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, 87% of corporate leaders say that COVID-19 significantly elevated the strategic importance of their supply chain operations and fulfillment processes.
Yet not every company considers inventory control or supply chain and warehouse management to be core competencies. 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.
In this article, we look primarily at how outsourcing your workforce and using 3PL providers can help you streamline your labor management and warehouse management processes. With a more efficient workforce, you can ensure inventory accuracy and manage more customer orders, resulting in increased performance and customer satisfaction.
Not every organization prioritizes warehouse management. Some prefer to focus on their staff’s areas of expertise, such as designing, marketing, manufacturing, or selling products. However, that doesn’t mean they can simply forget about tasks such as inventory tracking, cycle counting, reliable order processing, or transportation management for products.
These organizations may find the optimal solution is outsourcing their operation to a 3PL. Doing so allows companies to focus their energies on the value-added activities they excel in. They no longer have to struggle with the movement, protection, storage, and control of raw 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. Partnering with the right 3PL workforce and operations management provider means a company can expect better administration of all their warehousing activities through:
Further, by outsourcing warehouse and distribution operations to a 3PL that provides managed workforce services, a company can be completely relieved of the labor challenges currently surrounding warehouse and supply chain operations, including the well-documented hiring and retention issues.
Those workforce challenges have only been made worse by the unprecedented uptick in order volumes and decreased inventory levels 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 50-70% 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 becomes the employer of the warehouse's associates, supervisors, and managers. The 3PL also handles all the administrative duties associated with this function, including hiring, training, retention, and compensation.
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:
To measure results, it’s important to choose key performance indicators (KPIs) and corresponding metrics within the business. This allows companies to track their progress in real-time and make adjustments as necessary to reach their goals. For example, when tracking purchase orders they might see a desired increase but also notice the extra work will affect the allocation of staff and resources.
Additionally, your 3PL should establish service level agreements (SLAs) and a transparent rate structure. 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.
At FHI, we offer both 3PL warehousing services and managed workforce solutions for operations of all sizes. Our teams work throughout the country and partner with companies in multiple markets, including:
We bring expertise across the full complement of warehouse management systems (WMS software) 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. Most of our operations managers began their FHI careers as front-line associates and continue to make a measurable difference for our customers.
Because we manage both warehouse operations and staffing, a company's flexibility and scalability are no longer limited. As needed, we can deploy associates from our FHI NOW 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 and pricing 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 continually renewed 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.