July 11, 2022
How 3PLs Can Avoid Making Rash Investments in the Race to Keep Pace
ARC Advisory Group Taps Open Sky Group’s Alan Prillaman for a More Rational Approach to Modernization
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E-commerce purchasing habits have spiked markedly, from the start of COVID-19 to the present. Consumers buying online have come to expect 24- to 72-hour delivery on everything from color TVs to cheap sunglasses. This direct-to-consumer pattern shows no signs of abating.
As a consequence, 3PLs serving retail clients are now carrying safety stock onshore and examining new, fancy automation solutions to keep up with their partners’ customer order fulfillment promises. Demand for warehousing services is causing organizations to hire more workers. And management is on the lookout for new ways to preserve or increase ever-thin margins.
According to CBRE’s U.S. Real Estate Market Outlook for 2022, “3PLs led industrial leasing activity in 2021 (and) will expand further in 2022 as companies look to reduce direct logistics costs.”
Careful Investment Can Provide Options
With pressures plentiful and resources scarce, ARC Advisory Group interviewed Alan Prillaman, Vice President of Client Services for Open Sky Group, to ask what 3PLs should be investing in today to remain competitive for tomorrow.
Prillaman cautioned that leaping into automation, in response to ongoing labor shortages, increasing consumer demands and shorter cycle times, might not always be the best way forward.
Not All Automation Is Preferred
So, what type of automation makes the most sense?
Prillaman cited the difference between high-cost, long-term physical automation (such as automated storage and retrieval or conveyor systems) versus lower-cost, flexible digital automation (such as voice-picking or warehouse and labor management systems).
Where physical systems represent a longer-term ROI, leveraged against rotating, short-term client contracts, digital automation (systems) can be leveraged across a broader client base and be easily upgraded over time, leading to a quicker payback.
Look Before You Leap
The first step, before spending money, is to assess your current environment. According to Prillaman, 3PLs should maximize what they currently have before incurring new expenditures. For instance, a state-of-the-art, cloud-based warehouse management or labor management system, if used correctly, can illuminate opportunities for maximizing travel times in the warehouse, improving pick efficiencies or aid in seasonal labor forecasts.
He suggested a restrained approach to automation adoption.
Find What Fits
3PLs serving multiple clients from a single warehouse can particularly benefit from a “go slow, spend low” approach. Prillaman emphasized investing in today’s more proven, lower-cost automation options, such as autonomous robots, goods-to-person systems and pick-to-light systems that apply to multiple applications, and can reduce training time, drive quality and keep headcount in check.
The key is choosing automation that fits your specific type of operation, inventory mix and financial risk profile.
With technology moving so fast, it’s easy to get caught up in the race to keep pace. But as listeners to the ARC-Open Sky Group, online discussion learned, “shiny objects” abound. Sometimes, a more deliberate, calculated approach to modernization can pay greater dividends in the long run.
