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Want to Outsource Warehouse Operations? Make Sure Real-time Data Sharing is Part of the Package
Retailers are shuttering their own warehouse operations in favor of third-party logistics providers. Even grocery chains are turning to third parties; Kroger and Ahold USA are just a few examples of the growing number of grocers handing over operations to 3PLs, according to MWPVL International, a specialized supply chain, logistics and distribution consulting firm.
The shift is giving the 3PL market a big boost. According to Armstrong & Associates, Inc., a supply chain management market research and consulting firm, the U.S. 3PL market will see revenues of $142.2 billion in 2012, up from $133.8 billion the year before.
But buyers beware. Although outsourcing can save money by eliminating labor costs and benefiting from a third party's more efficient distribution networks, there are trouble spots. Mid-sized and smaller 3PLs struggle with effective data sharing, forcing retailers to get the detailed logistics and distribution information they need from a variety of sources: the phone; faxes; email; and Web sites. Some may even have to rely on spreadsheets their 3PLs provide them.
The crux of the problem is a lack of integration with the 3PLs' warehouse management systems (WMSes) and transportation management systems (TMSes) to the external-facing systems 3PLs offer to their customers. This means much of the information is hours, or even days old. Delays prevent suppliers and retailers from proactively addressing issues before they impact the supply chain and cause expedited freight costs, extra labor costs or product/inventory misses. Another problem: labor-intensive manual entry processes, which all too often produce mistakes and inaccuracies.
Fixing the data-sharing dilemma requires automation. Advanced, cloud-based services that enable real-time data collection and data sharing are available, and these services enable partners to easily and effectively communicate critical information, such as how a specific order is packed and when it is en route. These services generally rely on EDI and other technologies and data formats that enable electronic data sharing.
EDI and other electronic data sharing technologies are competitive advantages for 3PLs – and they should be a priority for retailers as they shut down their internal operations and seek out providers. With real-time visibility into supply chain operations, including invoices, in-transit data, service records, etc., everyone – the retailers and suppliers – benefit.