Executive Briefings

Time to Step It Up, 3PL Providers!

Analyst Insight: Third-party logistics providers (3PLs) will no longer be able to squeeze the wages and benefits of their warehouse workers for cost savings. In the past, 3PLs came in with a lower hourly rate and a lower benefit package, with a mix of contract and full-time employees. The savings from this strategy, along with design improvements, workflow and systems, enabled the 3PL to present a value proposition with a lower cost for operation. - Valerie Bonebrake, SVP, Business Solutions, Tompkins

Time to Step It Up, 3PL Providers!

While cost reduction is not the highest, or the only goal for outsourcing, survey after survey indicates that cost reduction is always in the top three criteria when shippers elect to outsource. In 2016, the labor market for warehouse workers will continue to tighten, and the market will demand a higher wage base in order to attract needed talent. When you look at certain markets where big shippers like Amazon, Walmart and others all locate, the challenge of hiring enough warehouse workers is greater.

To find enough of the right talent today requires a base wage of $15 an hour, and that is on the low end.

Many companies who pay the highest wages also enjoy the highest productivity, highest quality, lowest turnover, and lowest total cost. The labor shortage presents a great opportunity for 3PLs to up their game. Here are some thoughts on how to accomplish this:

Insure that your warehouse layout is efficient. Improved efficiency across all of your operations offers opportunity to reduce wasted manpower, freeing up dollars to fund wage increases. Measure performance and put the right training and incentives in place to maximize productivity.

Consider investing in new warehouse solutions. With the onset of smaller and more frequent orders, solutions such as put systems can improve labor management and order accuracy.

Consider non-traditional employees. People with disabilities represent a highly underutilized workforce. Companies like Walgreens and P&G are leaders in demonstrating the potential of developing a great workforce of loyal and capable workers. This requires effort and investment on the front end, but the payback will be there in more ways than one.

Invest in new technologies. 3PLs and shippers must work in partnership to develop new and creative ways to price and pay for results delivered, not just tasks to perform. Those who do this will flourish – innovation will increase performance and relationships will thrive through the changes that occur in all businesses today.

Don’t forget the basics. It is more important than ever to really focus on getting the most out of your workforce. You want to be the employer of choice. The base wage is clearly the most important element, but don’t stop there. Invest the time to really understand the environment and what is needed to recruit, hire and retain the best.

The Outlook

Make your own list for 2016 – and commit to it. Involve everyone in the process – not just HR or operations managers, but the workforce, finance and marketing, engineering, your customer – and get the support of executive leadership to create a sustainable and winning solution for third-party logistics in 2016 and beyond.

While cost reduction is not the highest, or the only goal for outsourcing, survey after survey indicates that cost reduction is always in the top three criteria when shippers elect to outsource. In 2016, the labor market for warehouse workers will continue to tighten, and the market will demand a higher wage base in order to attract needed talent. When you look at certain markets where big shippers like Amazon, Walmart and others all locate, the challenge of hiring enough warehouse workers is greater.

To find enough of the right talent today requires a base wage of $15 an hour, and that is on the low end.

Many companies who pay the highest wages also enjoy the highest productivity, highest quality, lowest turnover, and lowest total cost. The labor shortage presents a great opportunity for 3PLs to up their game. Here are some thoughts on how to accomplish this:

Insure that your warehouse layout is efficient. Improved efficiency across all of your operations offers opportunity to reduce wasted manpower, freeing up dollars to fund wage increases. Measure performance and put the right training and incentives in place to maximize productivity.

Consider investing in new warehouse solutions. With the onset of smaller and more frequent orders, solutions such as put systems can improve labor management and order accuracy.

Consider non-traditional employees. People with disabilities represent a highly underutilized workforce. Companies like Walgreens and P&G are leaders in demonstrating the potential of developing a great workforce of loyal and capable workers. This requires effort and investment on the front end, but the payback will be there in more ways than one.

Invest in new technologies. 3PLs and shippers must work in partnership to develop new and creative ways to price and pay for results delivered, not just tasks to perform. Those who do this will flourish – innovation will increase performance and relationships will thrive through the changes that occur in all businesses today.

Don’t forget the basics. It is more important than ever to really focus on getting the most out of your workforce. You want to be the employer of choice. The base wage is clearly the most important element, but don’t stop there. Invest the time to really understand the environment and what is needed to recruit, hire and retain the best.

The Outlook

Make your own list for 2016 – and commit to it. Involve everyone in the process – not just HR or operations managers, but the workforce, finance and marketing, engineering, your customer – and get the support of executive leadership to create a sustainable and winning solution for third-party logistics in 2016 and beyond.

Time to Step It Up, 3PL Providers!