Logistics has always been a significant part of every economy and business entity. The worldwide trend of globalization has led to many companies outsourcing their logistics functions to third-party logistics (3PL) companies. This helps them concentrate more on their core competencies and generate higher revenues.
With more sellers, the demand for third–party logistics ( 3PL ) warehouses has never been higher. Businesses need third parties that can handle the intricacies of their logistics so they can double down on their core competencies.
To help you navigate the new realities of a booming supply chain and, more specifically, 3PL warehouses, we’re highlighting some of the most crucial challenges you’ll need to tackle head-on in 2021 and beyond.
Without the logistical backbone to support it, exponential growth is a recipe for disaster. This is one of the prime reasons why businesses rely on 3PLs. They want to delegate the logistical headaches to a third party to focus exclusively on compounding growth.
Suddenly, systems and processes of the 3PL warehouse are going through a rigorous stress test, and many are already snapping. Hence, we believe scalability will be one of the biggest challenges for 3PLs moving forward.
The traditional brick-and-mortar stores have to pay a premium regardless of business activity between rent, salaries, and other commitments. But eCommerce brands can run without any significant financial obligations, allowing them to scale costs back when things are slow. It’s not surprising to see internet brands thriving in highly seasonal categories.
Unfortunately, this also means that 3PLs are under intense pressure to accommodate these massive shifts from season to season. It was running out of space, dealing with untrained seasonal workers, filling the cracks in processes to accommodate the new peaks—and then scaling everything back to lows once the season runs out.
Especially true for 3PLs that specialize in helping clientele in seasonal categories. Examples include merchants selling winter sports gear, air coolers, and even metal detectors. This ties in with our previous point, as scaling down is as important as scaling operations up.
There’s no denying that the modern consumer wants cheaper and faster shipping. With Amazon constantly pushing the boundaries of the shipping experience, we’re seeing no signs of this trend slowing down anytime soon.
In other words, faster and cheaper shipping is turning from a nice-to-have into a must-have for digital merchants. It can make or break their business.
Merchants are naturally turning to 3PL warehouses to fulfill this demand. But with the shipping costs rising worldwide, not to mention the challenges that come with handling a wide variety of products at scale, many 3PLs are struggling to keep up.
As a result, they’re losing clients to warehousing providers who have developed creative solutions to reduce shipping costs for their customers and have the resources to tackle these challenges.
Traditional warehouses were designed according to the needs and requirements of the time. There’s only so much growth a store in some small town can hope to have in a year. But in the world of online commerce, a single viral campaign can expand the sales of a business by hundreds if not thousands of percentage points. So flexibility is essential for 3PLs as they are exposed to exponential growth on two sides: their own business and their customers.
Unfortunately, one of the first side effects of exponential growth is that warehouses run out of space. Failing to offer adequate capacity can put a deep dent into the reputation of any 3PL. Add to that the massive price hikes in real estate across the nation, and you can see why space requirements will be an enormous challenge this year.
Finding the right talent is never easy. With the sudden growth in logistics, we have more companies fighting for expansion than ever, and as a result, workers have many options to pick. Amazon, for instance, is expanding its workforce aggressively, both in terms of acquiring talent and offering competitive compensation. Then there’s the fact that developing talent is only half the battle. Retaining the ones who are genuinely driven and hardworking is easier said than done.
The result is that hiring, training, and retaining the right people, all while keeping costs at the minimum to keep your pricing competitive, is yet another central challenge 3PL warehouses are facing today.