Thanks to the pandemic-driven boom in ecommerce, the number of digital sellers has skyrocketed. Both new entrants and established businesses pivoting to digital are behind those record numbers.
With more sellers, the demand for third-party logistics (3PL) warehouses has never been higher. Businesses need third parties that can handle the intricacies of their logistics so they can double down on their core competencies.
Now, 3PL warehouses are more than happy to fill this influx of new business. But as nature has shown time and again: where growth happens, challenges follow.
To help you navigate the new realities of a booming supply chain and more specifically 3PL warehouses, we’re highlighting some of the most crucial 3PL challenges you’ll need to tackle head-on in 2021 and beyond.
1. Scalability
Exponential growth without the logistical backbone to support it is a recipe for disaster. This is one of the prime reasons why businesses rely on 3PLs. They want to delegate the logistical headaches to a third party so they can focus exclusively on compounding growth.
So if there’s any industry that knows the importance of scalability, it’s third-party logistics. Adapting to client growth is a part of the business. But what’s different this time is the astronomical surge in ecommerce adoption.
All of a sudden, the systems and processes of 3PL warehouses are going through a rigorous stress test, and many are already snapping. Hence why we believe scalability is going to be one of the biggest challenges for 3PLs moving forward.
2. Seasonality
Between rent, salaries, and other commitments, the traditional brick-and-mortar stores have to pay a premium regardless of business activity. But ecommerce brands can run without any major financial commitments, allowing them to scale costs back when things are slow.
It’s not surprising then to see internet brands thriving in highly seasonal categories.
Unfortunately, this also means that 3PLs are under intense pressure to accommodate these massive shifts from season to season. Running out of space, dealing with untrained seasonal workers, and filling the cracks in processes to accommodate the new peaks—and then scaling everything back to lows once the season runs out—is painfully challenging.
This is especially true for 3PLs that specialize in helping clientele in seasonal categories. Examples include merchants selling winter sports gear, air coolers, and even metal detectors.
This ties in with our previous point, as scaling down is just as important as scaling operations up.
3. Shipping
There’s no denying that the modern consumer wants cheaper and faster shipping. With Amazon constantly pushing the boundaries of the shipping experience, we’re seeing no signs of this trend slowing down anytime soon.
In other words, faster and cheaper shipping is turning from a nice-to-have into a must-have for digital merchants. It can literally make or break their business.
Merchants are naturally turning to 3PL warehouses to fulfill this demand. But with the costs of shipping rising worldwide, not to mention the 3PL challenges that come with handling a wide variety of products at scale, many 3PLs are struggling to keep up.
As a result, they’re losing clients to warehousing providers who have developed creative solutions to reduce shipping costs for their customers and have the resources to tackle these 3PL challenges.
4. Storage Space
Traditional warehouses were designed according to the needs and requirements of the time. There’s only so much growth a store in some small town can hope to have in a year. But in the world of online commerce, a single viral campaign can expand the sales of a business by hundreds if not thousands of percentage points.
So flexibility is incredibly important for 3PLs as they are exposed to exponential growth on two sides: their own business and that of their customers.
Unfortunately, one of the first side effects of exponential growth is that warehouses run out of space. Failing to offer adequate capacity can put a deep dent into the reputation of any 3PL.
Add to that the massive price hikes in real estate across the nation, and you can see why space requirements are going to be a massive challenge this year.
5. Workforce
Finding the right talent is never easy. With the sudden growth in logistics, we have more companies fighting for expansion than ever, and as a result, workers have many options to pick from.
Amazon, for instance, is expanding its workforce aggressively, both in terms of acquiring talent and offering competitive compensation.
Then there’s the fact that acquiring talent is only half the battle. Retaining the ones who are genuinely driven and hardworking is easier said than done.
The result is that hiring, training, and retaining the right people, all while keeping costs at the minimum to keep your pricing competitive, is yet another major challenge 3PL warehouses are facing today.
How Technology Can Help You Overcome These Challenges
Technology can completely transform the efficiency of your operations, and consequently, your bottom line. At the core of that transformation lies automation.
Automation has traditionally been reserved for mega-corporations as it takes tremendous levels of expertise to develop, deploy, and maintain such systems.
At Extensiv, our mission is to arm 3PL warehouses with sophisticated warehouse management system (WMS) solutions that can level the playing field for them.
We have connected solutions to automate nearly every aspect of your warehouse, from receiving, picking, packing, shipping, and overall warehouse management. Here are a few ways this can completely transform your operations:
Make your warehouse paperless. Our simple but powerful combination of scanners, packers, and software solutions can digitalize nearly every aspect of your business. Not only does this minimize the room for errors to practically zero, but it can also boost the productivity of your team by automating a variety of manual tasks. Imagine tracking item locations within the warehouse, printing the right labels, scheduling dock appointments, exchanging data between different platforms, sending reports and confirmations, and lots and lots of other traditionally manual tasks handled for you by a smart WMS software system.
Make your workflows digital. This way best practices are automatically tracked and enforced throughout your chain of operations. As a result, training seasonal workers turns into a completely pain-free process. Fewer mistakes and training hours can help you scale your workforce effortlessly.
Optimize your shipping. Extensiv 3PL Warehouse Manager can automatically grab pricing from carriers, select the one with the best rate and speed to delivery, and select that option for you.
These scenarios only scratch the surface of what’s possible with modern WMS technology today. Get a free zero-obligation consultation with a WMS expert today to see the difference technology can make for your business. Or, if you plan to evaluate WMS technology, download the WMS buying guide with checklists for each step of your evaluation.
