3PL Warehousing Gets In the Zone
By working as partners, third-party logistics providers and shippers take on today’s warehousing challenges.
Like most business, shippers and logistics providers confronted new challenges in 2020. “I call 2020 the ‘Disruption Decade,'” says Jim Tompkins, founder and chair of logistics consulting firm Tompkins International.
Among other changes, COVID-19 altered supply chains and prompted a massive shift to e-commerce. Coupled with the accelerated delivery of online orders, these changes have led to spikes in distributed logistics, direct-to-consumer order picking, and outsourcing.
The tight market for warehouse workers presents additional challenges, says John Kettman, senior vice president of distribution and operations with Kane Logistics. One driver behind this trend is Amazon, which is scattering warehouses and distribution centers across the United States and offering top wages to attract employees.
While the largest retailers can typically afford the technology investments that will enable them to respond effectively to these shifts, many smaller companies are limited by their budgets. So, they’ll turn to third-party logistics (3PL) providers, says Christine Feuell, chief commercial officer with Honeywell Intelligrated.
In turn, 3PLs have been upgrading their material handling equipment so they can work more efficiently, Feuell says. Some are deploying autonomous mobile robots that can quickly move goods around a warehouse. Others are installing conveyors that speed workflows or implementing tools like voice-guided work.
With these investments and by working as partners, logistics providers can help shippers tackle today’s warehousing challenges.
Here is a look at several successful partnerships between shippers and their 3PLs.
FORD METER BOX & PEGASUS: Going with the Flows
As a water system superintendent in the 1890s, Edwin Ford, founder of The Ford Meter Box Company (FMB), encountered shortages caused by customers’ excessive and unmetered water usage.
While meters were available, none were practical in the winter. So, Ford designed a meter box for in-ground settings. From that start, FMB, based in Wabash, Indiana, has grown to 30,000 products that help bring clean water to homes and businesses in 120 countries.
During the past 10 years, FMB, like many other companies, has seen delivery times accelerate. “When housing started to recover, our customers carried less inventory and wanted quicker, more frequent deliveries,” says Christopher Shanks, senior vice president and general manager.
To accommodate these requirements, FMB began placing distribution centers in key markets. In Dallas, it also partnered with a 3PL provider. That company turned out to not be a good fit. Within six months, FMB began looking for a new partner.
Shanks and his colleagues then turned to Pegasus Logistics. The partnership got off to a rapid start: Within three days, Pegasus helped FMB move 12 truckloads of more than 100 SKUs to a new warehouse and begin shipping products.
Given the criticality of FMB’s products and the fact that they’re installed underground or in hard-to-reach areas, all are manufactured to tight tolerances and then packaged according to exacting standards. For instance, a part that’s accidentally dropped may appear unharmed, but even a tiny nick would keep it from meeting FMB’s standards.
The Pegasus team understands this. “Their pride in ownership is tangible,” Shanks says. To meet tight delivery times and continually monitor inventory levels, Pegasus operates with FMB’s warehouse management system.
Several attributes have been essential to this successful partnership. One is FMB’s commitment to it, as seen in the training they’ve provided Pegasus employees working on the account, says Dennis Stanley, vice president, business development with Pegasus. This was particularly critical, given the rapid launch to the partnership.
The open communication between FMB and Pegasus “makes it a real partnership,” Shanks says.
WHIRLPOOL & KENCO: Cleaning Up with Top Tier Technology
Housing the dishwashers, refrigerators, and other appliances Whirlpool Corporation produces requires mammoth facilities. The company’s five regional distribution centers across North America span 4.5 million square feet.
In addition, until recently, many processes in its Canadian warehouse were paper-based. “Big space, distance, and paper all equals time,” says Brian Tomchick, senior manager of operations for Whirlpool. “And time equals money.”
Tomchick sought to implement a warehouse management system (WMS) that would allow his team to quickly and accurately process and record orders. “When a refrigerator goes, there’s no time to waste with a slow supply chain,” he notes.
While the WMS market features many solid solutions, many are geared toward consumer packaged goods. Because nothing off the shelf satisfied Whirlpool’s needs, Tomchick turned to Kenco Group, a logistics provider.
The two firms had worked together on multiple projects. Moreover, Kenco boasts a dedicated innovation team that continually watches for emerging technologies, says Kristi Montgomery, vice president of innovation with the Chattanooga, Tennessee-based company.
Montgomery and her team explored several options. RFID technology would help address Whirlpool’s challenges, but at significant cost. Drone technology wasn’t mature enough to be a viable solution.
Then, Kenco discovered a company whose technology monitored patients in hospital beds. If patients moved more than one inch or so, it likely meant they had fallen, and the system notified the hospital staff. Montgomery and her team reasoned the technology could potentially track appliances digitally around a warehouse.
Whirlpool decided the potential benefits were worth deploying the technology in a new setting. As Tomchick and his team adapted the solution to their warehouse, they incorporated insight from the company’s most productive operators into the solution.
For instance, an operator unloading a truck occasionally comes across a package or product that’s damaged. Initially, the plan was for the operator to immediately bring the item to a repair area. In a large warehouse, however, that location can be far away.
Instead, experienced operators wait until they have about six items and then move them all to the repair area. The solution allows operators to wait until they need to move multiple appliances, cutting travel time by about 80%, Tomchick says.
In addition, tablets located on materials handling equipment replaced manual processes. To ensure an intuitive interface, Tomchick and his team engaged end users during the design.
In contrast to many implementations, productivity didn’t dip and then rebound. Instead, it improved from the start.
