Mar 17, 2021 15 Min READ

Ultimate Guide to 3PL Warehouse Technology: Building Out Your Tech Stack
Saul Lipenholtz

Saul Lipenholtz is a Sr. Implementation Manager at 3PL Central. He has over 10 years of experience supporting 3PL businesses with the implementation of WMS software and technology. Saul has guided hundreds of warehouses through setup and optimization of their warehouse management software to increase efficiency and facilitate growth. He is passionate about technology and how it can be applied to create real-world solutions and drive results.

15 Min READ
Ultimate Guide to 3PL Warehouse Technology: Building Out Your Tech Stack


The world is a tech-driven powerhouse and 3PL warehouses have to stay ahead of the game by using leading technology solutions.

The realm of third-party logistics (3PL) has become highly competitive. To spring ahead of the competition and make good on your promises requires more than challenging work and dedication - it takes leading technology and software to manage the business, improve operations, streamline automation, and provide real-time customer service.

What Is a WMS?

WMS stands for warehouse management system. It is a software solution that supplies complete inventory visibility and offers management for all supply chain fulfillment operations that span from the warehouse or distribution center all the way to customer delivery. A technology stack encompasses a collection of various technologies that all function together.

There are four types of WMS software:

  • A Cloud-based WMS. A cloud-based WMS provides access to warehouse software applications over the Internet using shared computing resources. These warehouse systems update in real-time as new features are released. These are often flexible and integrate easily with ecommerce technology.
  • On-Premises WMS. On-premises WMS software is installed on the company’s local servers and may require extensive one-time setup.
  • Supply chain modules. These do not overlap with your existing software but work singularly.
  • Enterprise Resource Planning (ERP) can combine warehouse functions with Accounting and other system functions, but may require significant cost, system implementation time, and dedicated resources to support.

The Growing Need for Integrated Warehouse Technology

The transportation and logistics industry is booming. The staggering growth of 3PL warehouses displays rapid evolution. In 2018, US businesses were shown to have spent $1.64 trillion on logistics alone which was an increase of 11.4% since 2017. In fact, the growth has accounted for 8% of the nation’s GDP. Nowadays, the international supply chain industry shows that spending within the industry has doubled and will reach 15.5 trillion by 2026. The need for innovative technology that can be built upon for future needs has never been more critical.

The astounding growth in 3PLs is spurred by the consumer demand for ecommerce purchases. With the COVID-19 pandemic, ecommerce sales have skyrocketed. Reports show that from March 29 to April 12, 2020, the U.S. and Canada online retail sales skyrocketed from 55% to 76%. Even brick-and-mortar retailers experienced astronomical online sales that went up to 42%.

Many have projected that once the pandemic lockdown and shelter-in-place orders were alleviated that sales would plummet, but that has not happened. Sales are continuing to grow every month in 2021 with no slowdown predicted. 3PLs have to take initiative with their customers and partners to solidify relationships, identify opportunities, and create opportunities for their operations to gain a competitive advantage. One of the first steps towards achieving a technology advantage is with warehouse management software to start building an integrated stack.

The Latest Tech Stack for 3PLs

Running a third-party logistics warehouse serving ecommerce or omnichannel merchants requires the latest technologies to ensure current shopping cart and marketplace connectivity, functionality, and integrations. A successful 3PL has to stay ahead of the game with superior and current technology integrations coupled with excellent customer service - all tech must have a necessary customer service component.

Necessity of WMS for 3PLs

The key to optimization for a 3PL is having a leading warehouse management system (WMS) that provides efficiency and 3PL-centric features and functionality, including: billing and invoicing, logical customer/inventory separation, and individual integration connectivity by customer. Comprehensive warehouse technology solutions allow a 3PL to take on more business and grow by leaps and bounds. Remember, the key to bringing in more customers is to show them that you have the efficiency and best practice workflows needed to meet their needs and never let them doubt your abilities.

Meet the Tech Demands of Customers and Expansion

A 3PL must meet the increasing demands of the fast-paced technology-driven world by providing easy access and integrating complex systems such as marketplace and online shopping systems into the supply chain. Every customer’s needs are unique. Your technology stack must provide the versatility necessary to offer truly customizable solutions for every customer. You’ll also need to have the ability to scale your business to manage even more customers and expand when necessary.

Technology Promotes Warehouse Growth

As a 3PL owner or operator, we know that you want your logistics company to grow. However, without the right technology infrastructure, there is no way to meet the rapid demands of burgeoning ecommerce and omnichannel fulfillment. A 3PL has to stay ahead in warehousing and effectively meet the demands of rapid growth, which can sometimes hit quickly.

