How a good 3PL relationship can trim costs for higher profit margins and a better performing supply chainBy: Ron Cain, President and CEO of TMSi Logistics
Most businesses are faced with the challenge of eliminating excess in their supply chain operations. Internet-driven, customer-centric service is putting more pressure than ever before on logistics operators to run ‘perfect’ supply chains. The perfect order – identified as on-time, accurate and complete – is many companies’ most significant key performance indicator (KPI). Neglecting this crucial KPI puts companies at risk of losing customers and, ultimately, causing permanent damage to their bottom line.
A common misnomer in industry is that there is a “necessary” loss of efficiency that comes with any warehousing operation. Improvements in warehouse management are often thought to be unattainable without the implementation of elaborate processes and the investment of a great deal of time and money. On the contrary, many cost cutting procedures can be implemented within a reasonable budget that will deliver exceptional long term results. These procedures are best implemented by an experienced firm. Since most successful companies must focus on their core competencies to remain profitable, partnering with a qualified third party logistics provider (3PL) is often the answer for companies in need of achieving real, long-term business growth and sustainability.
Why Partner with a 3PL
A 3PL can initiate solutions ranging from simple, effective changes to extensive cultural and operational overhauls to increase overall efficiency. Simple organizational techniques are often beneficial to companies facing a tough economy and shrinking profit margins. A recurring cause of warehousing inefficiency is the poor use of warehousing space, which causes companies to invest in more warehouse area than they actually need.
A 3PL can implement efficiencies that maximize the space of the warehouse, including racking, mezzanines, conveyors, and multiple levels, which will decrease the overall warehousing cost. The implementation of an efficient stock locating system, as well as timely restocking systems, may be incorporated to ensure that no time is lost attempting to locate missing product, or searching for a product that has not been restocked. While these concepts lie at the basis of the function of any warehouse, they are some of the areas in which the most time and money is lost. Fortunately, a trained 3PL is able to recognize where complications arise and can fix them with effective and uncomplicated solutions at low relative cost and notable ROI.
Solution 1: Improve Packaging for Maximum Warehouse Efficiency
A qualified 3PL will tackle the challenge of leaning excess waste from warehousing operations through collaborative lean workouts with your company. A successful lean workout and the expertise of the 3PL may demonstrate, for example, that a customized packaging solution is the most practical and cost effective answer for leaner warehousing and shipping operations. A qualified 3PL will evaluate existing procedures and make recommendations for a customized packaging solution that would deliver the following:
- Increase inventory savings
- Create more free rack/floor space in DCs
- Decrease the burden on the receiving department
- Reduce cube production
- Increase space utilization on technician services trucks
- Reduce cycle time on creation of boxes/cartons
- Minimize packing hours annually
- Reduced operator accumulation time
- Improve box design process
- Reduce touches on packaging a product
Through a trusted relationship with a qualified 3PL, companies can realize long-term savings through minimal upfront investment that can mean the difference between ending this year – or the next five to ten years – in the red or the black.
Solution 2: Cross-Dock to Cut Costs and