It’s obvious that COVID has exponentially changed the landscape of today’s supply chain. The question is, how are retailers and manufacturers adapting? The answer is simple, they are shifting all (or a portion) of their distribution and fulfillment needs to 3PL partners. In this blog, we’ll illustrate the reasons that retailers and manufacturers are making a fundamental change by outsourcing their fulfillment and distribution services to the experts (3PLs).
First, let us clarify what are some of the services included in Third-Party Logistics (3PL). To name a few: warehousing, storage solutions, inventory management, order fulfillment, distribution services, supply chain optimization, freight forwarding, cross-docking, etc.
- GROWTH: Many businesses struggle with growth due to their inability to focus on how to scale. Warehousing and distribution are cumbersome even for the largest retailers and manufacturers in the United States. COVID has only magnified the time and effort that businesses are spending as they try to keep up with increased eCommerce order demand. We are beginning to see more and more retailers and manufacturers pivot from the traditional “in-house” order fulfillment model to outsourcing their order fulfillment to warehousing services that specialize in distribution and fulfillment. As result, businesses have more bandwidth to refocus on what is important to them – GROWTH!
- WAREHOUSE EXPENSES: Owning or leasing warehouse space to store inventory is capital intensive. As you can see in the list below, the startup and recurring expenses are substantial. Retailers and manufacturers have come to the realization that they can mitigate the risks of overpaying for warehouse space and other fulfillment costs by partnering with a distribution center. Particularly because they only pay for the storage used (pallets, bins, etc.) and services rendered during a given timeframe. There are no risks of wasted space, overstaffing, and other expenses as you see with “in-house’ fulfillment.
- Warehouse mortgage/rent
- Computers and Printers
- Warehouse Management Software (WMS)
- Order Management Software (OMS)
- EFFICIENCY & EXPERTISE: Retailers and manufacturers are generally experts within their segments, which means they often lack knowledge, technology, and systems when it comes to fulfillment and distribution services. It’s imperative now more than ever that businesses are equipped to manage the ever-changing dynamic of today’s supply chain. Warehousing partners (3PLs) have the ability and infrastructure to help businesses better perform when it comes to Direct To Consumer Fulfillment (D2C), Business To Business Fulfillment (B2B), Amazon FBA / FBM, and Freight Forwarding.
- TIME: What do growing businesses struggle with the most? The answer is generally going to be time. Retailers and manufacturers must learn to leverage their time proportionally to ensure success and sustained growth. As an example, businesses are under pressure to meet the increased eCommerce order fulfillment demand due to the COVID effect. Now more than ever retailers and manufacturers in our country are choosing to partner with order fulfillment services because it not only saves them time but also provides distribution and fulfillment flexibility.