The 3PL industry is highly competitive. There is a pressure to drive down costs that has become unrelenting and even exhausting. Think about it, just about every shopping cart now provides an all-in-one ecommerce shopping and payment service solution. Also, many serve as further order aggregators. They allow ecommerce merchants to access and serve an even wider range of markets with multiple shopping channels. The feedback presented by the Third-Party Logistics Warehouse Benchmark Report shows that 84% of 3PLs have adopted a WMS. It has quickly become the backbone of successful 3PLs. Seventy one percent of companies with a WMS report time savings of 11 plus hours per month after they implement the WMS software.

WMS Technology Control Costs

When you can optimize workflows on all sides, including receiving, picking, packing, and shipping sides of the warehouse then you will start to eliminate errors that often occur with a paper-based process. An automated solution that incorporates a mobile barcode scanning solution is virtually error free. A WMS is the backbone of 3PLs and easy to integrate with all key systems so you can structure a very optimized solution to gain the results you look for and experience an improved bottom line.

Opportunities for 3PL Growth

Growth in ecommerce has spurred an impressive range of opportunities for the most ambitious 3PLS who embrace technology. To harness the opportunity, consider leveraging state of the art WMS that integrates with shopping carts, marketplaces, order management systems, transportation management systems, and shipping carriers.

Importance of a State-of-the-Art WMS

Any 3PL that takes on ecommerce customers needs a state-of-the-art warehouse management system to connect the ecommerce platforms in a perfectly seamless way. Creating an automated inventory feed with live inventory availability across all selling channels lets warehouse customers focus on their business instead of trying to manage inventory. Providing access to these crucial 3PL services gives your customers the tools they need to thrive and grow.

Handling Growth

As your customers flourish, you have to be ready to handle the growth administratively and operationally. You’ll need to find a WMS platform that connects to different billing and invoice services or offers billing and inventory functionality within the system natively, so you always have real-time information at your disposal including automated messaging. With such features, you’ll enjoy less researching and gathering of information while truly streamlining your operations.

Drive Efficiency

Growth is fantastic, but it always has a snowball effect. You’ll need to incorporate industry best practice workflows to further drive efficiency of all orders and management including pick and pack operations. It is imperative that you have the right technology in place to enable rapid receipt of your customer’s inventory, directed putaway to appropriate bins in the warehouse, plus enjoy the benefit of accuracy during all aspects of the picking, packing, and shipping process. Think about it - you are successful only when your customers' businesses are thriving. A 3PL warehouse needs customer growth to expand, and having the right technology will help them grow. When your customers start to grow, you’ll need to scale quickly and efficiently.

Technology that Works for Your Warehouse

The 3PL warehouse’s WMS is a hub that connects all of the spokes of the supply chain to a singular central technology. You can effortlessly plug into platforms that better feed and serve your customers’ business needs. Clearly, to meet this need means that you must build out your technology stack in the proper way to provide essential services and make an impact.

The correct technology stack enables integration with all necessary platforms so you can enhance your customer’s experience. You’ll want to choose the proper technology to maintain your pace and rapidly change the landscape of technology when necessary, so you grow and support a competitive edge.

Let’s examine the ways that technology plays a significant role in any 3PL warehouse’s service.

Improved Connectivity

Enjoy enhanced connectivity to platforms that truly drive your customer’s business which leads to more clients. Remember, the success of your clients is your success. Even a new 3PL who has a single client can quickly experience growth as several more ecommerce clients are brought onboard within just a month or two.

You’ll need to be ready to meet their needs with innovative tech that assures your growing customer base that you can meet their needs and fulfill shopping cart orders within days and at once after the inventory arrives. Remember, when picking warehouse technology, you’ll want to always look at operational capabilities and system connectivity.

Automated Billing

One of the biggest concerns for 3PLs is capturing all billable activities in order to generate the most potential revenue. In fact, 48% of 3PLs cite uncaptured billing charges as one of their biggest invoicing challenges, while 46% cite lack of automation. A WMS designed for 3PLs should include significant billing functionality, including recurring charges, automated charge capture upon activity or scan, and integration into other automated billing systems for 3PLs.

Software for Real-Time Visibility and Communication

A 3PL with a strong focus on customer service has software that supplies real-time visibility and communication in an effort to ensure that customers have ready access to their inventory to set them apart from other third-party logistics providers. Clearly, scalability is the key to staying ahead for 3PLs. They have to be ready to grow to meet the demands of their customers and continue to thrive in the highly competitive market environment. Leveraging tools like a customer portal, where a 3PL’s customers can log in and have live access to order and inventory information can help a 3PL differentiate their service and provide that real time visibility needed.

