The global third-party logistics (3PL) market was valued at just over $1 billion in 2019 and is projected to reach nearly $1.8 billion by 2027 – approximately a 7% jump from 2020 to 2027. Despite this growth, productivity in the warehousing and storage industry dropped 7.6% last year. Much of this can be attributed to growing pains as 3PLs try to adapt to changing customer expectations, new technology, e-commerce demands, and more.
Five Challenges for 3PL Warehousing and Distribution
Let’s take a look at the top five challenges that today’s 3PL companies are trying to manage and solve.
1. Warehouse Capacity
Many warehouses and distribution centers are built based on the needs of the business at the time of construction. While the 3PL industry is always evolving, today the industry is experiencing rapid growth. Of course, one of the first side effects of this is that warehouses run out of space. In addition, price hikes in real estate make it difficult for some distribution centers to expand.
According to Inbound Logistics, capacity was one of the top challenges for 3PLs in 2019, with 65% citing it as an issue. So what can fulfillment warehouses and distribution centers do? To maximize space, 3PLs may want to consider expanding vertically, not horizontally. This can be accomplished by installing customized storage solutions using pallet racks, industrial shelving, and other material that matches the layout of the warehouse, improving 3PL storage capacity and efficiency.
2. Workforce
According to the US Chamber of Commerce, all sectors of the economy are facing a shortage of workers, with over 10 million job openings in June (a number that continues to escalate). This has greatly impacted the 3PL industry as well. With the sudden growth in logistics, more companies are trying to expand meaning workers have more job options available to them. Inbound Logistics reports that nearly 65% of surveyed 3PLs said that finding, training, and retaining qualified warehouse employees was a challenge. Lack of staff or unskilled staff can lead to increased labor costs, slow business growth, and damage the company’s reputation with customers.
Until the economy right sides itself, warehousing and distribution centers may want to look at ways to boost the productivity of the current staff. This can be accomplished by maximizing storage space and improving organization, which reduces employee walking and searching time, ultimately improving fulfillment times (better organization will also make training easier when you do find new employees). Automation, which we’ll cover soon, can also improve employee speed and help pick up the slack when there’s a lack of employees.
3. Employee Safety
The warehouse can be a dangerous place. Accidents at docks or those involving forklifts, conveyors, materials storage, and manual lifting can result in injury or even death. 25% of all industrial accidents occur at the loading dock while forklift accidents result in nearly 35,000 serious accidents annually.
Aside from the devastating impact on those injured and their families, 3PL warehouse accidents affect the business itself. Warehouse accidents account for 95 million lost workdays every year, and accidents result in a loss of productivity, worker compensation claims, lowered employee morale, and potential OSHA fines. To ensure accidents remain at a minimum, 3PL companies need to regularly keep track of potential maintenance issues throughout the warehouse and consider installing safety features such as dock alerts, lighting, and safety gates; as well as rack netting, end guards, and pallet support bars. Download our warehouse safety checklist here.
4. E-commerce
Online sales are booming! Americans spent nearly $800 billion during 2020 on e-commerce, up more than 30% from 2019, according to data published by the U.S. Census Bureau. While COVID’s impact on this increase is undeniable, many consumers will likely continue their online shopping habits even when the pandemic has ended. Of course, consumer expectations for e-commerce have also evolved. Due to offerings from giants like Amazon and Walmart, the majority of e-commerce shoppers now expect expanded product choices, real-time visibility into tracking and delivery, hassle-free returns, and quality packaging.
The biggest expectation, however, is fast and/or free shipping. Today, 75% of consumers expect free shipping when they make an online purchase. While the retail giants can afford to take the hit for free shipping, offering free shipping can be brutal on the budget for smaller e-commerce warehousing 3PLs which may need to get creative, for example, increasing the price of a product just enough to cover free shipping. Now, this may sound counterproductive, but many people don’t notice a small price increase but they will notice a shipping cost. The Wharton School of Business even shows that free shipping that saves a customer $6.99 is more appealing than a discount that cuts the purchase price by $10. Having a well-organized and efficient storage system in place can also help speed up fulfillment, by making it easier for employees to find, pick, and pack items.
5. Technology
Digital transformation is poised to forever change warehousing, distribution, and fulfillment. Today, many large 3PL warehousing services have adopted automation through robots and artificial intelligence (AI) to speed up processes. There are also other relatively inexpensive ways to streamline logistics such as inventory scanner systems and a warehouse management system (WMS). A WMS, most of which are cloud-based solutions, provides transparency into the supply chain and helps ensure that goods and materials move along in the most efficient and cost-effective way. A good WMS keeps an eye on warehouse design, inventory tracking, picking and packing goods, receiving and put-away, shipping, labor management, yard and dock management, and reporting.
Because of the cost of adopting new technologies, it’s important for 3PLs to truly understand their needs and the intended goals for their 3PL warehousing software, as each is different and includes various features. You’ll want to weigh the pros and cons and make sure you’ll see a healthy ROI over the shortest amount of time.
How SSE Helps 3PL Warehousing Companies
Is your 3PL business feeling the strain of any of these distribution challenges? If your warehouse is located in Florida or South Georgia, the professionals at Southern States Enterprises (SSE) want to help. For over 20 years, companies in the area have relied on Southern States Enterprises as the leading name in motive power, docks and doors, industrial pallet rack, pallet storage systems, and warehouse equipment.
We know how to expand your facility vertically, allowing you to save money, increase efficiency, improve operations and employee productivity. We also know how to make safety a priority, and know exactly what you need to keep your docks, doors, and racks safe and efficient. Our field service technicians will also keep your facility running smoothly and safely at the lowest possible cost through a planned maintenance and repair schedule using a warehouse safety checklist. And, when it’s time for a new part, a replacement part, of a technology upgrade, we can help and make recommendations and find the right equipment for you.
Want to talk to someone now? Contact us.
