Small eCommerce Companies: Consideration for Selecting 3PLs
Thanks to eCommerce, utilization of third-party logistics (3PL) is growing rapidly, based on data released by supply chain consultancy Armstrong & Associates. These data, reported Armstrong, are an extension of its annual 3PL market analysis, based on Armstrong’s developing of global logistics cost and 3PL revenue estimates that include annual projections through fiscal year 2022. In 2016, the global third-party logistics market reached $802 billion and is on track to exceed $1.1 trillion in 2022; global logistics costs were $8.2 trillion in 2016 and should surpass $11.1 trillion in 2022.
The smallest eCommerce company may turn to a 3PL for a variety of reasons starting with labor constraints. Onboarding new associates can be very costly, and unless using new table-based solutions such as WarehouseOS, many companies experience each new hire with a slow productivity ramp before fully effective.
Technology solutions allow companies to delay the utilization or implementation of a 3PL because standardized processes allow new associates effective on-boarding and encourage longer labor employee retention. Warehouse functions can be systemically driven, driving maximum labor effectiveness. Understanding the 3PL’s access to labor and their retention strategy must be a determining factor in evaluating the best 3PL for small eCommerce operations.
3PL partners must demonstrate a transparent approach to managing small eCommerce inventory, providing daily reports with complete insight. The solutions used at the “home” warehouse is optimized when the same technology is utilized.
Cycle counting ensures that a high percentage of orders will be processed alleviating cancelled orders. Cycle counting must be a daily function with active pick locations, reserve locations counted regularly. Year-end audits are vastly improved with a strong cycle-counting protocol available in 24/7 real-time data available with WarehouseOS.
An eCommerce solution must offer a rate shopping freight solution that provides access to a variety of carriers so that the best carrier is selected for both cost and service. The shipment size, weight, and delivery ZIP code will have major impacts to shipping costs, and there are different carrier options that make more sense as those factors change. 3PLs must provide competitive options for even the smallest eCommerce company.
Armstrong’s data points to global 3PL cost estimates for fiscal years 2018 through 2022 coming in at $894 billion, $843 billion, $951 billion, $1.014 trillion, and $1.080 trillion, respectively. This steady upward growth pattern shows no sign of stopping as consumer purchasing patterns are irrevocably changed.
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