Do
you use a 3PL to store and distribute products from a multi-client, or shared,
warehouse? If youre like many shippers
with a shared warehousing strategy, you may need to change the way you manage
your 3PL relationship to maximize your benefit.
With
shared warehousing, your logistics costs parallel your revenue stream. When volume (and revenue) is up, the
transaction-based invoicing from the 3PL is also up. When volume is down, you see cost reduction
tied to fewer transactions. The value
proposition for shared warehousing is that you don’t run out of space,
equipment or staffing during the peak volume periods, but also don’t pay for
excess space and staffing during lax periods.
Large
shippers who contract with a 3PL to manage a large, dedicated warehouse just
for their products tend to have a more strategic relationship with their
partners, with regular dialogue on how to adjust operations to get better,
faster and more efficient.
But
smaller shippers who may store goods in one or multiple shared warehouses
across the country too often view the relationship with their 3PL as tactical,
focusing solely on getting the lowest possible transaction cost. Hence, many of the benefits of outsourcing to
a logistics specialist are left on the table.
Based
on the common mistakes we see, here are some suggestions to maximize the many
benefits of shared warehousing.
Provide
an accurate business profile. Getting
the transaction rate right at the start is a result of having the right
information, in detail, to build a solid order profile. Some shippers may not have the staff or the
time to parse through and provide the requested data. Instead, they rely on standard,
system-generated reports. Example: A manufacturer recently provided a monthly
shipping volume report as the primary piece of data on which to base
pricing. The missing puzzle piece was
that volumes on the last 3 days of the month equaled the volume of the first 17
business days. Surprises like this lead
the 3PL to request a pricing adjustment – a frustrating process for all
concerned and one that could have been avoided with an earlier, deeper dive
into the data.
Determine
Key Performance Indicators (KPIs).
Again, it takes time to think through and decide on how you want to
measure success. But, otherwise, how can
you judge the value of the relationship – for yourself or your senior
executives? Having just one KPI – the
lowest possible transaction cost – may encourage shortcuts that lead to quality
problems and costs in other areas (retailer chargebacks, reworks, etc)
Establish
regular communications that provide a “telescope” view of upcoming business
changes. Again, such meetings take
time. But it pays off tenfold in increased
productivity and lower costs. Let’s say
an increased volume of products is required to support an upcoming promotion
with a retail customer. If your 3PL gets
this information 4-5 weeks in advance, they can use it to plan required space
and labor to avoid costly overtime. In a
shared warehousing environment, better planning of day-to-day shipping
requirements easily translates to 6- and 7-figure savings over the course of a
year. Most shippers don’t want to keep
their 3PL in the dark, it’s just what happens when there’s too much to do and
not enough time and people available.
That’s why regular, scheduled communications are so important.
Talk
strategy. These higher level discussions
could be scheduled on a quarterly, semi-annual or annual basis. The focus would be on your longer-term
business plan and performance expectations.
Are you planning to add a new sales channel, such as direct to consumer? Will your product offering expand – possibly
through acquisition? Will there be a
need for value-added services at the distribution center – variety packs,
display building, postponement activities?
The purpose of such meetings is to engage the brainpower and experience
of your 3PL partner, which can lead to creative solutions you may not have considered.
Shared
warehousing should not be regarded as a tactical, transaction-based
solution. Establishing a more strategic
relationship with your 3PL will help maximize the service and cost advantages
that shared warehouse solution can deliver.
http://www.weberlogistics.com/blog/california-logistics-blog/bid/277931/Shared-Warehousing-Maximizing-the-Benefits