Third Party Logistics: What You Need to Know in 2016
In the past, shipping companies that had their own warehouse employees opted for cost-cuts, increased flexibility and the objective of transforming fixed costs into variable costs. And they could only do that by outsourcing various operations and processes to third part companies.
Third party providers would then draft a reduced per-hour rate and a minimized cost-benefit package, throwing in an amalgamation of full time workers as well as independent contractors, for example 70/30. The money they saved from implementing this strategy, including various other elements like workflow, systems, layout design alteration, etc, allowed the provider to give an overall proposition of value, which ultimately reflected a cost-effective base for warehouse operations.
It is also important to understand that although cost-reduction is not the only reason for shipping companies to outsource operations, according to different surveys, it has been identified as a repetitive trend, which indicated that cost-reduction is pretty much the foremost criteria for shippers to resort to outsourcing.
But as we progress into 2016, the warehouse labor market will become stronger, which means workers will start to demand an increase in wages specifically to attract more industrial talent. You have to look at the facts first, the Consumer Price Index from 2002 to 2015 of different items like housing, medical care, food, recreation, transportation and communications increased to 35.5% while worker wages increased a mere 7.4%. It is important to understand that this lower base can never be eternally maintainable. This is especially true if you look at big industrial players like Amazon and Walmart in the US, the objective of hiring a big amount of warehouse workers is beginning to get tougher.
According to labor professionals and experts, before, it only took a minimum of a dollar every hour in order to dislodge warehouse workers. However, it was a different story when recession hit. But in order to attract a large chunk of that talent today, companies would have to pay $15 an hour or even more.
This isn’t entirely bad, a majority of companies who high wage contracts also benefit from an increase in overall productivity, superior quality, minimized turnover and reduced costs of operation. But this shortage of labor paves for a good opportunity for Third Party Logistics provide to enhance their game. And mentioned below are some ways you can do so efficiently:
1. Be absolutely sure to enhance the layout of your warehouse. Traveling too much wastes time and is frustrating. Improving your warehouses’ operational efficiency, receiving, storage, picking and packing, order processing will provide bountiful opportunities to reduce manpower wastage, which can allow for cost-savings – which can then be uses to increase wages.
2. Develop precision based, engineered standards for all operations. Always measure your warehouses’ operational performance, provide incentive, give training in order to boost productivity.
3. Think about how you can invest money into innovations to streamline warehouse operations. There is no doubt about the fact smaller orders, which come in more frequently have become a trend – and investing in ‘put-systems’ can help enhance labor management and result in more accurate order processes.
4. Consider investing newer technologies. Third party providers find it increasingly challenging to spend money on automation and similar solutions mainly because of the time-shortages that come walking in with a traditional or a typical shipping contract. The ideal way of maximizing investing is for shipping companies to partner with 3PLs to identify newer trends and technologies and how they can implement technology to further their objectives.