Staying Ahead with New Technology

Supply chain management is one of the fastest growing industries in the world. In order to stay ahead, 3PLs have to familiarize themselves with the latest technology. To stay ahead, a 3PL has to examine various software and systems tailored for the logistics and supply chain industries. A technology platform has to scale the business so it can effectively navigate the complexities and future changes that are forecasted to occur as omnichannel and ecommerce fulfillment continue to grow. To meet the demands of growth, a 3PL must choose software that will complement their warehouse technology stack.

Components of a Warehouse Technology Stack

An integrated technology stack built upon a WMS lets a 3PL manage more transactions at the warehouse level and effectively allocate inventory by order channel and demand. With the fast growth rate of 3PLs, automation isn't always simple. The sheer complexities of ecommerce fulfillment create a great need to orchestrate operations for innovative optimization. All of these factors are pushing the necessity of advanced execution software within the middle of the technology stack and for added optimization tools.

The tech stack has changed. Nowadays, it’s not just the WMS on top, the warehouse control system (WCS) software positioned in the middle, or the automated materials handling systems found at the floor level. Nowadays, to meet the ever-changing demands and needs, the stack is expanding. 3PLs must grasp, grow, and use new technology or they risk ending up falling behind, and puts omnichannel fulfillment efforts at risk.

Factors in the Stack

Yes, automation hardware such as robotics, high end sortation, conveyors, and pick-to-light systems are all potential tools that can be part of the stack for ecommerce. Automation providers also believe that the stack is software driven.

Joint Solutions of Hardware and Software

Automation is extremely important for 3PLs, but the combination of hardware and software create a combined solution that truly gives users a crucial advantage. With Amazon pushing same day delivery, everyone else wants to stay ahead in the game too and supply the same perks. It is necessary to have automated material handling and software solutions to truly thrive or risk being left behind.

 At this time, ecommerce is moving a huge volume of small orders which require added order fulfillment and transportation management decisions. Shipping small and fast is a necessity throughout most of the North American supply chain. The demand/fulfill cycle is unrelenting and has been cut down from days to hours. In fact, in the Third-Party Logistics Benchmark Report, 53% of 3PLs report fulfilling orders in less than 90 minutes. Various types of optimized software have appeared that truly synchronizes the pick sequencing along with the staging and loading.

Warehouse Execution System (WES) Software

The emergence of WES software and WCS is creating greater functionality with order releasing, resource optimization, analytics, and wave management. WCS focuses on a traditional role of automation coordination and flow.

Complete Warehouse Management Platform

Without a doubt, the logistics industry is snowballing at a rate never seen before. Competition is fierce as new 3PLs emerge. It is imperative that to compete, the best 3PLs have to stay on their toes to sprint ahead. The only way to ensure a place in the front of the pack is to run a complete warehouse management platform in the cloud that is fully comprehensive and provides regular functionality updates and releases that align with industry needs. 3PLs will want to put a halt to paper-based, error prone habits that might have worked a decade ago but are now considered fossilized habits that bog a business down. With a WMS in place, a business can focus on customer satisfaction, efficient operations, and ongoing growth opportunities.

A complete warehouse management platform supplies the following:

Customer Service

Provide greater support to customers with whatever they sell and wherever they need the items sold. Customer service support is crucial not only for ecommerce businesses but also for the 3PLs. When the ecommerce business grows, so does the 3PL’s business. Tools like automated notifications, customer portals, and bi-directional integrations can enhance the customer experience.

Efficient Operation

A warehouse management platform helps a 3PL operate more efficiently. Whether dealing with warehouses, workflows, or workers, an integrated warehouse technology stack provides adaptability which offers greater room for growth.

Grow Faster

An innovative warehouse management platform accelerates your growth with greater solutions and can improve the bottom line. In fact, 23% of 3PLs grew their order volume by 50% or more after implementing a WMS.

Embracing A Warehouse Management Platform 

A 3PL that does not embrace an innovative warehouse management platform can suffer from manual errors, lost inventory, and more which can cost the business thousands per month in lost revenue. You can shorten your order cycles and improve your warehouse operations with an integrated warehouse technology stack.

  • Track all of the inventory in the warehouse from the cloud - never wonder if there is something in stock or not.
  • Automate orders
  • Leverage API/EDI integrations
  • Utilize directional putaway so all inbound inventory is stored rapidly
  • Streamline the pick, pack, and ship process with mobile barcode scanning
  • Draft repeatable and best practice workflows for each customer that are scalable.

