Last week, Bloomberg reported that Walmart is testing a fee-based service called ‘Fulfilled by Walmart’. The publication described the service as “storing and shipping products for third-party vendors”. The company’s E-commerce Chief, Marc Lore, said “the service would be an area where the e-commerce arm could generate revenue”. And why wouldn’t the e-commerce giant tap into an industry that has experienced steady growth in the last 5 years and is forecasted to be worth USD$25billion in 2019 (source: IBISWorld)?
Moreover, according to Statista, over 2.14 billion people worldwide are expected to buy goods and services online by 2021. With an estimated global population of 7.7 billion people, that’s about a quarter of the world’s population shopping online. According to Nasdaq, around 95% of all purchases are thought to be via e-commerce by 2040.
The growth of online retail puts significant pressure on supply chains. Although product price is still the primary factor in a consumer’s decision to make a purchase, it’s very closely followed by shipping speed and cost. Consumers have grown accustomed to the promise of fast and cheap (or free!) shipping. To the extent that e-commerce giants market fast and free shipping as one of the main benefits within their subscription / membership services.
To succeed in this new economy, businesses need to employ robust processes and solutions to support their supply chain. Making order fulfilment a priority is key to maintaining e-commerce profitability.
What is order fulfilment?
Order fulfilment encompasses the entire end-to-end cycle of your product within you warehouse and involves the processes of storing, picking, packing and shipping ordered inventory to customers. The three main fulfilment models retailers use are:
Self-fulfilment - occurs when a company completes all steps of the fulfilment process internally. It allows full control of inventory and the pick, pack, and ship process.
Dropshipping - the merchant acts like a middleman. They never hold the products they sell in their online store; instead, the products are produced, stored, and shipped by the manufacturer.
Third Party Logistics (3PLs) - organizations that offer warehousing, fulfilment and distribution services to businesses in a variety of industries. These services can be as simple as brokering and managing freight flows for the customer or as complex as setting up operations for companies’ major distribution centres.
Is fulfilment as a business for everyone?
If your company disposes of a vast amount of free space within its facility(s) and has implemented outstanding strategies for last-mile delivery (undoubtfully supported by best-of-breed Warehouse Management and Transportation Management systems), offering fulfilment on behalf of other retailers might make sense, right? Well, maybe.
“Becoming an effective and profitable 3PL is no easy task for a manufacturer or distributor. In order to succeed as a 3PL, the new logistics division or subsidiary needs relative autonomy and a direct pipeline to corporate management. It needs its own P&L, the freedom to solicit business, sufficient IT and financial resources, and most importantly, time. Investing the time needed to build a successful business is often the greatest challenge for nouveau 3PLs.” – Inbound Logistics
Although storing, fulfilling and distributing orders might sound straightforward, 3PLs face very unique operational challenges. They need to work as an extension of their customers, whilst keeping full control of their internal systems and processes to ensure maximum efficiency and profitability. They must balance conflicting factors such as cost, flexibility and productivity to sustain the value they offer to their customers.
Achieving this balance is no easy task if you’re managing multiple clients and products across several facilities sometimes in different time zones, speaking diverse languages and using various currencies. You could be handling one customer’s product range spread across many warehouses or managing a warehouse containing multiple products from different customers.
Additionally, there are a host of complicated legal and insurance requirements that you will need to sort out before offering logistics services to external clients.
However, it might not be all doom and gloom. A retailer could leverage their expertise and existing relationships and technology, especially if distribution is already a core competency.
“While examples of retailers migrating into the logistics solutions provider business are few, manufacturers and distributors are making the move in small numbers. The motivation for extending an internal logistics department into the 3PL business can be slim margins or tough competition in the parent company's market segment.
But where there is challenge, there is also opportunity as niche players often are very familiar with vendors and customers. Those relationships provide good opportunities to sell logistics solutions and projects.” – Inbound Logistics
Conclusion
The demand for transport and logistics as a service is growing, driven by the rise of online shopping. This opens an opportunity for retailers and transportation companies alike, to broaden their service offerings to include storage and fulfilment. However, there is more to becoming a 3PL than just adding "Logistics" to the company’s name. Businesses need to understand all the industry’s demands and nuances to succeed.
Still, if you choose to add order fulfilment as a new service division, you’ll need the right technology to support your business. A robust, 3PL tailored Warehouse Management System will allow you the inventory visibility and control you need to launch your logistics operations.
WMS for 3PLs
A Warehouse Management Solution can bring a myriad of benefits to your current operations, as well as propel your 3PL division. It operationalises and streamlines order fulfilment, inventory and shipping management. It allows for more accurate reporting, allowing managers to make better informed forecasting decisions.
Moreover, it will decrease transportation planning time and achieve cost savings through order consolidation, load optimization, bestway routing, tracking and proof of delivery. Furthermore, a purpose-built WMS can integrate to a TMS, leveraging the data model that has client specific information, including their unique routing requirements.
By providing accurate, real-time data on orders, receipts, items and invoices, a WMS reduces obsolescence, safety stocks, and work in process. Additionally, a purpose-built WMS provides 3PLs with access to large volumes of client data that can be leveraged into valuable business information. These insightful reports can be custom built and automated to suit your client’s requirements and preferences.
iWMS Australasia provides scalable HighJump solutions to streamline your 3PL business. Our easy to deploy software has a high level of configurability for true multi-tenancy (clients, facility, workflows, language). Our solutions have been fully Unicode-enabled and ships with twelve languages out of the box. Live implementations in each of these languages are available as well.
Contact us today to find out how a WMS can optimize your processes, dramatically increase efficiency and drive down costs—empowering operational excellence, on-time customer orders and, ultimately, customer satisfaction!