INTEGRATING SOLUTIONS WITH YOUR 3PL
Here’s one way to get your 3PL to provide a service you need: Ask.
Third-party logistics providers will tell you that the development of many of their value-added services came as a result of customer requests.
But here’s a little secret about 3PLs: They really don’t want to be in the value-added services business, if that means providing an a la carte menu for shippers to choose from. Instead, they want to form strategic relationships with shippers to provide integrated solutions. Sometimes those stray beyond the bounds of logistics to include processing, assembly, customization and manufacturing.
How this benefits the 3PL is fairly obvious. How can this benefit your company? By streamlining your supply chain and reducing your costs.
“Our services evolve based on the demands of retailers and consumers,” says Leslie Ajlouny, vice president for Business Development at Evans Distribution. “Speed to shelf has become most important, especially for high-turn items. We provide fulfillment, kitting, displays and other processing services to help our clients.”
“Our services are driven by our customers,” says Harvey Rickles, a director in the UPS logistics marketing team. “Their requests are usually driven around reducing costs and complexity.”
When manufacturers and retailers are working on a problem, it makes sense for them to talk about it with the 3PL partners they have been doing business with for years, notes Sean Coakley, senior vice president of Sales and Marketing at Kenco Group Inc. This has led to a transformation among 3PLs. “The industry has been adding industrial engineering and manufacturing engineering talent who can implement these solutions,” he says.
“We want to move from tactical activities like staging and shipping products into more strategic activities than can be integrated with warehousing,” says Tim Smith, executive vice president for Sales and Business Development at Lineage Logistics. “That requires completely different skill sets and we are developing the expertise necessary to do that at the highest level.”
Providing integrated solutions might be complicated but it really isn’t that hard to understand. It’s usually all about moving a new process into the warehouse to cut out a transportation leg and save time and money.
“Inventory control is often tied with postponement strategies,” says Rickles. “That can mean making last-minute changes to finished goods before they go out. It could mean adding a company logo to a product or customizing the language to the country of destination. It’s adding the last bit of value to make it unique for the customer. That cuts down on the number of SKUs you have to carry and on inventory carrying costs.”
Rickles estimates that postponement services can save shippers 2 to 5 percent of inventory carrying costs. Transportation savings often amount to between 2 and 4 percent of total product value.
The same principle applies to the kitting and display work that Evans Distribution performs. “One of our newer customers has us heat sealing soccer balls in plastic wrap before they go out to the retailer,” says Ajlouny. “We put together displays that can be placed directly on the retailer’s floor without any further processing.”
Evans also performs some fulfillment services for eCommerce customers. That involves integrating the IT systems of retailer and 3PL so that orders from online shopping carts are automatically communicated to Evans’ warehouse and order management systems. “Those integrations must be customized for each customer,” Ajlouny notes. “Speed is everything. When we get orders electronically from our clients’ websites we can fulfill it immediately.”
These capabilities often require substantial investments on the part of the 3PL. In the case of Lineage, which specializes in cold-chain logistics, customers approached the company about performing high-pressure processing (HPP) on produce and protein packaged foods. The five HPP machines acquired by Lineage, stationed in two locations on the East and West coasts, cost the company several million dollars.
HPP is a post-packaging, non-thermal processing method of killing micro-organisms. Food vendors are interested in using and promoting the process for the obvious food safety and related marketing reasons. But HPP has its logistics implications as well.
“Because HPP extends the shelf life of food, companies can ship in larger quantities,” says Smith. “That often means that they can use truckload services instead of less-than-truckload, and that can save a lot of money on transportation costs. It also means they can broaden their geographic reach and grow their business that way.”
For some of its food clients, Lineage has attached production and packaging areas to its distribution center to streamline logistics processes. In one case, the 3PL actually manufactures bread for a large quick-service restaurant in the Pacific Northwest.
“In these cases we are creating synergies between production and distribution that drives waste out of the supply chain,” says Smith. In each case it was Lineage’s customers that approached the 3PL about taking on these added responsibilities.
