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CPG SUPPLY CHAIN MANAGEMENT IS EVOLVING. 4 WAYS TO LEVERAGE 3PL SERVICES

November 10, 2020 3PLFulfillment

The impact of COVID-19 and rising consumer expectations are putting pressure on the supply chains of the CPG industry. Returning supplier issues and disruptive events can hamper the operations of even the most well-run companies. But there are ways to safeguard your supply chain. A 3PL partner with a nationwide network and capabilities can help you strategically alleviate risk and take proactive steps to avoid supply chain mistakes. Here’s how.

Looking to revamp your CPG supply chain management strategy? Here are 4 ways to leverage the services of a 3PL partner

Only weeks before Covid-19 derailed global supply chains, Supply Chain Digital identified the top challenges of CPG supply chain management: online shopping, new digital technologies, and intensifying channel fragmentation. Now, those challenges remain at the same time as CPG companies are left to navigate unpredictable pandemic-related restrictions and sudden changes in consumer behavior.

What is your organization doing to safeguard — to the largest extent possible — your supply chain?

In this post, we will identify four key ways that the right third-party logistics partner (3PL) can help you shockproof your supply chain at a time of mounting challenges.

CPG supply chain management: 4 ways to thrive amidst challenges

1. Gain access to a nationwide network

Why it matters: Weather-related disruptions, seasonal demand changes, unexpected spikes or dips in demand — it all adds to the unpredictability of CPG supply chain management. The cost of running a nationwide network in-house is not financially viable for most organizations while relying on a regional solution can hamper growth and add unnecessary transportation costs. Enter the 3PL partner with a well-developed, full-service distribution, and fulfillment network.

A nationwide network of distribution centers provides the foundation you need to quickly adapt to whatever is coming your way. By leveraging the coast-to-coast coverage of your 3PL partner, you can position inventory where your customers are, ensuring speedy deliveries and reduced shipping costs, both key features in an environment in which consumers favor free and fast shipping (free is the No. 1 priority if they have to choose). Nationwide coverage is equally crucial in the B2B sphere, enabling the swift movement of goods from ports and major transportation channels to strategically located distribution centers.

The WSI example: A startup trying to break into the competitive packaged cookie market sought out WSI to set up its new distribution network on each coast. The customer was also able to leverage WSI’s global transportation volume to obtain significant discounts, securing 40-45% lower LTL pricing than the customer alone could have negotiated.

2. Leverage the ability to scale

Why it matters: When your business grows or contracts, how well does your distribution network adjust to the changes? While software-based, on-demand warehousing providers have garnered a lot of attention in recent years, the service comes with distinct downsides such as lack of both its own Warehouse Management System (WMS) and dedicated workforce to handle sensitive products (perishables, chemicals, easily damaged goods).

The fact is a 3PL partner can not only offer short-term space but also take a holistic look at your entire CPG supply chain management strategy. Do you sit on obsolete inventory? Is demand suddenly rising in another part of the country? Do you quickly need to move the product?

A 3PL with logistics software, like its own Transportation Management System (TMS) and/or B2B systems integration software, possesses all the tools to fulfill your needs, whether it’s a three-month or four-year commitment. With a 3PL partner, you get a scalable distribution network at your disposal, reducing costs for warehouse storage and labor that you don’t need.

The WSI example: A world-leading producer of polymers and high-performing plastics found, after reconfiguring its supply chain, it no longer had the volumes to support a large West Coast distribution center that it was occupying in the Los Angeles area. After turning to WSI for help, WSI assumed operation of the facility, giving the customer flexibility in storage volume and handling capacity. Similarly, the company traded fixed for variable costs when it decided to leverage a WSI facility on the East Coast to better accommodate the cyclical changes of the chemical industry.

3. Maintain inventory accuracy

Why it matters: Achieving inventory accuracy is incredibly important to your entire fulfillment operation. Yet, inventory issues cost an estimated $1.1 trillion every year. Covid-19 exacerbated the challenge as companies found shipments stuck in port or overseas, orders canceled on short notice, and certain products running out of stock because of surging demand. Without airtight inventory tracking procedures, it could easily result in chaos (as it did for many).

Deloitte speculated earlier this year whether the pandemic could be a Black Swan event that will cause companies to rethink their supply chains. In some cases, it will mean entrusting all or part of their CPG supply chain management to a qualified 3PL partner. A large part of the success of 3PLs rests, after all, on their ability to maintain inventory accuracy. They have invested in and know how to use the required tools to your advantage, like advanced WMS.

The WSI example: A major industrial equipment manufacturer, well aware of the dramatic impact of inventory accuracy on the entire operation, enlisted WSI to streamline its distribution system. WSI integrated every facet of the inventory management system with billing and implemented RF scanners to identify orders and full items from inventory. The actions resulted in reduced obsolescence and improved delivery efficiency that saved the company up to $8,000 per month.

4. Drive results with the right technology

Why it matters: Among the trends shaping warehouse operations — dropshipping, reverse logistics, flexible pick methods — one, in particular, stands out: the increased prevalence of WMS investments. Supply Chain Digital notes: “An efficient warehouse runs on technology and the investment priorities of warehouse executives show…WMS and partial automation using conveyors or automated sortation systems remain top priorities.”

The fact is the quality of your WMS determines the future relationships you have with carriers as well as any inroads you want to make with larger customers. Other tools such as visibility software, third-party integration, barcoding, and heat mapping are all integral features of the modern warehouse. But not all organizations are ready to make such large investments. Again, cue the right 3PL partner. As we pointed out in this post, you need to evaluate each 3PL contender based on your own business needs. Technology should drive results for you and the particular circumstances of your business.

By leveraging the services of a reputable 3PL partner, you position your organization to better handle the ebb and flow of business along with the curveballs that Covid-19 keeps throwing at us.

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