The need for third-party logistics companies (3PLs) has grown significantly over the past few years. In fact, Third-Party Logistics Warehouse Benchmark Report noted that 85% of 3PLs experienced order growth in 2021. With the increased demand for ecommerce fulfillment and varied distribution channels, more and more companies do not wish to manage the varied distribution expectations. So, what’s the answer?

The solution is for businesses to outsource elements of their distribution and fulfillment operations to handle orders coming in and going out. An infographic published by DC Velocity clearly highlights the increasing importance for 3PL capabilities in light of the ecommerce boom.

All industries and companies, whether already offering direct fulfillment to customers or not quite yet, have already started identifying processes to start to handle or improve upon multichannel distribution. The pandemic spurred this shift and with it, brought labor shortages and supply chain disruptions.

Realizing these challenges, many of those companies are now looking to experienced 3PLs to provide the logistics knowledge, warehouse software solutions and systemic automation expertise to manage the extensive growth.  

Why Third-Party Logistics?

Traditionally, 3PLs used very manual processes requiring fluctuating labor resources to manage peak demand. Today, technology is enabling even more successful operations for 3PLs. For cost-effective operations to meet the ever-growing volumes and customer service level agreements (SLAs), an increasing number of 3PLs are adding automated material handling solutions, both mechanical and software.

3PLs serve a number of industries and applications. Whether a high-volume ecommerce company, subscription service, consumer goods wholesaler, automotive supplier, or start-up retailer, you may be using or have considered using a 3PL company to help with distribution to your customers.

A Leap Toward 3PL Automation & Software Solutions

There is a strong, growing interest from 3PLs in more automated solutions that rely less on a large labor force as it becomes increasingly difficult to find employees. It really shouldn’t come as a surprise given the growing demands being placed on them around:

• Higher service level requirements and expectations for faster order fulfillment times
• Increasing volumes of packages to handle through ecommerce business growth
• Demand for more visibility and metrics capabilities
• Challenges finding enough labor to meet demand

As 3PLs begin to consider the leap toward automation, it doesn't have to be an all or nothing investment. Depending on available capital, current business, and future goals, automation can be implemented in various levels to maximize ROI. For 3PLs this weighs most heavily when competing to win new contracts, which may only be a few years long.

Entry-Level Automation

Established 3PLs generally have a WMS (warehouse management system) and perform picking by label or RF. Adding a WCS (warehouse control system) can aid in adding more process optimization, a low upfront cost solution. Ease of access for picking and reduction of replenishment movements improve labor efficiency and use.

• Conveyor routing and sortation
• Weight check
• Print and apply

Mid-Level Automation

Once a 3PL has a WCS implemented at a location, it provides flexibility for the future. As the customer has new business requirements or demands, it is faster and easier to add new software functionality and integrate additional equipment such as picking technologies.

• Pick to Light
• Pick to Voice

High-Level Automation

Within the past three years, more 3PL companies are requesting highly automated solutions to help meet expected rates, support logistic complexities and reduce labor requirements.  A WES (warehouse execution system) provides the necessary business intelligence to promote operational efficiency bybalancing automation, fulfillment needs and workflow.

• ASRS (Automated Storage and Retrieval Systems)
• Goods to Person
• Robotic bin picking

Finding the Right Software and Automation

A general guideline is that any automation, software or equipment, you may have or may be considering should simplify and create efficiency. In the field, we’re seeing that 3PLs are increasingly employing scalable, high-level automation like goods to person solutions that have room for additional ports or bins to meet high peak season demands. The benefit – little to no down time for the additional support and software advancements provide for easier integration and greater efficiencies. They’re also continuing to explore low and mid-level automation software solutions that provide intelligent conveyor routing, for example. With a lower level price point and fast project implementation, this software solution is an easy way to bring more visibility and control to operations.

Author: Sheila Dooley