How to Ensure a Successful 3PL Implementation

Third-Party Logistics (3PL) refers to the practice of outsourcing logistics services to a specialized third-party provider. These services can include warehousing, transportation, inventory management, and freight forwarding. By partnering with a 3PL provider, companies can offload the complexities of logistics, allowing them to focus on their core competencies.

Over the past few decades, the 3PL industry has evolved significantly, offering a wide array of logistics services to businesses across various sectors. Specific to warehousing, operating your own warehouse can be expensive and challenging so many companies decide to leave it to a 3PL provider to conduct these services. Integrating warehouse operations with a 3PL provider offers several advantages for supply chain management, like efficiency improvements, cost savings, flexible labor, scalability, access to specialized expertise, and enhanced customer service.  To achieve these improvements, it is imperative that the right partner is selected.

When using a 3PL, the process of selecting and implementing your partner is pivotal but can be a daunting task for businesses. It is essential to have a focused internal or external group driving the selection and integration process. In situations where internal resources are limited or time is constrained, leveraging external expertise can be an optimal path forward. At Establish, we follow a detailed 5 step approach when selecting and integrating a new 3PL provider. Read more about our 3PL consulting services here.

1. Defining Operational Goals and Requirements: Understand your business objectives and organizational needs. What are you aiming to achieve through 3PL integration?

2. Partner Selection and Evaluation: Choosing the right 3PL partner is critical. What are the deciding criteria? (Cost, experience, culture?)

3. Mapping Integration Points for Systems and Data: Seamlessly align your existing systems with the 3PL provider’s infrastructure. Integration points matter.

4. Transition Management + Go-Live: Execute the transition smoothly. Minimize disruptions during the critical go-live phase.

5. Ongoing Management + Continuous Improvement: Sustaining success requires initiative-taking management and continuous refinement.

In another blogpost (How to Choose the Right 3PL Partner — Establish Inc.), we talked about the importance of defining operational goals and requirements (step 1) and the need for thorough partner selection and evaluation (step 2). While choosing the right partner is important, the integration and go live process is critical to ensure success. In this blogpost, we will put the last three steps in the spotlight.

Step 3: Mapping Integration Points for Systems and Data

After the 3PL partner selection has been finalized and contract is awarded, it is time to begin the implementation process. One aspect of the transition is designing the system integration. In the collaborative design process, organizations work together to establish seamless connections between their systems. Having the support of third-party resources here helps to keep the project focus, bring in best practices, align business needs between you and the 3PL rather than completely redesigning what is in place, and maintain an efficient integration timeline by managing internal resources effectively. Here is how the system integration typically unfolds:

1. Designing Data Flows: Teams map out how data moves between different systems. This involves identifying data sources, transformation points, and destinations. Considerations include real-time data exchange, batch processing, and data synchronization. Usually a decision between an EDI, API or more manual integration has to be taken.

2. Operational Procedures: Collaborators define operational procedures for handling data. This includes data validation, error handling, and exception management. Standardizing procedures ensure consistency and reliability.

3. Workflow Hand-Offs: Workflow hand-offs occur when one system completes its task and passes relevant data to the next system. Clear documentation and communication are essential to avoid bottlenecks or data loss during hand-offs.

4. Reporting Integrations: Reporting systems need access to relevant data. Integrations ensure that reporting tools can pull data from various sources. Customized reports, dashboards, and analytics enhance decision-making.

5. Tailoring to Existing Infrastructure: Organizations adapt integrations to fit their existing technology stack. This involves assessing compatibility, security, and scalability. Legacy systems may require additional connectors or middleware for seamless integration.

By collaboratively addressing these aspects, organizations create robust end-to-end connections that enhance efficiency and drive business success. 

Step 4: Transition Management

While system integration is a key milestone in the 3PL integration process, it is important to plan and manage the operational and physical transition with the new partner. To ensure a smooth transition, it is essential to focus on the following areas:

• Phased Approach: For larger implementations (multiple sites, business units, or sales channels), considering the benefits of a phased rollout is key. By breaking down the implementation into manageable phases, organizations reduce the risk of large-scale disruptions. For example, for multi-site implementations, every warehouse, partner, or region can have a specific and different go-live-date.  Each region becomes a testing ground, allowing adjustments before full-scale deployment. Moreover, phased rollouts provide valuable insights. Organizations learn from early adopters, refine processes, and adapt to regional nuances. Additionally, concentrating on one region at a time ensures efficient resource allocation, and it prevents strain on personnel, infrastructure, and support systems.

