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The Rising Pressure to Increase 3PL Profitability and how to manage it efficiently



“The economy is still growing, but experts see uncertainty ahead for shippers and 3PLs, caused by tightening transportation capacity, the electronic logging device (ELD) mandate, and the service demands of the Amazon era. You used to ship high volumes of goods on a low frequency, and ecommerce has flipped that to low volumes on a high frequency.”


The Challenge

A Warehouse Operations Manager’s number one priority is to run an efficient business that is also highly profitable. They must be able to accurately track daily tasks and value-added services being provided – and bill them properly per customer. This can be extremely difficult in a paper or Excel-based environment which don’t offer automation for different customer workflows or billing schedules. Manually updating billing can take weeks. Growing warehouses need to easily bill customers and receive payments quickly. As the global economy grows ever more connected, opportunities for fast-acting warehouses, 3PLs, and distribution centres continue to expand. These opportunities for increased profitability also bring new challenges to our industry.


The Impact to 3PL Operations

A Warehouse Operations Manager’s number one priority is to run an efficient business that is also highly profitable. They must be able to accurately track daily tasks and value-added services being provided – and bill them properly per customer. This can be extremely difficult in a paper or Excel-based environment which don’t offer automation for different customer workflows or billing schedules. Manually updating billing can take weeks. Growing warehouses need to easily bill customers and receive payments quickly. As the global economy grows ever more connected, opportunities for fast-acting warehouses, 3PLs, and distribution centers continue to expand. These opportunities for increased profitability also bring new challenges to our industry.

Everything from growing customer expectations to fiercer levels of competition, warehouses must be able to meet these challenges head-on in order to drive more revenue. Warehouses seeking to profit through these obstacles must be at the top of their game in every area – which is why we at 3PL Central strongly recommend a regular and comprehensive “warehouse tune-up.” Such tune-ups enable you to identify gaps, evaluate new technologies, and position your warehouse for the lucrative years ahead.

To optimize your logistics operations, here is a few warehouse tune-up that can help you optimize your people, processes, and assets:

2. Evaluate Your Staffing – Your employees’ have an enormous impact on your overall profitability. Measuring productivity and profitability is a complex analysis. Employers must assess the performance of everyone on your payroll, and evaluate their investment in training and educational efforts to grow their teams. Remember, employee performance affects your profitability every single minute of every single day. Even small changes in behaviour and attitude can yield enormous results over the long run.

The Solution

To optimize your logistics operations, here are a few warehouse tune-up that can help you optimize your people, processes, and assets:


1. Analyse Your Profitability by Account – In order to understand where you can improve your profitability, your 3PL must first understand where it is making money – and where it is losing it. You can do this by performing a detailed analysis of every customer account. Best practices show that performing this analysis for every customer on a monthly basis can prevent profit leaks and help you begin pricing adjustment discussions in a timely manner.


2. Evaluate Your Staffing – Your employees’ have an enormous impact on your overall profitability. Measuring productivity and profitability is a complex analysis. Employers must assess the performance of everyone on your payroll, and evaluate their investment in training and educational efforts to grow their teams. Remember, employee performance affects your profitability every single minute of every single day. Even small changes in behaviour and attitude can yield enormous results over the long run.


3. Question Your Processes – The small, routine, and highly repetitious tasks that power your warehouse often offer tremendous opportunities for cost-savings. Any improvement, optimization or reduction in the effort will be repeated over and over again throughout the work, can quickly add up to have a hugely positive effect on your bottom line. Every process should be scrutinized and tested to see where it could be improved. Once you have reviewed each process individually, analyze your warehouse operations as a whole.


4. Assess Your Physical Assets – Warehouse space, equipment, and other physical items are often overlooked when conducting a review of your business. And, while it may appear that holding on to existing assets saves you money, a closer analysis could reveal it actually costs you a lot more – both today and in the future. If you’re trying to squeeze one more year out of an older piece of equipment you might actually be spending more on maintenance or lost productivity than it would cost to upgrade the item. Worse still, the perception that your operation isn’t state of the art can leave your current or prospective customers with a negative impression of your level of technological sophistication. A thorough assessment should surface these issues.


“The economy is still growing, but experts see uncertainty ahead for shippers and 3PLs, caused by tightening transportation capacity, the electronic logging device (ELD) mandate, and the service demands of the Amazon era. You used to ship high volumes of goods on a low frequency, and eCommerce has flipped that to low volumes on a high frequency.” command and control centre. Choosing the right WMS for your business and customer needs will increase revenue by streamlining processes and delivering reliable results. For example, a cloud-based (SaaS) system will become increasingly important as such technologies like automated packing and shipping, autonomous vehicles and the Internet of Things become commonplace throughout the logistics industry. These technologies offer immense opportunities to increase your 3PL warehouse’s profitability. Having the proper WMS in place to manage your business will be crucial to getting the results you desire.