Improved Billing

Avoid lost revenue caused by manual billing. Using ultramodern software, you can instantly send invoices and automate all billing from within the WMS solution.

  • Segment billing, inventory, and reporting by customer
  • Stay up to date on all chargeable events in the warehouse
  • Automate charge capture upon event
  • Automate billing and invoicing
  • Effortlessly figure out recurring charges for storage, shipping, handling and more.

Real-Time Information

To manually process tasks is time consuming and virtually impossible in a growing 3PL.

A WMS lets a company conduct all functions rapidly and stay up to date with the following:

  • Rapid on-demand reporting that requires no coding
  • Fully automated customer notifications to stay current on inventory
  • EDI and API integrations to connect to adjacent systems and order entry systems
  • Implementation programs to quickly launch the software and keep it running

Choosing the Best Technological Resources for Warehouse Operations

A 3PL warehouse must adopt state-of-the-art technology to forge ahead and weather any future obstacles or disruptions. Future problems may include qualified worker shortages, faster scaling, increasing demand for real-time information, increased product demand, supply chain disruptions, and shipping slow downs.

A successful 3PL that needs to grow will require an eye to the future and using all tools at their disposal to not only survive but also tackle disruptive events.

The COVID-19 pandemic has clearly revealed weaknesses in the supply chain and logistics that were not foreseen. However, 3PLs have struggled with the unforeseen difficulties and persevered. Overall, it's been a learning experience that has revealed strengths and weaknesses which many are using to build future strategies that embrace technology and take warehouse logistics to a new level.

3PLs must invest in cost effective technologies to combat becoming obsolete in a few years. Below are a few steps a 3PL should take to choose the best technology resources for operations.

Analyze Current Technology

Take a careful look at your warehouse technology to decide if it will suffice for your business’s future growth and the goals of all who collaborate with your company. You’ll need to make sure that your IT and system partners can manage any sudden demand spikes without affecting your bottom line too drastically so you can still continue to provide the necessary expected level of customer service. If your current IT and systems do not meet any of the necessary criteria, then it’s time to upgrade.

If it's time to upgrade and buy a new warehouse management system, then you’ll want to make sure it can support all of your expansion plans such as the purchase of new facilities and additions of new customers. You might think that an on-premises WMS is an acceptable choice, but if the system is not a software as a service (SaaS) or is not supported by the cloud then your team or customers will not be able to access it from all locations which poses a significant problem. On-premises also means that you won’t get real time updates from the WMS provider for new functionality.

Whatever new WMS software you opt to go with should capture data and give you comprehensive forecasting along with complete reporting capabilities. It is highly beneficial to have numerous insights at your disposal on all of your warehouse transactions, future forecasting, and cost analysis. Which makes a stark difference between yourself and your competition. You can use the data revealed to further perfect operations, increase profits, find new clients, make new sales, and improve service opportunities.

Remain Up to Date on the Latest Industry Trends

Remain up to date on global logistics trends to learn how advancements increase warehouse function. Once you know how software providers can influence the supply chain then you can position and identify tools to achieve beneficial additions to your technology stack. Best of all, you can gain a competitive edge over other 3PLs. You’ll want to focus on software that gives you the potential for long-term growth over tools that simply satisfy your short-term needs.

Staying Ahead of the Competition

Creating unique differentiators versus other 3PLs provides your logistics company with an edge. You can tailor your value-added services, prices, and technologies to better meet the needs of your customers and potentially demand a price premium. Examine what is working for competitors and then vow to meet or exceed their service programs. The environment is hyper-competitive, and you cannot afford to settle for software that is simply considered ‘good enough.’ Instead, you have to find an integrated WMS technology stack that is superior and has the capability of growing.

Post-Covid-19 Growth

Many 3PLs want to stay ahead post-COVID. Although projections have third-party logistics continuing to grow by leaps and bounds, ultimately, the best will rise to the top and stay there by continuing to scale, meeting customer demands, and staying nimble. How they oversee peak shipping season is also going to become a telling factor.

Improving Operations

Operational improvements are critical for any warehouse to remain successful even if you have longevity under your belt. If you don’t change with the times and find ways to improve then your business will start to become lackluster and suffer.

Many people who run businesses become too self-assured. Things are operating well, so they take on an attitude of - ‘if it's not broken then why fix it?’ Basically, they think they can just coast along and stay on top doing what they do month after month and year after year. Sure, it might be cost effective at first to take this strategy, but eventually you’ll start to lose customers to competitors and your bottom line will fall.

