Executive Briefings

Keys to Managing 3PL Growth

John Reichert, director of supply chain execution solutions at Tecsys, discusses factors driving increased demand for 3PL services and describes the type of provider best positioned to leverage this growth environment.

A number of factors are driving increased demand for 3PL services, says Reichert. "The aftermath of the recession and the slow recovery have left a lot of organizations less interested in investing in long-term fixed assets," he says. "Additionally, e-commerce is growing and omnichannel fulfillment operations are stretching a lot of retailers and suppliers, who don't have the distribution network and infrastructure to deal with high-volume, small orders going directly to consumers. Add to this the large growth in SKUs and corporate concerns about risk and you have a lot more companies turning to 3PLs."

3PL organizations best able to leverage this environment are those with advanced technology solutions that provide the visibility and real-time information customers are demanding, says Reichert.

Questions about such capabilities are being included more frequently in RFPs going out to 3PL companies, he says, along with questions about traditional transportation and warehousing capabilities. “Capabilities that drive past traditional warehousing and transportation operations are becoming key issues in the selection process,” says Reichert. What potential customers really want is the ability to blend a 3PL’s information with their own internal information so they can perform analytics on the consolidated picture, he says.

As a result, 3PLs are starting to embrace technology that gives them the ability to easily adapt to changes in the environment and to easily scale up or down, Reichert says. “3PL organizations must have the right IT platform, and that means one that can scale in any direction, from large to small and from highly manual to labor-intensive operations,” he says. ”Those operations require different processes and different methods to be efficient, so 3PLs need a platform that can handle the total elasticity curve.”

To view the video in its entirety, click here

A number of factors are driving increased demand for 3PL services, says Reichert. "The aftermath of the recession and the slow recovery have left a lot of organizations less interested in investing in long-term fixed assets," he says. "Additionally, e-commerce is growing and omnichannel fulfillment operations are stretching a lot of retailers and suppliers, who don't have the distribution network and infrastructure to deal with high-volume, small orders going directly to consumers. Add to this the large growth in SKUs and corporate concerns about risk and you have a lot more companies turning to 3PLs."

3PL organizations best able to leverage this environment are those with advanced technology solutions that provide the visibility and real-time information customers are demanding, says Reichert.

Questions about such capabilities are being included more frequently in RFPs going out to 3PL companies, he says, along with questions about traditional transportation and warehousing capabilities. “Capabilities that drive past traditional warehousing and transportation operations are becoming key issues in the selection process,” says Reichert. What potential customers really want is the ability to blend a 3PL’s information with their own internal information so they can perform analytics on the consolidated picture, he says.

As a result, 3PLs are starting to embrace technology that gives them the ability to easily adapt to changes in the environment and to easily scale up or down, Reichert says. “3PL organizations must have the right IT platform, and that means one that can scale in any direction, from large to small and from highly manual to labor-intensive operations,” he says. ”Those operations require different processes and different methods to be efficient, so 3PLs need a platform that can handle the total elasticity curve.”

To view the video in its entirety, click here