• Communication and Training: Another important pilar is to establish a plan for communication, training, and testing. Transparent communication with stakeholders is crucial. Inform employees, customers, and partners about the upcoming changes, timelines, and expected impacts in adherence to contractual agreements and operational considerations. Next, it is important to provide comprehensive training to the affected teams. Address their concerns and ensure they feel confident using new systems and offer ongoing support during the transition. From a system and operations perspective, a best practice is to run existing and new systems in parallel, just like exiting partners and entering partners. This minimizes disruptions and allows for gradual adjustments.

• Exit Strategy: If there are existing 3PL partner(s) that are losing business, effectively managing the transition away from them can be challenging, but there are strategies to keep them engaged during this critical phase. First and foremost, timely and clear communication is essential. Regular touchpoints and checkpoints should be maintained throughout the entire process. Aligning expectations—both legally and operationally—is highly important. Providing well-defined instructions and thorough documentation facilitates a professional transition. Additionally, keeping a close eye on costs and systems ensures a smooth exit. Given the complexity of this task, it’s often advisable to conduct on-site visits to manage expectations and gain a comprehensive overview of current stated operations.

• Be Proactive: When navigating the complexities of a 3PL integration and transition, it is important to be as proactive as possible. Best practices consist of appointing change champions within each region or group – they advocate and promote adoption, address resistance, and encourage positive attitudes. This establishes a feedback loop to capture user experiences and identify pain points. Proactive management involves addressing issues promptly, so it is important to set up the right fora to hear these voices. Setting up a new warehouse comes with challenges and glitches, so it is important to anticipate them and proactively address bottlenecks, technical glitches, and unforeseen obstacles – ensuring the continuous improvement journey to start from the beginning.

Step 5: Ongoing Management and Continuous Optimization

The journey doesn’t end with the go-live event; it extends into the post-implementation period. First, it is key to explain the need for continuous optimization after the initial launch. This involves ongoing assessment, optimization, and a commitment to continuous improvement. An industry best practice is making use of an issue tracker meeting to keep track of open items that need follow up. After go-live, a lot of additional ideas and change requests will come up to help better the operation and add to the scope; it is important to capture and prioritize these correctly.

Once at a steady state, it is also important to discuss governance models, track KPIs and monitor performance. These KPIs will often be defined in the Service Level Agreement (SLA) and summarize the performance of outbound operations, inbound operations, and inventory accuracy. Taking the time to audit the 3PL invoices and ensure their accuracy is also paramount. It provides a sense check that correct rates are being billed as well as accurate operational volumes being billed. Occasionally, there could be systematic errors in the billing function which could be overlooked.

In the end, it is the 3PL’s job to deliver an effective solution for your business, but you can help to facilitate a successful integration and promote continuous improvement by utilizing a consulting partner, like Establish, who will ensure you take the correct steps and set up an effective post go-live structure.

In this blogpost, we have explored the critical steps necessary for a seamless 3PL integration. By partnering with a consulting company like Establish, you can strategically align your operational goals and requirements, ensuring a successful launch and ongoing optimization. Remember, successful 3PL integration isn’t just about technology—it’s about people, processes, and collaboration. With the right approach, you will unlock efficiency gains, cost savings, and improved customer satisfaction. Read more about our 3PL consulting services here.

How to Choose the Right 3PL Partner

Third-Party Logistics (3PL) refers to the practice of outsourcing logistics services to a specialized third-party provider. These services can include warehousing, transportation, inventory management, and freight forwarding. By partnering with a 3PL provider, companies can offload the complexities of logistics, allowing them to focus on their core competencies.

Over the past few decades, the 3PL industry has evolved significantly, offering a wide array of logistics services to businesses across various sectors. Specific to warehousing, operating your own warehouse can be expensive and challenging so many companies decide to leave it to a 3PL provider to conduct these services. Integrating warehouse operations with a 3PL provider offers several advantages for supply chain management, like efficiency improvements, cost savings, flexible labor, scalability, access to specialized expertise, and enhanced customer service.  To achieve these improvements, it is imperative that the right partner is selected.

When using a 3PL, the process of selecting and implementing your partner is pivotal but can be a daunting task for businesses. It is essential to have a focused internal or external group driving the selection and integration process. In situations where internal resources are limited or time is constrained, leveraging external expertise can be an optimal path forward. At Establish, we follow a detailed 5 step approach when selecting and integrating a new 3PL provider.

1. Defining Operational Goals and Requirements: Understand your business objectives and organizational needs. What are you aiming to achieve through 3PL integration?

