazon Prime, Amazon has inspired other retailers like Walmart to offer similar shipping timelines included in membership packages. How is Amazon able to accomplish this? Amazon operates a network of shipping hubs across the country with inventory split amongst them such that they can deliver any order to any address in the contiguous United States within two days. However, Amazon also loses a lot of money from Prime Shipping; they spent $21.7 billion on shipping costs in 2017. Giving the consumer whatever they demand “at the expense of profits” forced Amazon to scale back its Prime Two-Day home delivery to shrink shipping costs incurred by the company. But, they still offer Prime Now Two-Hour Delivery, Same-Day Delivery, One-Day Shipping and Two-Day Shipping in most cities nationwide for millions of products.
How can you help your customers compete with the insanely fast shipping from Amazon? The answer is simple: by leveraging your relationships with shipping carriers. According to the 2022 State of the Third-Party Logistics Industry Report, “transportation and freight expertise top the list as to why businesses look to partner with a 3PL.” Your customer may not be able to sacrifice profits to offer the fastest shipping for free like Amazon. However, considering 3PLs specialize in contracting with shipping carriers, you can negotiate better shipping rates for your customers to help them offer many delivery timeframes at affordable prices.
Additionally, you can form partnerships with 3PLs in other parts of the country and operate as a 4PL. This would allow you to spread your customers’ inventory across 3PLs in different regions and build shipping hubs comparable to Amazon’s network of warehouses. Even partnering with 3PLs on opposite coasts–much more feasible than replicating Amazon’s entire warehouse network–will go a long way toward reducing shipping timeframes and costs on orders shipped throughout the country.
2. Invest in digital automation
Amazon’s warehouses constantly make headlines for their use of advanced technology in their warehouses, especially robotics. The dedicated Amazon Robotics and Advanced Technology team researches new robotics technology–including robotic shelves with attached robotic arms to pick from high shelves as well as autonomous mobile robots and guided carts–that make warehouse workflows more efficient. However, Amazon also uses other technology in addition to robotics. The Amazon Fulfillment Technologies team supports Amazon’s warehouse management system (WMS) that includes an inventory management system (IMS) used for tracking the inventory as it travels into, within, and out of the warehouse.
Although robotics can effectively increase warehouse efficiency, you do not need to fill your 3PL warehouse with robots to help your customers compete with Amazon. Instead, invest in digital automation. Digital automation refers to eliminating manual (paper-based) processes with software that handles repetitive tasks for you. For example, a WMS captures data on all transactions that happen in a warehouse from receiving to shipping, inventory counting to picking/packing, billing and more. Automating these processes with a WMS saves your 3PL time, reduces human error, and eliminates inconsistencies, drastically increasing efficiency within your warehouse. With a reliable, scalable WMS, you can process orders quickly enough so your customers can compete with Amazon.
For more on becoming a tech-enabled 3PL, read this article Becoming a Tech-Enabled 3PL.
3. Optimize processes for omnichannel fulfillment
Amazon is a trendsetter in omnichannel fulfillment, offering many delivery options like buy online pick up in-store (BOPIS), or at one of their lockers, years before omnichannel became an industry hot topic. Though initially divisive and seen as a poor alternative to the original free 2-day home delivery, Amazon lockers and pick up in-store give consumers more flexibility as they have options for how they want to receive their orders. In many cases, picking up an order from a locker reduces the shipping time and is more environmentally friendly than home delivery. Furthermore, being able to make returns for online orders in stores gives consumers the flexibility they want from ecommerce.
Now, omnichannel fulfillment is everywhere. Buy online pick up in-store is a common fulfillment option at retailers across industries, ranging from Target to Best Buy to major grocery store chains. To keep up with demand, your 3PL needs to optimize your processes for omnichannel fulfillment. This means juggling B2B, B2C, and ecommerce fulfillment strategies in a unified approach so that your customers can accommodate their consumers’ needs. A lot goes into staying organized for omnichannel fulfillment, but you should pay special attention to your ecommerce strategy as it is one of the biggest drivers of omnichannel fulfillment. Again, a robust WMS that can integrate with online shopping carts and marketplaces is the best solution. Application programming interface (API) integrations bring orders into the WMS from online sources and transmit inventory levels back so that you do not oversell products, making ecommerce fulfillment a breeze. Reverse logistics is also critical in ecommerce and omnichannel fulfillment, so having a WMS that processes returns smoothly is important for helping your customers compete with Amazon.
Read the 2022 State of the Third-Party Logistics Industry Report for more insights into this year’s trends, including technology and omnichannel fulfillment.