Challenges and opportunities in 3PL fulfillment

While the increasing adoption of e-commerce has scaled the opportunities for third-party logistics, it has also become essential for companies to ensure that the logistics movement is streamlined, optimized and safe besides ensuring speed and lowering of delivery costs

Warehousing and 3PL (Third-Party Logistics) fulfilment are the most dynamic, complex, and critical service verticals for modern economies. For any country to ensure economic prosperity, employment, food security and life quality, it is essential that the logistics movement is streamlined, optimized and safe. With e-commerce gaining ground in the retail sector, speed and lowering of delivery costs have become another major need for 3PL companies. The adoption of e-commerce, more so in the last three years, has scaled the opportunities for 3PL companies. They also need to make some fundamental changes to overcome the challenges that this growth brings along. Let us first look at the challenges faced by operators in this scale, and then at the ways through which we can navigate through to success.

Understanding the customer: The e-commerce era has transformed customer expectations in an unprecedented way. Earlier, they might be considerate about the constraints faced by an operator and would patiently wait for days to get the shipment or the updates. However, now the expectation is the same or next-day delivery. The common belief is that if Amazon Prime can do it then why can’t you? Any 3PL players that fail to level up, are considered as inefficient. 

Poor inventory visibility: In the omni-channel environment, a brand might be present at 20 different points of sale, and successful sales operations require complete inventory visibility across all channels. In the absence of such visibility, you might remain in the dark and end up replenishing stocks at a platform where there was already sizable stock available and miss out on another that has declined orders due to outage. In the era of 24×7 retail, this could lead to losing out on hundreds of potential sales, and if it is the festive season then even more. 

Inefficiency of warehousing processes: As a warehousing services provider, one of the biggest challenges is legacy technologies. Most operators have introduced certain tools such as ERP systems etc, but these are often inadequate when it comes to fulfilling the needs of modern supply chains. The need of the hour is to have access to automation, data-driven insights, and seamless integration of all supply chain components. The ERP software that you had deployed as a cutting-edge solution 5-6 years ago, might fail to meet the expectations. 

Resource optimization: Warehouse space is at a premium these days. It is essential for 3PL companies like you to make the best use of the available space, and the personnel you deploy at a fulfillment center. Manual inventory management and decision-making about space can often lead to underutilization of the space due to poor sorting and storage of goods. 

Another challenge that warehouse operators might face is the lack of adequate training and equipment knowhow among the staff. At times, in a bid to store maximum goods, you might end up creating narrow pathways or obstructions that make it difficult or impossible to use automated vehicles or equipment. Thus, you would need to rely on manual labor to store or fetch items from those areas. This could not only be inefficient, but potentially risky for the staff too.

Role of technology in overcoming the challenges 

The above mentioned challenges have persisted for way too long and the Indian logistics industry has had little option, but to drag these around as ankle weights that slowed down growth. However, with India’s rapid ascent into the digital superpowers club, and innovative as well as cutting-edge 3PL technologies being introduced by companies, you no longer need to carry the burden forward. 

Cloud-based 3PL solutions now offer end-to-end visibility of the supply chains, and inventories across platforms. In fact, the technology is so advanced and accurate now that instead of making different allocations for different platforms, you can maintain inventory that can be dynamically allocated across the platforms. This helps in ensuring maximum visibility for all stocks, and makes replenishment easier. Moreover, you will not have to risk ‘stock outage’ or excessive stocking at any platform. 

Leading 3PL players are making sizable investments into multi-category Warehouse Management Software (WMS), which can seamlessly differentiate and handle products as diverse as delicate glassware and electronic equipment to perishable items with limited shelf-life such as food items or medicines etc. Temperature controlled environment, FEFO picking methodologies reduce human effort and improve safety for the personnel. For instance, the software would ensure that your warehouses have optimized distribution of resources, including humans and machines.

When you use AI-powered WMS for regulation of operations, it is possible to deploy robots and automated vehicles as well as warehouse workers in the right proportions. Robots can take care of handling hazardous material to reduce risks of injuries to workers, fire, or breakage etc. Moreover, the movement of goods from storage racks to loading areas and vice versa can be optimized. 

Smart WMS can help in stationing people and equipment strategically so that the distance covered and effort for procuring each order is reduced, and the staff doesn’t need to make multiple trips to the same spot repeatedly. Such world-class automation can not only reduce the effort for your workers, but also the operational costs. Not only that, your warehouse workforce would be appreciative of the comfort, safety, and technology support they get for the job. 

Outside the warehouses, technology can also be deployed by 3PL players to get end-to-end visibility and control over the supply chains. You would be in the know about real-time movement of shipments, and proactively update customers about the delivery status. Even if there is a delay, if customers get a notification about the same before they ask, it gives an impression that you understand their concerns and are consciously trying to deliver the best experience.

Bottom Line No matter what you try, supply chains are always going to be complex, multi-layered, and unpredictable. However, usage of the best available technologies for collaboration with professional digital-first 3PL companies can simplify, streamline, and speed up operations. That’s what the business and the customers want. Go ahead and ace the game of logistics efficiently and profitably with the power of digital automation!

The writer is Founder and CEO, Prozo, a full-stack supply chain company in India that is supporting companies of all sizes across B2B, D2C, and B2C segments by offering them enterprise-grade supply chain capabilities on a pay-per-use model.

This article first appeared in IMAGES Group’s Progressive Grocer Magazine April 2023 issue.