2. Partner Selection and Evaluation: Choosing the right 3PL partner is critical. What are the deciding criteria? (Cost, experience, culture?)

3. Mapping Integration Points for Systems and Data: Seamlessly align your existing systems with the 3PL provider’s infrastructure. Integration points matter.

4. Transition Management + Go-Live: Execute the transition smoothly. Minimize disruptions during the critical go-live phase.

5. Ongoing Management + Continuous Improvement: Sustaining success requires initiative-taking management and continuous refinement.

Read more about our 3PL consulting services here. In this post, we will dive into the first 2 steps to and discuss some of the key considerations for selecting the right 3PL partner. For more details on steps 3 through 5, see our other post How to Ensure Successful 3PL Implementation — Establish Inc..

Defining Operational Goals and Requirements

1. Define Goals:

Why it matters: Clear goals help you choose a 3PL partner that aligns with your business needs, whether it’s cost reduction, faster delivery, or better customer service. Goals also provide benchmarks to measure success and allow the 3PL to tailor services to your requirements. This ensures efficient resource allocation and helps both parties focus on critical areas, making the partnership more effective.

Key Actions: Conduct a thorough assessment of your logistics needs, including current challenges, future growth plans, and specific requirements like warehousing, transportation, or technology integration. Set clear, measurable goals (e.g., reduce shipping costs by 10%, improve delivery times by 20%, expand into new markets within six months). Involve key stakeholders from various departments (e.g., procurement, operations, finance) in the goal-setting process to ensure goals are comprehensive and aligned with the overall business strategy.

2. Data Collection and Analysis:

Why it matters: Data underpins informed decision-making and storytelling. Accurate supply chain, inventory, and operational data help forecast volumes and depict your operation’s current and future state. Capturing forecasted changes in volumes, order profiles, and shipping lanes is crucial for 3PL service. Network studies and shipment data analysis can identify the optimal location for your operation, aiding the 3PL search process.

Key Actions: Gather data on inbound and outbound shipments and order profiles, SKU (Stock Keeping Unit) diversity, inventory levels, lead times, and seasonal fluctuations and apply forecasts. Analyze historical performance metrics to understand trends and pain points. Capture pictures and videos to give additional levels of insight into operations.

3. RFP (Request for Proposal) Development:

Why it matters: An effective RFP sets the stage for successful collaboration with 3PL providers. It outlines your expectations, service requirements, and evaluation criteria. A good mix of qualitative descriptions (explain processes, service levels and requirements) with quantitative measures (forecast volumes, seasonality, order profiles, etc.) should be included in this document. Including storage, product, and shipment example photos or videos provides great visual references for the 3PLs as well.

Key Actions: Craft a detailed RFP that covers service expectations like service levels, technology requirements, reporting, and forecasted volumes to be handled. Be clear about your goals and desired outcomes. Having this document gives you a tool to communicate with potential 3PL partners in a structured, data-driven, and unbiassed way.

Partner Selection & Evaluation

1. 3PL Identification:

Why it matters: Choosing the right 3PL partner significantly impacts your supply chain efficiency so it is important to cast a wide net of potential partners to be a part of the RFP process. By casting a wide net, it allows for better rate and capabilities comparison. In addition, 3PLs have their specific expertise, geographical footprint, vacancy, and historical reputation that impact the decision of their participation in the RFP process.

Key Actions: Research and identify 3PLs based on their capabilities, industry experience, vacancy, and geographic coverage. Consider factors like warehouse locations, transportation networks, and scalability.

2. RFP Management:

Why it matters: Efficient RFP management streamlines selection, ensures timely provider responses, and facilitates fair comparisons. Understanding and negotiating 3PL rate structures is crucial for apples-to-apples comparisons. Given the strategic importance of a 3PL search, effective time management and strict deadlines are essential to maintain momentum.

Key Actions: Communicate promptly with potential partners. Establish proposal review calls and walk through each bid together- asking questions, understanding rates and services, and pinpointing gaps in the proposal. Consider the 3PLs’ responsiveness, alignment with your requirements, and value-added services as part of the evaluation criteria.

3. Strategy Alignment:

Why it matters: A strategic approach aligns 3PL services with your overall supply chain strategy. It ensures long-term success and flexibility with your future partner. It is common for business leaders to sit together with 3PL leadership and share their current and future vision on operations and collaborations. Conducting site visits to see 3PL operations can help support final decision making as well as create a forum to discuss the strategic goals of both parties. The right partner is one that works for the present, but also for the future.