Kenco’s integrated solutions for manufacturers often follow a postponement model. In the case of auto industry clients, it involved off-site kitting and delivery of manufacturing components. For appliance manufacturers, Kenco has provided last-minute customizations based on consumer orders. One of its appliance clients wanted to get a handle on the management of its dispersed fleet of material handling equipment such as forklifts and pallet jacks. Now Kenco manages that activity across the manufacturer’s production facilities as well as distribution centers managed by Kenco and its competitors.
“The equipment was historically managed by local organizations and was not centralized,” says Coakley. “This activity has saved the manufacturer in the multi-millions of dollars.”
The future is likely to see 3PLs serving their clients’ logistics data needs. “People are starting to ask for our insights,” says Rickles. “Our clients are becoming more interested in data analytics to help them find where the next cost saving might be. We have some capabilities in this area but there is more work to be done.”
No doubt, UPS will oblige its customers and develop the kinds of competencies required to answer their big-data questions. Which goes to show that a conversation with your 3PL can be a good first step to solving multiple business problems.
HOW DO YOU MANAGE YOUR EXPORT LOGISTICS?
13.2% | Our foreign partners handle this 100 percent
26.4% | We share the management of our export logistics with foreign partners
18.9% | We manage our export logistics with help from a 3PL
26.4% | We manage our logistics 100 percent in house
15.1% | We only ship using parcel carriers
WHAT IS THE BIGGEST LOGISTICS CHALLENGE YOU FACE?
62.9% | Keeping the costs down
13.3% | Managing inventory
14.3% | Speed to market
7.6% | Seasonal demand
1.9% | Returns management
WHICH SUPPLY CHAIN CHANGES DO YOU EXPECT TO HAVE THE BIGGEST IMPACT ON YOUR BUSINESS IN THE NEXT FIVE YEARS?
2.8% | Proliferation of drone deliveries
5.7% | Implementation of driverless trucks
37.7% | Automation in manufacturing, warehousing and distribution
7.5% | Advancements in 3D printing
46.2% | Disruptions in ocean shipping
LEARN FROM THE PROS…
WHAT IS THE FIRST TYPE OF SOFTWARE A SMALL OR MEDIUM-SIZED SHIPPER SHOULD INCORPORATE INTO ITS BUSINESS AND WHY?
“From a supply chain perspective, a web-based Transportation Management System is the most effective method to reduce cost and identify inefficiencies.” – Derek J. Leathers, President and CEO, Werner Enterprises
WHAT IS THE NEXT GREAT CONSUMER MARKET U.S. SHIPPERS SHOULD START PLANNING TO ENTER?
“eCommerce will utilize same-day deliveries in major cities utilizing smaller, local couriers.” – Allan J. Miner, President, CT Logistics
WHAT IS THE NEXT GREAT EVOLUTION TO LOGISTICS TECHNOLOGY NO ONE IS TALKING ABOUT?
“Robotic warehouses.” – Scott Weiss, VP of Business Development, Port Logistics Group
WHAT IS YOUR ADVICE FOR SHIPPERS NEEDING TO NAVIGATE THE NATION’S TRUCKER SHORTAGE?
“Establish long-term partnerships with carriers who understand the potential impact and have already implemented a sustainable strategy to mitigate the risk to shippers.” – Derek J. Leathers, President and CEO, Werner Enterprises
ARE THERE CHANGES COMING TO THE LOGISTICS LANDSCAPE OVER THE NEXT FIVE YEARS THAT A SHIPPER CAN PLAN FOR NOW?
“Yes, the length of trailers will increase allowing for more cargo and weight per average delivery.” – Allan J. Miner, President, CT Logistics
HOW DO YOU EXPECT SUPPLY CHAINS TO EVOLVE IN 15 YEARS?
“Much shorter window from the time product is manufactured to a customer’s door.”
– Scott Weiss, VP of Business Development, Port Logistics Group