Customer expectations for fast, accurate deliveries to their doorstep and fully stocked retail shelves have raised the profile of supply chains both among consumers and top executives. According to the 2022 MHI Annual Industry Report, "Evolution to Revolution: Building the Supply Chains of Tomorrow," 87% of corporate leaders say that COVID-19 significantly elevated the strategic importance of their supply chain operations.
Yet not every company considers supply chain and warehouse management to be a core competency. Indeed, some consider it to be (at best) a necessary evil or (at worst) a frustrating, expensive headache. After all, there are warehouses to build, maintain, and equip; equipment that must be acquired and routinely serviced; inventory to purchase, store, manage, and ship; and employees who must be recruited, trained, and retained.
In an era of intense competition, extensive customer demands, and limited available labor, many organizations are choosing to outsource some or all of their supply chain management and staffing needs to third-party logistics (3PL) service companies. Research from Statista found that 63.5% of companies are outsourcing their warehousing activities specifically to 3PL providers. It's a trend that is expected to continue, as the 3PL market has been growing year-over-year (with the exception of 2019), and is predicted to top $297.2 billion U.S. by 2023.
The Benefits of Outsourcing Warehouse Workforce Management
Organizations that do not consider managing their warehousing to be a core competency or a strategic advantage in their market may find outsourcing their operation to a 3PL to be the optimal solution. Doing so allows companies that excel at designing, marketing, manufacturing, or selling products to focus their energies on those value-added activities. They no longer have to struggle with the movement, protection, storage, and control of materials and products on the distribution end of the business.
For a 3PL that specializes in warehousing, distribution, and order fulfillment—whether for store replenishment or direct-to-consumer—these activities represent distinct core competencies. By partnering with the right 3PL workforce and operations management provider, a company can expect better administration of all their warehousing activities through:
Streamlined inventory handling processes
Implementation of Lean processes that reduce waste
Better customer service
More controlled, predictable costs
Further, by outsourcing warehouse and distribution operations to a 3PL that provides managed workforce services, a company can be completely relieved of labor challenges—including the well-documented hiring and retention issues—currently surrounding warehouse and supply chain operations. Those workforce challenges have only been made worse by the unprecedented uptick in inventory and order volumes since the start of the pandemic. Staffing also typically represents the largest operating expense within a warehouse, estimated by Logistics Management to be anywhere from 50% to 70% of an average operation's budget.
In a managed workforce model, the facility and its technologies, including software and material handling equipment, remain in the company's control. The 3PL takes over the day-to-day management and function of the operation. It is the employer of the warehouse's associates, supervisors, and managers. Further, the 3PL handles all the administrative duties associated with this function, including hiring, training, retention, and compensation activities.
An on-site management team from the 3PL works closely with the company to ensure the operation's unique goals and objectives are properly prioritized and documented within standard operating procedures (SOPs). Our focus is typically on creating:
Service level agreements (SLAs) and a transparent rate structure are established. This allows a company to gain better control of overall supply chain costs and transfer capital expenses to the operations side of the balance sheet.
FHI's 3PL Managed Workforce Offerings
At FHI, we offer both 3PL warehousing services and managed workforce solutions for operations of all sizes. Our teams work throughout the country as we partner with companies across multiple markets. These include:
Food and beverage
We bring expertise across the full complement of warehouse management system (WMS) softwares—first-, second-, and third-tier—and vast experience in streamlining workflows, inventory management, and order fulfillment.
With over three decades of experience in recruiting and training a reliable, professional warehouse and distribution workforce, FHI can also resolve permanent staffing challenges at our customers' facilities. Our large team of recruiters is dedicated to finding the right people locally for our 3PL operations. We reward them with incentive-based pay and opportunities for advancement (our warehouse associates average 173 days between hire and promotion). Most of our operations managers began their FHI careers as front-line associates and continue to make a measurable difference for our customers. And we continue to support and nurture their growth as leaders.
Further, with FHI managing both warehouse operations and staffing, a company's flexibility and scalability are no longer limited. As needed, we can deploy associates from our contingency labor services group to help support daily, seasonal volume, and throughput peaks to support a company as it expands its business into new markets or regions.
Finally, FHI offers flexible contract terms with unlimited extension options, working with our customers to define a more customizable commitment than the 3PL industry standard of three to five years. This allows our customers to experience FHI's outsourcing approach with minimal risk, although all of our current 3PL customers have continued to renew their contracts (some have even extended their terms to encompass multiple years).
Want to learn more? We're here to help.Schedule a call, and we'll be happy to answer your questions and share additional information about how outsourcing your distribution and warehousing to FHI's 3PL-managed workforce solutions can help your company regain its focus.
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In any market, your supply chain can make or break your ability to compete well. Don't leave that to chance. We can help you create a strong operation, so you never fall behind the competition.
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