Key Actions: Define your logistics strategy. Consider factors like cost optimization, risk management, and customer service. Evaluate how each 3PL aligns with these goals.

4. Final Selection

Why it matters: The choice of a 3PL provider affects operational efficiency, customer satisfaction, and costs. Their performance impacts order fulfillment, inventory management, and overall supply chain. As an extension of your brand, their service quality directly influences customer experience. While cost is important, it shouldn’t compromise service quality or technology.

Key Actions: Evaluate proposals thoroughly by considering cost, service quality, technology capabilities, and cultural fit. Scrutinize pricing structures and additional fees. Assess the 3PL’s reputation and service quality, and ensure their values and communication align with yours. Verify they have robust technology and reporting systems.

5. Contract Negotiation:

Why it matters: Contract negotiation is crucial because it establishes the framework for the partnership between your company and the chosen 3PL provider. It sets clear expectations, defines roles and responsibilities, and outlines the terms under which services will be delivered. A well-negotiated contract helps prevent misunderstandings, reduces risks, and ensures alignment between both parties.

Key Actions: Negotiate contract terms to protect both parties. Engage in open discussions with the 3PL to agree on terms related to pricing, volumes, service levels, performance metrics, and any specific requirements unique to your business. The contract should safeguard the interests of both your company and the 3PL partner. Address issues such as liability, termination clauses, dispute resolution, and confidentiality.

Having the right 3PL partner can help facilitate growth, improve customer service, and lead to cost savings so it is critical to take the right steps when selecting your partner. If this process seems daunting, consider partnering with a consulting firm like Establish, to guide you through this intricate process. The right consultant partner can offer expert knowledge of the 3PL market and an unbiased evaluation when making a decision. They also can manage the timeline and deliverables efficiently and ensure a structured, data-driven approach and can support additional analyses such as center of gravity and network optimization. Overall, a consulting partner enhances and guides you to an optimal 3PL partner selection which in return, can result in a successful long-term partnership. Read more about our 3PL consulting services here.

A Guide to Warehouse Automation for Every Warehouse

The evolution of technology has been marked by the emergence of technologies that were once considered impossible. The first televisions and computers were bulky, expensive, and limited in their capabilities. However, they paved the way for the development of more advanced devices such as smartphones and tablets. These devices are not only more affordable but also more accessible to a wider audience, enabling them to benefit from the features that were once exclusive to the privileged few. The automation landscape has undergone a similar transformation in recent years. The traditional approach of relying on large, robust, and rather expensive solutions has given way to a more modular, scalable, and affordable approach. This shift has enabled smaller companies to leverage the many advantages of automation that were once only available to larger companies. In this blogpost, we will focus on the advantages of automation, introduce the main technologies, and introduce some operational and budgetary considerations, before jumping into some specific examples.

Advantages

The rise of automation has revolutionized the way warehouses operate. By leveraging technology, warehouses can now process more orders in less time, optimize their use of space, labor, and equipment, and reduce their reliance on manual labor. This has led to increased revenue, reduced costs, and improved efficiency. In this blogpost, we will explore the benefits of automation in more detail and how it can help warehouses achieve their goals.

1. Increased warehouse throughput: Automation can help warehouses process more orders in less time, which can lead to increased revenue and customer satisfaction.

2. Better resource utilization: Automation can help warehouses optimize their use of space, labor, and equipment, which can lead to reduced costs and increased efficiency.

3. Reduced labor and operational costs: Automation can help warehouses reduce their reliance on manual labor, which can lead to reduced costs and increased efficiency.

4. Real-time visibility into workflows: Automation can help warehouses track inventory and orders in real-time, which can lead to better decision-making and improved customer service .

5. Ability to forecast with greater accuracy: Automation can help warehouses predict demand and optimize inventory levels, which can lead to reduced costs and increased efficiency.

In conclusion, automation has transformed the warehouse landscape by enabling warehouses to operate more efficiently and effectively. By embracing automation, warehouses can stay ahead of the competition and achieve their goals.

Main Technologies

Another purpose of this blogpost is to have a deeper look at warehouse automation technologies that can increase efficiency and reduce labor costs. Across different industries and clients, the following technologies would be recommended:

1. Autonomous Mobile Robots (AMRs): AMRs are a type of robot that can navigate through a warehouse without human intervention. They are equipped with sensors and cameras that allow them to detect obstacles and avoid collisions. AMRs are highly customizable and can help warehouses automate the movement of inventory from one end of the warehouse to another, which can lead to increased efficiency and reduced labor costs.

