A growing trend in the third-party logistics (3PL) industry is combining traditional storage and logistics with staffing, particularly for use by small businesses. Outsourced warehousing and distribution has long been the province of multinational mega-companies to resolve logistical challenges on a global basis.
A recent report by research and consulting firm Armstrong & Associates (www.3PLogistics.com) indicates that 77% of domestic Fortune 500 companies use 3PLs. Historically, the use of 3PLs by small businesses has been relatively light. The primary reason is that large 3PLs are simply not equipped to cost effectively provide necessary staffing services to small businesses.
However, a new niche in this segment is emerging, one which caters to smaller businesses by providing a level of customer service and special attention to their specific needs. This enables companies to shape business models that reap the traditional outsourcing benefits, namely lower overhead costs for building acquisition and management; equipment purchasing and maintenance; as well as trucking and other transportation.
Outsourced Staffing Solutions
One benefit of this outsourcing model is staffing efficiency. Time-intensive jobs, such as product distribution, customer service, inventory management and order fulfillment are good examples of value-added services 3PLs can offer. Instead of having to hire, train and maintain a staff for those important functions, companies are turning to 3PLs.
Outsourced staffing helps reduce fixed costs in salary and benefits, and lowers HR management requirements. In addition, outsourcing seasonal labor needs that challenge many industries provides greater stability in year-round staffing and helps companies build staffs with a stronger concentration of skills in a company’s core functions.
For many companies, choosing a 3PL with a high level of customer service capabilities is a key decision factor. Owning and staffing a warehouse and a fleet of delivery trucks can be cost-prohibitive; opting to go the 3PL route, in some cases, can offer small businesses with another alternative.
Choosing the Right 3PL
Companies interested in employing an outsourcing strategy should be prepared to not only decide what types of warehouse facilities they need but also what types of services are necessary. Look closely at the 3PL’s communication skills, customer service, personnel mix and dedication to partnership with clients.
The range of value-added services appropriate for outsourcing encompasses many different business requirements. Certainly, basic labor for applications, such as pick and pack jobs and processing orders, is well suited for outsourcing. But so are more complex assignments that require specific skills and training, such as: product assembly and labeling; loading, unloading and storage of weight-laden or delicate materials; customer scheduling and delivery; document retention (archiving and shredding); and export/import. Be sure to select an outsourcing partner that has the personnel mix to satisfy all anticipated manpower needs, or risk the added complexity of having to work with multiple vendors.
Other considerations to keep in mind: Does your business require partners to have special state or federally mandated permits, licensing or insurance? Businesses in the food industry, for example, may require certification from the Food and Drug Administration, while those in the alcoholic beverage industry must meet licensing requirements from the Alcohol Beverages Control Commission.
Technology is another factor. Look for 3PLs that can offer state-of-the-art tools and technical expertise, such as access to real-time, on-line inventory monitoring and reporting capabilities, as well as systems that can process and track orders with a high level of accuracy and efficiency.
Through a careful selection process, small businesses stand to reap many benefits from 3PL providers— and in today’s economic climate, maximizing cost control and maintaining internal staff containment without compromising quality can play a major role in a company’s success.
Tom Gorman is president and CEO of BCS Distribution & Fulfillment (www.bcsdistribution.com), a Boston, Mass.-based 3PL facility and outsourcing service provider.