That means the retailers are starting to apply more pressure on their suppliers to meet that demand. And that pressure is only going to increase. Regardless of the size of the supplier, many are opting to outsource their logistics functions. This is where third-party logistic providers can shine. Many 3PLs say they can offer cost savings, a variety of contacts and streamlined coordination of all supply chain processes and transportation modes. But given the massive number (estimates are between 15,000 and 16,000) of them, unless there is some aspect of their business that sets them apart, chances are they won’t be able to separate themselves from the rather large pack.
Suppliers have to do their due diligence to ensure they’re getting the most bang for their buck. There are a few differentiators to look for. A 3PL who is pre-integrated or fully compliant with your network of buyers is key, because they’re prewired with your requirements, according to David Novak, executive vice president of Sales and Business Development and SPS Commerce. That goes a lot farther than the 3PL that says ‘Let me find out what the retailer is looking for and I’ll get back to you,’” he says.
The 3PL that is fully integrated to suppliers’ ERP systems is also going to be a more attractive choice, because that’s the one that has visibility into things like order inventory and shipment information. The problem is most small- and medium-sized 3PLs can’t afford to do those things; they don’t have the capital and don’t know about technology to do that. So Novak says instead, they offer very customized services, but there’s no margin to that.
If your business has seasonal periods, your 3PL should also have the ability to scale space, labor and transportation according to inventory needs. That’s one reason some 3PLs are partnering with cloud-based or Software as a Service (SaaS) providers that offer subscription services. Much like the classic cloud computing model, they offer things like competitive pricing, scalability, high availability and security, not to mention industry-specific applications like ERP and EDI for monthly fees so the 3PL doesn’t have to invest huge amounts of capital in these systems. With the cloud model, 3PLs pay only for the technologies and capabilities they need.
Using SaaS providers means 3PLs can also reduce their internal IT staffing and infrastructure costs and then pass along those savings in the form of more competitive rates to customers while improving their services, says Novak.
Cost savings is of course, an attractive differentiator. But what the supplier also wants at the end of day from the 3PL is predictability. They want to know what it’ll cost them every month so they can plan, he emphasizes. So the 3PL that can package their services in such a way that it’s completely predictable for the supplier has an edge. That makes perfect sense. Your finance person is happy and there are no surprises.
Suppliers that have done fulfillment in the past realize how volatile it can be and how storage and shipping costs can go through the roof, Novak points out. So regardless of their size, the 3PL that can go to a supplier with a level of predictability is going to win a lot of business.
The bottom line is you want a 3PL that can help you to grow your business, provide good service at a reasonable cost and is up to date on the latest industry best practices. Is that a lot to ask for? Surely among those 15,000 some-odd 3PLs there’s one out that can give you that peace of mind.