Taking 3PL and E-commerce a step further
Published on 28 May 2019
Traditionally, 3PL providers work in mass distribution. However, given that they are faced with a crisis in the retail sector today, it has become necessary for them to find a new position for e-commerce on the market. Online sales in particular can be a veritable growth driver, but what e-commerce logistics challenges are 3PLs met with and how can they best be managed? We’ve compiled a list of logistics issues to address and solutions to consider during this transition.
E-commerce logistics: it’s all in the numbers
When working with mass distributors, 3PL solutions previously dealt with large volumes of merchandise transported by full palettes. Similar to online sales trends, which increased by 20% yearly, package shipping is starting to replace truck-loaded palettes. And although the volumes are still great, package shipment is now considered less valuable than palette transportation.
As 3PLs transition towards online sales, they will need to solve a difficult cost price equation. In e-commerce logistics, the cost of a preparation line is four to five times greater than usual for an equivalent job, and sometimes even more excessive. Consequently, industrialization is necessary to reduce the need for manual labor. In this context, it is essential to invest in robots and conveyors so that warehouses can be fully automated.
Changes to the Profession
By moving from full palette handling to package delivery, the profession is edging closer and closer to UPS-like shipping services. And in order for e-commerce merchandise to be dispatched, companies must also be equipped with adequate vehicles for delivery to end clients, who are often located in urban areas. To adapt to changing legislation, distribution methods have taken on a new face with electric vehicles and bicycle delivery, but such assignments generally still hold little value.
The social cost of e-commerce is also a problem for 3PL providers. The fact that clients do not pay for delivery has a direct impact on the finance of e-commerce logistics chains, whose added value decreases in turn. And, although the processes in a warehouse can be automated, the same can’t be said for transportation, which requires a workforce often subject to tough working conditions. This also explains the increasing number of urban pooling projects that seek to offer solutions to the contextual issues of 3PL.
For further reading : 3PL: Transportation of the Future—a Pooled Resource
Looking After Brand Image
When it comes to ensuring the the needs of mass distributors, the retail sales industry requires that 3PLs provide a superior level of quality in the preparation stage. Since these services have a direct impact on a brand’s image, logistics operators are often the ones penalized when clients end up unhappy. Consequently, compliance rates and requirement levels in e-commerce are much higher and more difficult to attain.
The Need for Reinforced IT Integration
Due to the serious time crunch inherent to e-commerce, tight-knit information system integration is mandatory for relations between the end client and 3PLs. An effort must be made to reduce the operation times between when orders are placed on a merchant site and when packages are delivered. In fact, development of EDI streams between 3PLs and recipients is currently undergoing a boom.
Client portals dedicated to logistics tracking operations are also taking center stage. For 3PLs, this means communicating about all the phases along the value chain, so that clients are informed and can develop a heightened sense of trust. Today, they can track orders at any time of the day with real-time truck delivery software.
On the same topic : How 3PL Portals Facilitate Payer Relations
Information precision has become a key element in package tracking. This in turn requires architecture and software investment, which should be considered with respect to the relatively small profit margin afforded by 3PL companies. For the longest time, 3PL providers perpetuated a concentration and repurchase strategy that allowed them to bank on higher volumes. Today, if they wish to ensure continued success, they must be able to provide value-added services.
Wedding and cocktail dress delivery, for instance, is starting to take off in the sector. And, since there is a heightened need for greater speed and organization when dealing with product returns, this type of service offers the advantage of being easier to market.
Big Name E-commerce Integrated Logistics
For several years now, supply chain players have had to deal with competition from big labels like Amazon. These Internet conglomerates have their own in-house blend of integrated e-commerce logistics, and they are well outside of the reach of 3PL providers. Additionally, the companies are a major source of competition for supply chain players.
This is the case because e-commerce behemoths also offer neophytes a head start by affording them a place on their marketplace. The network of a group like Amazon is such that it can sometimes perform better than a 3PL in the delivery game. When faced with high volumes, the companies can keep trucks on the road at all times in order to meet customer needs.
E-commerce is undergoing profound transformation and today, it poses a major threat to 3PL providers. As a result, complete overhaul is a prerequisite if providers want to survive amidst fierce competition. By offering additional high value-added services, providers can set themselves apart when it comes to e-commerce logistics.