When it comes to modern ecommerce, third-party logistics (3PLs) have become essential for managing complex supply chains and order fulfillment around the globe. Industry sources report that 90% of Fortune 500 companies now turn to 3PL providers for help carrying out their operations.
3PLs provide make-or-break support for managing the logistics of high-volume order fulfillment—and ecommerce brands are undoubtedly placing a lot of trust in 3PLs not to let their business fail! This blog covers the most common 3PL challenges, including fulfillment concerns/fears that 3PL clients have, and how 3PLs can address them with smart warehousing technology.
In this guide, we’ll explore:
- How Can 3PLs Help Your Business?
- What are Today’s Biggest 3PL Challenges?
- Beating 3PL Challenges and Alleviating Customer Fears
How Can 3PLs Help Your Business?
3PLs can help your business in several ways, but the most noteworthy and popular reason most companies rely on 3PLs is the distinct—and dynamic—way they positively impact your numbers. We’re talking about a better bottom line.
3PLs are proven to significantly reduce overall operating costs and cut any unnecessary extra expenses, which equals higher profits. Period.
In fact, according to PLS stats for 2022, an impressive 75% of shippers claimed that they have seen a marked drop in overall costs after recruiting the aid of a 3PL in their operations. How do 3PLs work such magic?
What makes 3PLs so special is that their services are end-to-end, from storage to shipping. Optimizing end-to-end can result in a mountain of savings for businesses. Order fulfillment in particular, can benefit from utilizing a 3PL. Using a third party to avoid the overhead cost of running your own fulfillment team is an advantage many DTC businesses are looking for.
Speaking of order fulfillment, it’s increasingly vital that companies can ensure packages are supplied in promised timeframes. The online shopping world is experiencing an explosion and consumers are expecting quick turnarounds. When those online orders come streaming in, businesses have to be ready and prepared to meet the demand at a moment’s notice.
According to recently published survey stats, almost one-third of global respondents (30%) report they shop online at least once weekly (many mentioned going even more); despite the pandemic stay-at-home orders having been lifted some time ago.
It makes sense that a visible uptick (some may call it a skyrocketing) of increased activity in online shopping trends began in 2020 due to the arrival of COVID restrictions and physical shopping being rendered impossible. However, this online shopping craze that was first attributed to pandemic-inspired shopping behaviors doesn’t appear to be going away anytime soon.
In fact, new data sheds interesting insight on online shopping and ecommerce, with predictions for home shopping to continue gaining momentum as we head into the holidays and onward into 2023. Online sales are showing a clear upward trajectory, with a projected estimate of $5 trillion in sales topping out 2022. This uptick comes as no surprise in light of the increased popularity of mobile shopping and subscription-based services—all of which make for a collective tech-centric runaway train that only appears to be picking up steam.
But that is just one of the examples to highlight in the arsenal of advantages 3PLs bring to the table. As well as handling and streamlining order fulfillment, 3PLs also can help with warehousing, logistics (scheduling deliveries, etc.), and even with business expansion.
What are Today’s Biggest 3PL Challenges?
As online shopping has expanded, more home shoppers have been touched by a major or minor inconvenience from an online order. Such hiccups can wreak havoc on a brand’s reputation, and definitely won’t inspire return business or glowing reviews. After all, customers want more than just high quality, they want to know their order is going to get to them on time. So, how do businesses ensure this?
Here are the biggest challenges facing 3PLs today as ecommerce businesses strive to mitigate the risk of snafus in the first place.
5. Staff Shortages
Recent years have seen a global supply chain struggle. Staff shortages are among the biggest concerns contributing to the unprecedented supply chain volatility we now face. Warehouses, for example, experienced a staggering 49% turnover rate in 2021, and truck drivers are also becoming increasingly scarce. Pair these shortages with an influx of increased consumer demand, and many companies’ fear their fulfillment operations simply aren’t equipped (staffed) to meet the demands. Enter 3PLs, who can offer not only distributed labor costs, but also better technology and the advantage of having established staff.
4. Inflation and Rising Costs
Inflation has been steadily on the rise, and its effects send a ripple—or more like a riptide—that touches all. The majority of today’s inflation can be directly linked to volatile supply chain infrastructure, where the prices are rising higher and higher. The top culprits raising prices include: the rising cost of raw materials, utility bills, and as we touched on before, staff and transportation. 3PLs can help you tackle this issue by overseeing all supply chain operations—including inventory management.
3. Fuel Costs
When oil and gas prices rise, that cost is inevitably passed on to clients along the supply chain. One way 3PLs can help with this is by relying on their well-established relationships with couriers and negotiating rates on your company’s behalf, reducing crazy shifts and upheavals, and especially unfair gauging, even when oil prices soar.
2. Supply Chain Shortages
Supply chain shortages can cripple your process and bring everything grinding to a halt. The good news is that 3PLs have the bandwidth and data at their disposal that allows them to provide real-time visibility into all aspects of your supply chain. In a nutshell, a solid 3PL can help you navigate the supply chain and foresee any issues coming down the line.
1. Competition Levels Are High
Looking for even further incentive to enlist a 3PL partner? The right 3PL partner can keep your company one step ahead of the competition, which is fierce. These niche companies’ have developed more advanced and modern processes to overhaul your warehousing and logistic needs (including advanced technological wms software packages). By using them, you’re always operating at your maximum efficiency and bringing your A-Game.
Beating 3PL Challenges and Alleviating Customer Fears
Some great news for proactive companies looking to further improve is that many common 3PL challenges can be greatly impacted by the right 3PL software, as mentioned above. Let’s face it: All 3PLs get surges and have some order fulfillment mistakes. Some 3PLs aren’t prepared for same-day order fulfillment and might not be able to maintain consistent customer communications. The list goes on.
3PL software helps with communication and visibility and keeps customer data secure. Also, modernized software (like ours at Logiwa) can help track 3PL WMS KPIs and give operators much better insights throughout the process.
Utilizing a 3PL software can also put your customers at ease by helping you track all areas where there is potential for trouble. And if you are looking for the right one and don’t know where to start, Logiwa can help with that, too.
For more insights into how Logiwa can help you keep up with the competition and optimize your operations, download our spotlight on 3pls guide, get a demo, or reach out to our team.