A newer business might not be as proven as yours, but they might be willing to embrace newer and more modern technology which could eventually give them the edge they need to overtake outdated companies and capture their business. The goal with any logistics company focusing on ecommerce fulfillment is to truly streamline operations so you can measure key performance indicators (KPIs) for your 3PL’s future improvement.

Take the time to audit all services and operations so you can quickly identify if any of your processes are lagging and where the workflow is still providing you with tried-and-true performance.

Inbound and Outbound Workflows

Take the time to closely examine your inbound and outbound work flows. Examine receiving, picking, and packing processes so you can gain insight into the workflow and output. You’ll want to find any redundancies or where improving technology can help speed things up, so you can better perfect order fulfillment processes.

Inventory Management

Use a warehouse management system to calculate cycle time accurately and confirm inventory counts. You can then implement new processes and use paperless methods such as barcode scanning so you no longer have to use any manual entries and can cut down on errors. You’ll want to keep track of findings so you can learn how to improve things and, hopefully, reduce any future problems.

Warehouse Layouts

Rely on FAST (focus, accountability, simplicity, and transparency) principles to improve your warehouses layout and throughput to effectively increase ecommerce efficiency. Strive to achieve the greatest warehouse performance.

Make an Investment in Technology

The rise of ecommerce growth has opened a door to modern technologies that focus on the specific needs of the logistics and supply chain industry. The COVID online buying increase has definitely created an evolved landscape and there is no slowdown in sight.

Nowadays, everyone wants to buy online instead of in person which has spurred ever-growing ecommerce demand. Technology innovations are moving fast with automation and integration to increase customer satisfaction and help with 3PL profitability.

Extensiv’s Third-Party Logistics Warehouse Benchmark Report shows which 3PLs fall into the highest growth brackets. As a result, the following 3PL facts stand out:

The highest growth 3PLs are 200% more likely to invest in system integrations with shopping carts and marketplaces and are 50% more likely to invest in technology for ecommerce.

Technology is ever-changing with a wide assortment of shapes and sizes appearing. What fits one company might not fit another, so you’ll want to focus on the three principal areas that matter to 3PLs when making a choice.

1. Innovation 

As a long-term fulfillment player, the biggest technology change is going to be moving from on-premise solutions to the cloud. SaaS-based technology has been a part of the tech stack for several years, but there are still businesses who are dragging their feet at adopting cloud-based technology. WMS market growth is projected at 13.1% CAGR from 2020 to 2025, but cloud based WMS will grow at 28.7% during the same time frame showing that most companies plan to make the shift to the cloud

2. Automation

Labor management, inventory, receiving, picking, packing, shipping, and more that process and manage workflow automation all spur growth in a 3PL. Automation provides efficiencies by taking away the need for manual entry and possible errors that can lead to mistakes like mis-picks and chargebacks. Automation helps tackle the management of billable activities which help a warehouse get paid more and faster. 3PL billing software takes things to a whole new level. See how one company increased their invoices by $15,000 per month.

3. Integrations

It doesn't matter where your business sits in the supply chain, integrations are necessary so that you can connect with other players and metrics. With Extensiv 3PL Warehouse Manager WMS you can have greater visibility and improve the customer experience. Consider investing in EDI or API integrations, Wi-Fi enabled devices, shopping cart integrations, marketplace integrations, and more to meet the increased demands of connectivity for ecommerce.

Focusing on the Customer Experience

As a 3PL, you always want to focus on the customer experience with third-party fulfillment software. Remember the customer experience is the lifeblood of ecommerce. When your ecommerce partners grow, their needs expand and your 3PL benefits. It’s a snowball effect. Everyone can come out a winner when each spoke of the wheel functions together.

Ecommerce consumers want unlimited product choices, multiple shipping methods, product tracking, branded orders, hassle free returns, and real time visibility on all inventory. Without a doubt, a seamless shopping experience is a must-have to remain competitive. How a 3PL’s WMS functions and integrates will determine whether the brand can meet those consumer expectations.

To enhance the overall customer experience 3PL warehouses are now tasked with even more responsibility because they must help to spur innovation and growth. All supply chain players have to work together to fulfill expectations.

Logistics professionals must know how to build and maintain key operational workflows, create long term relations, and invest in the right technology. You should never wait until peak shipping season to optimize your operations. Now is the time to make sure your warehouse is ready to tackle any significant game changers in the logistics industry which means investing in the best WMS for your 3PL.

When shopping for a cloud-based WMS, don’t be afraid to ask for a WMS software demo. You’ll want to make sure that the software has what it takes to build your 3PL warehouse technology stack to function today and well into the future. Contact Extensiv to learn more today!


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