With the significant growth in e-commerce, the potential for third-party logistics services is growing significantly. In order to provide a comprehensive fulfilment service and meet ever-increasing customer demands, 3PLs must seriously consider the introduction of automation into their operations.
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● Significant growth in e-commerce
○ Introduction of next and same day delivery in e-commerce
○ Increases in product lines (SKUs) + fewer items per order
○ Growth in omnichannel retail
● Consumer demands resulting in shorter lead times
● Shortage of skilled labour globally
○ Large e-commerce operations require up to 3,000 employees
○ In a typical US warehouse 65% of the budget is spent on labour
○ Almost half of US employers can’t find the skilled workers they need
● Shortage of real estate
○ CBRE: 1.29 million sq ft warehousing required for every £1bn extra spent online
● COVID-19
○ Social distancing and sickness
Context
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“3PLs that once eschewed automation in favor of labor have been pushing hard into the e-
commerce fulfilment market. There, speed matters above all …. Innovation is now top of mind. It is
lending a new image to an industry that is no longer your father’s 3PL”. - MMH magazine
“To attract and secure these long-term retail contracts, 3PLs must quickly adapt and
become more automated. This transition represents a significant paradigm shift for an industry that
has traditionally relied on mostly manual labor”. - Intelligrated.
“Meeting customer demands within e-commerce requires increased adoption of warehouse
automation solutions to keep costs and operational complexity in check. Online retailing is
fundamentally a logistics business driven by margin improvement from cost reduction in inventory
management, order fulfilment and delivery capabilities”. - Logistics IQ
“Businesses today are looking for a 3PL partner that can keep up with rising consumer demands
and solve complex logistical challenges—and one of the best ways to do so is through automation”.
- Rob Thyen, SVP Engineering & Facilities at GEODIS.
Where Is 3PL Automation Headed?
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7. ● Meet and/or exceed service level agreement KPIs
○ Perfect order index
■ On time
■ In full
■ Damage free
■ Correct paperwork
○ Stock accuracy
● Continuous improvement
● Cost reduction
● Good customer relationship
● Innovation
Customer Expectations from 3PL Partners
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8. ● Experience and knowledge
● Innovation
● Buying power
● Ability to analyse Big Data and introduce
technologies such as IoT
● Automation
How Can 3PLs Meet Customer Expectations?
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● Increased accuracy rates
● Increased productivity
● Increased worker safety rates
● 24/7 operation
● Time & cost savings
● Data-driven decision making
● Competitive edge in a commoditized market
● Improved brand image
● Increased profit margin
Automation Benefits for 3PLs
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● Introduction of AMRs and CMRs
○ Rental schemes
○ Greater flexibility compared to AS/RS systems
○ No fixed infrastructure
● Automation underwritten or acquired by the client
● Longer contracts
○ Clipper Logistics in the UK – recent contracts
■ River Island – 5 years
■ Mountain Warehouse - 10 years
● Shared risk
● Generation Z entering the marketplace
3PL Automation Enablers
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● Cost and return on investment
● Contract length
● Risk
● Available real estate
● Large ranges of product lines in various shapes and sizes
● Seasonality
Barriers to 3PL Automation
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● Shared user warehousing
○ Similar products
○ Diverse products
○ Closed book charging methods
● Dedicated contracts
○ Customer owned premises and equipment
○ 3PL owned premises and equipment
○ Open book with management fee
○ Open book with gainshare
Types of 3PL contracts
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● The demise of the 3PL? Dedicated warehouse contracts?
○ Where is the added value?
● Shared user warehouses
○ Significant growth
● FBA - Fulfiment by Amazon
● Freight transport
● A new kind of 4PL integrator
○ SCaaS - Supply Chain as a Service
The Future?
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16. FlytWare combines intelligent software with
reliable, off-the-shelf drone hardware for
safe, cost-effective, and highly scalable
automation of inventory counts in large
warehouses and distribution centers.
FlytWare use-cases include single-deep
pallets stored in traditional racking, single-
deep case reserves in VNAs,
and bulk inventory.
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FlytWare
17. Featured In
FlytBase, Inc.
2nd Floor, BHAU Institute, COEP
Pune 411005
1900 Camden Ave, San Jose,
California 95124, US
+1 551-358-6065
flytware@flytbase.com
flytbase.com
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