The Rise of 3PL and the Modern Warehouse

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Warehousing is in high demand. Some of the most coveted real estate in the country is currently warehouses. The price for prime warehouse space increased by double digits in a number of urban areas in 2015; nationwide it was up by 9.9 percent. Prime warehouse space is in such short supply near critical West Coast ports such as Los Angeles-Long Beach that developers have been forced to renovate lower grade properties or build inland in less desirable areas.

The modern warehouse is no longer just a place for storage. Today, it is an increasingly dynamic supply chain center that takes on an array of complex responsibilities, providing the systems, tools, and processes to fuel the growth of companies.

With a growing need for specialized expertise, many companies are turning to 3PL warehousing and distribution services. The growth of 3PL and warehousing has been driven in large part by the rapid rise of e-commerce. Internet sales in the United States now account for an estimated 8% of total retail sales compared to just 3% in 2006, while experts predict that online sales could make up 12.6% of retail sales by 2020. E-commerce customers expect their products to be delivered fast, making it necessary to store inventory closer to where they are. E-commerce is not going anywhere, and the 3PL industry is innovating and iterating to meet the expectations of e-commerce customers.

The demands of e-commerce customers change rapidly with the introduction of new products, trends, and promotions. At the same time, customers expect speedy and convenient delivery that they can control as much as possible, at a low cost. Whether for e-commerce or another industry, sophisticated 3PL services employ all of the tools at its disposal to receive, store, and distribute goods in the most effective manner. As important as the efficient movement of goods, 3PLs specialize in defining and executing the flow of information from suppliers to end customers. On the demand side, the Warehouse Management System can be integrated into the customer’s ERP to directly receive information about orders and automate the process of fulfilling those requests. On the supply side, a purchase order management system can create and track purchase orders to multiple suppliers and monitor their performance to identify inefficiencies.

By prioritizing end-to-end supply chain visibility, 3PLs strive to constantly improve overall operational processes through rigorous tracking and analysis of data. For example, the 3PL will lead the collection and analysis of critical data on product sales that will inform decisions about where to locate bestselling products for easy retrieval. Through the inventory management system, a 3PL partner will inform customers when to reorder products and which products are not selling quickly, providing the information necessary to forecast future sales and improve the planning of inventory. Parcel shipments can be tracked and analyzed to gather the insight necessary to negotiate rates with carriers and enhance performance. All of this crucial, real-time data should be accessible by the client online 24/7 to assist them in making informed, data-driven business decisions.

At the modern warehouse, products are also transformed with value added services. From assembling product kits for faster and more efficient shipping of items that are often bought together, to packing and repacking using quality controlled processes, to testing and inspecting returned or damaged goods and serving as a second level of quality control, warehouses can “finish” the shipments from suppliers.

In a market where an efficient supply chain is increasingly complex, and increasingly important to business growth and profitability, small and large businesses alike can benefit from outsourcing their warehouse, distribution, and related logistics to a 3PL partner. Especially for new companies that are not venture or investor funded, outsourced 3PL services offer a great deal of flexibility. There’s no need to invest in warehouses, hire and train staff, create quality-driven processes, integrate a variety of technologies, and face the constant pressure to adapt in the face of changing demand. Businesses will forego the capital cost, share the overhead costs of warehousing, and easily scale up or scale down as needed.

AGWorld 3PL designs customized logistics programs that combine warehousing, distribution, transportation logistics and value-added services and couples it with best-in-class customer service that will give you peace of mind. We operate C-TPAT certified warehouses with the capacity to serve customers with a range of requirements. Get in touch your local AGWorld representative to learn how about how we can plan the journey for your cargo.

Photo courtesy of Selka

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