Holste Says: By combining the elements of experienced people, order processing efficiency, and material handling automation, 3PLs can assist them by broaden their service offerings, reduce order turnaround time, increase competitive capability, while providing the ability to adapt quickly to market changes. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

As supply chains and distribution logistics become more complex driven by faster order cycle times, at some point for small to medium size distributors, outsourcing order fulfillment operations becomes an increasingly attractive alternative. For 3PLs looking to win this emerging business, speed, flexibility, and agility are must-have capabilities.

Many distributors are looking to satisfy their retail/wholesale and Internet customers’ demand for more customized services, including next-day delivery, through the adoption of high end automated material handling technologies. However, most small to medium size operations find it difficult to justify investing scarce capital funds in sophisticated DC automation projects. Nor do they have the internal staff required to manage and support hi-tech systems.

Understandably, many specialty and/or boutique operations look to 3PLs for alternative solutions. By combining the elements of experienced people, order processing efficiency, and material handling automation, 3PLs can assist them by broaden their service offerings, reduce order turnaround time, increase competitive capability, while providing the ability to adapt quickly to market changes.

But first these companies need to understand the limits of their own operations and reasons for outsourcing. This will better enable them to evaluate what 3PL services are most beneficial.

What Distributors Need to Know About 3PLs

There are many reasons for adopting a third-party logistics strategy.

The following bullet points were developed by LTD Management www.ltdmgmt.com an independent Supply Chain Logistics consulting firm:

• to acquire an expertise, talent and resources that don't exist internally
• to let the company focus on its core competency which it has determined is not logistics
• to develop value-added capabilities to better service its customers
• to improve operations or customer service
• or simply to improve its processes

• What do you bring to the table? What are your experiences with my industry, with my customers?
• What problems have you encountered with setting up third-party operations and why?
• What will it cost?
• How will it operate?
• How long will it take to set up and have running properly?
• How will we interface? What do you require of my business? Is this requirement for start-up or is it ongoing?
• Why do you want my business?
• Why should I select you?
  

The decision to outsource DC logistics operations has long-term strategic implications. Because the two parties typically share both risks and rewards, they each have a stake in finding opportunities for improvement. Or, to put it another way, they become vested in one another’s success.

Final Thoughts

Given the growing trend towards high-end DC automation, logistics companies of all sizes and shapes are becoming more automated. Technology is infectious. Just think about how many laptop PCs and cell phones are in common use. Initially, they were slow, not user friendly, and very expensive. Now they are relatively inexpensive and definitely indispensable. In a few years, robotic picking and automated mixed SKU palletizing operations will be as common in DCs as automated sorting systems are today.