4 Ways 3PL WMS Helps With Supply Chain Headaches
Online shopping is a thriving industry that isn’t showing signs of slowing down. As merchants scramble to fulfill their deliveries to global customers, many have turned to third-party logistics (3PL) firms to give them a hand.
Worldwide, the 3PL market size was at $1 trillion in 2020, according to research firm Mordor Intelligence. With an 8% 5-year growth projection from 2021 to 2026, it’s expected to rise to $1.75 trillion in 2026.
In spite of these figures, the supply chain is fraught with several issues, affecting many companies and resulting in millions of losses, as you’ll discover later. Disruptions in the delivery and fulfillment services can also negatively impact a brand and derail growth.
Fortunately, technologies such as a warehouse management system software or WMS software can minimize such issues. Discover how third parties leverage this technology to their client’s benefit.
How does 3PL WMS work?
A company must know how to streamline its raw materials sourcing, manufacturing, shipping, and handling processes. These workflows aim to reduce costs and enable organizations to manage their inventories better, ensuring they’re capable of fulfilling customers’ demands.
An efficient supply chain management strategy covers such activities and so much more.
But, developing a comprehensive method can be challenging for small businesses and start-ups. Doing so takes time away from their core activities, such as marketing and business development. That’s where 3PL companies come in.
Using 3PL WMS, these firms can handle customer fulfillment needs, including transportation, warehouse and inventory management, packing and repacking, distribution, and shipping and handling returns.
Here are some ways a 3PL’s WMS system mitigates supply chain issues:
- Improves inventory management
Inventory management is a crucial business process encompassing the proper use of raw materials and the company’s manufactured or unfinished products. It ensures that business resources are available to fulfill the organization’s and customers’ needs. Poor inventory management can lead to business inefficiencies that could result in low customer satisfaction and overspending.
Through 3PL WMS, businesses can have real-time access to stock positions, improving their business resource planning and strategies. Some systems come with digitized reordering and restocking functions that alert the company of diminishing supplies and ordering these in advance. In addition, the software can predict inventory demands and changes more accurately, allowing for quick data-driven decisions.
- Enabling flexibility and cost-effectiveness
Every business experiences peak and off-peak seasons. That said, paying for services you don’t need throughout the year can leave too much money on the table. According to a 2019 report by global management firm McKinsey and Company, warehousing operations are valued at $304 billion annually, excluding corrective costs.
The good thing about 3PL WMS is that they’re scalable, allowing businesses to add more features according to their needs. Third-party logistics companies invest in technologies that help companies to move their stocks quickly, add new warehouse locations, and explore additional transport and shipping options, all of which are vital in adapting to the demands of modern supply chain systems. The warehouse management software also enables your business to do more, like generate reports and periodic performance, without necessarily hiring more people to do the job.
- Improving customer satisfaction
Supply chain issues also inflict significant economic damage on different business sectors. According to a 2021 survey, US-based organizations lose an estimated $228 million annually, while Nordic nations and the United Kingdom have reduced revenues reaching $196 million and $146 million, respectively.
Brands can also take a major hit from delayed shipments. According to an Inc.com article, up to 57% of shoppers are likely to choose another merchant if their current delivery expectations aren’t met. Additionally, 54% of online sellers refund their delivery charges following shipping errors.
A 3PL WMS enables location and address verification to reduce failed deliveries, increase customer satisfaction, and eliminate costly mistakes. Access to this function has allowed up to 48% of retailers to reduce their costs, while over half reported increased repeat purchases.
- Ensuring regulatory compliance
A WMS helps 3PL improve logistics systems and provide customized services. For instance, some 3PLs are better equipped to ship refrigerated products, while others are for storing and handling hazardous materials.
These special goods are subject to more stringent rules by government and regulatory bodies, for instance, the United States Department of Transportation (DOT). As 3PLs need to be accredited before being allowed to operate, they have the skills, knowledge, and resources to meet these requirements.
As a business owner, you’d never want any legal trouble, especially because civil penalties involving improper handling, storage, or shipping can be costly. The maximum fee for improper shipping of hazardous materials is pegged at $83,439 daily per violation. This can go as high as $194,691 daily if your breach has caused injuries, property damage, death, or serious illness. Failure to train employees in proper handling also entails a penalty fee of $503 per employee and per day. These costs are exclusive of revenue losses due to shipment delays.
Concluding thoughts
Third-party logistics firms can also offer general or specialized warehousing and fulfillment services for certain companies. But flexibility, efficiency, and cost-effectiveness are only a few reasons these companies are in demand.
Partnering with a 3PL allows merchants to focus on the core aspects of their business while enjoying the abovementioned benefits. As warehousing, shipping, and fulfillment experts, 3PLs can positively impact a business by making technology and information work to their client’s full advantage.