2. Automated Storage and Retrieval Systems (AS/RS): AS/RS are a type of warehouse automation technology that can help automate the storage and retrieval of inventory, leading to increased efficiency and reduced labor costs. They are designed to store and retrieve inventory or products automatically, replacing large areas of shelving to save floor space, improve safety, and increase overall productivity. These systems can be designed to work with bins of smaller goods or full pallets and can work with people or integrate with other automated systems.

3. Automated Guided Vehicles (AGVs): AGVs are another type of mobile robots, equipped with sensors and cameras, that can help warehouses automate the movement of inventory within the warehouse, which can lead to increased efficiency and reduced labor costs.

4. Warehouse Management Systems (WMS): WMS is software that can help warehouses manage and control daily operations, from the moment goods and materials enter a distribution or fulfillment center until the moment they leave. It offers real-time inventory visibility, picking and packing processes, resource utilization, analytics, and more 1. By automating inventory tracking, order processing, and other tasks, WMS can lead to increased efficiency and reduced labor costs.

5. One of the most promising technologies in warehouse automation is the Autonomous Case-handling Robot (ACR). ACRs are mobile robots that can autonomously move cases or trays in shelf racks. They can help warehouses increase storage density and improve picking efficiency. ACRs are gaining popularity worldwide due to their flexibility, fast deployment, and high pick rate with huge SKUs. ACRs are used in goods-to-person automation models in warehouses, where they provide a shuttle-type retrieval function to handle totes from static shelves.

In conclusion, the implementation of warehouse automation technologies will provide significant benefits to your organization. By automating inventory movement, storage, and retrieval, one can increase efficiency, reduce labor costs, and improve customer satisfaction. The recommended technologies are proven to be effective and are gaining popularity worldwide. They also offer solutions that can work with operators or in a fully automated warehouse, allowing for flexibility and phased implementations of automation. We recommend implementing these technologies in a phased approach over a period of 18 months to minimize disruption to our operations and maximize the benefits.

Checklist

While it is true that automation can benefit businesses of all sizes, there is no one-size-fits-all solution. Every operation is different, and the potential of automation varies depending on the specific needs of the business. For this reason, we propose the following checklist to identify the viability of automation for your business:

1. Identify the process: Identify the business process that you want to automate.

2. Evaluate the process: Evaluate the process to determine if it is repetitive, time-consuming, and error prone.

3. Determine the benefits: Determine the benefits of automating the process, such as increased efficiency, reduced costs, and improved accuracy.

4. Assess the feasibility: Assess the feasibility of automating the process by considering factors such as the complexity of the process, the availability of technology, and the cost of implementation.

5. Develop a plan: Develop a plan for implementing the automation, including the selection of the appropriate technology and the training of employees.

6. Implement the automation: Implement the automation according to the plan.

7. Monitor and evaluate: Monitor and evaluate the automation to ensure that it is achieving the desired results.

Establish can assist you in identifying the viability of automation for your business and help you develop a plan for implementation.

Budget

The cost of implementing warehouse automation technologies can vary widely depending on the complexity and scale of the automation solutions chosen. Here are some factors that can influence the budget:

1. Initial investment: This encompasses costs for acquiring and installing automation equipment. These expenses can vary widely depending on the complexity and scale of the automation solutions chosen.

2. Operational efficiencies: Evaluating how automation will reduce ongoing operational costs is critical. This includes labor savings, increased throughput, storage capacity, and scalability for peak volume, to name a few.

3. Total cost of ownership (TCO): Future-proofing your investment means accounting for regular maintenance and potential upgrades of the automation systems, ensuring they remain effective and efficient over time.

4. Return on investment (ROI) analysis: Undertaking a detailed ROI analysis is essential. This step helps in quantifying the long-term financial benefits and justifying the investment in automation.

Establish can assist you in identifying the scope and budget of automation for your business and will keep the above financial indicators in mind when proposing potential projects and implementations.

Examples

While there is an abundance of use cases and considerable number of providers within each technology introduced, here is a list of some recent automation integration projects:

1. DHL has deployed up to 2,000 AMRs to reduce nonproductive walking time in their warehouses. 

2. Amazon uses AGVs to transport shelves of goods to human workers, who then pick and pack the items for shipping. 

3. Swisslog’s AS/RS system helped a leading pharmaceutical company increase their storage capacity by 50%. DHL also uses an AS/RS system to store and retrieve items in its warehouse.

4. A WMS helped a leading retailer increase their order fulfillment rate by 200% and can help businesses eliminate labor-intensive duties and improve operations.

5. A big retail client uses automated picking systems to fulfill online grocery orders.