The Whirlpool distribution center had been operating at world-class levels, making it difficult to improve productivity. However, it has seen a 10% increase with the new system. “To get 10% on top of world class is outstanding,” Tomchick says. He adds that Kenco has been great at taking feedback and finding the best path forward.
Whirlpool continues to strive for improvement. Among other initiatives, the team plans to automate the scanning of product serial numbers and automatically route incoming trucks to the door, which will be most efficient for unloading.
“There’s a whole new level of efficiencies to explore,” Tomchick says.
FDF & DACHSER: Growing a Ripe Partnership
During the past few years, product volume for FDF Latin America, which provides air- and freeze-dried fruits, vegetables, spices, and other specialties, has increased about 30%.
To support FDF’s growth, logistics provider Dachser Group SE & Co. helped the company move from a 328-square-foot warehouse to a food-grade space in Querétaro, Mexico, that provides between 3,280 and 4,921 square feet, depending on the season. “As FDF gains business, we’re ready,” says Edgardo Hamon, managing director, Dachser Mexico.
Among the range of warehouse operations Dachser manages are master data and inventory management, and applications that improve FDF’s dock and yard management and returns processes.
To ensure the quality of FDF’s products, Dachser conducts quality checks and sampling tests. Its color-coding system provides a quick way to distinguish between various types of products. “We provide an entire supply chain solution,” Hamon says. “We keep the products safe and ensure they’re at the right place at the right moment.”
“The Dachser warehouse staff has adapted their system to our needs,” adds Ivis Santiago, FDF’s operations regional coordinator.
Among other changes, Dachser increased the frequency of shipments from twice weekly to daily. And while sanitation and ventilation have always been critical in working with food items, the Dachser team has followed strict protocols to minimize risks during the pandemic.
Olly & RJW logistics group: Getting in Shape for Walmart
Olly, a San Francisco-based provider of vitamins and supplements, had launched in several retailers, and was about to roll out its products with Walmart. In addition to being one of the world’s largest retailers, Walmart holds strict standards and exacting delivery requirements.
That’s when Michael Markowski, director of customer service and logistics for Olly, looked for a 3PL that could support the launch and the company’s growth, while also providing best-in-class customer service, logistics, and warehousing at a reasonable cost.
RJW Logistics Group, which specializes in retail logistics, fit the bill. Each Olly warehouse now integrates with RJW’s logistics, trucking, and other value-add services.
For instance, RJW has deployed a Tier 1 warehouse management system with an inventory tracking solution that ensures Olly can offer real-time inventory analysis. This data allows Olly to reduce inventory and safety stock, while maintaining best-in-class on-time and in-full (OTIF) metrics.
“We have reduced lead times to retailer distribution centers and simplified inventory replenishment,” Markowski says.
Heading into the fourth quarter of 2020, Olly turned to RJW to assemble more than 7,000 end cap displays.
By working with RJW, Olly has been able to meet Walmart’s delivery and other standards, which helped drive a doubling of sales between 2019 and 2020.
RJW’s strategic focus on the “middle mile,” or the trip segment from a point of origin—like a factory to a fulfillment center—optimizes processes, and provides the ability to quickly pivot and make better decisions. “This allows Olly to focus on what we do best,” adds Markowski.
TRAEGER GRILLS & KANE LOGISTICS: Meating Smoking Growth
While sales of Traeger Grills have been growing for years, online orders exploded in 2020. “With the pandemic, our online business boomed,” says Michael Davis, director of logistics and distribution with the Salt Lake City firm.
At the same time, the pandemic limited Traeger’s ability to hire temporary workers to help meet the jump in demand.
Traeger worked with 3PL provider Kane Logistics to accommodate the rise in business-to-consumer orders. In one step, the two companies worked together to automate bills of lading.
“Now when drivers show up, they don’t have 40 pages of bills of lading,” Davis says. “They know what shipments they’re picking up and can just grab a trailer and go.”
Not content to stop there, Traeger plans to soon eliminate bills of lading. Instead, drivers will scan a manifest to identify the correct pallet. The company has successfully tested this process and found it allows trailers to move more efficiently.
To help Traeger respond to growth in its direct-to-consumer business, Kane engineers scrutinized the company’s warehouse processes, looking for efficiencies.
For example, Kane helped Traeger reposition fast-moving units closer to the pick-pack stations. The 3PL outfitted warehouse operators with tablets that print wirelessly, minimizing the distances workers must travel throughout the warehouse to print labels.
Just as important as these changes is the quick, thorough action Kane has taken throughout the pandemic to ensure all employees’ safety. This allowed Traeger to make it through the busy season while avoiding shutdowns.
Also key is Kane’s ability to regularly offer ideas and then act on continuous improvement projects.
“Some bigger 3PLs are slower to move,” Davis says. In contrast, Kane—like Traeger—has demonstrated responsiveness and flexibility amid growth in 2020. These qualities will be key, given Traeger’s forecasts of another year of double-digit sales increases.
Warehousing’s Future: Hang On to Your Hats
While the challenges imposed by the pandemic will, we all hope, recede in the coming year, several other trends promise to influence the warehousing sector going forward, says Jim Tompkins, founder and chairman of Tompkins International.
One trend is increasing automation, driven largely by the difficulty of finding labor to meet the increasing level of direct-to-consumer picking required.
To justify the investments required to automate, contracts between 3PLs and their clients will extend for longer time periods, Tompkins says. At the same time, 3PLs will need to be more flexible in offering warehousing on demand, along with traditional relationships.
In another shift, many warehouses will move closer to consumers, enabling e-commerce orders to be delivered more quickly and inexpensively. It’s also possible companies outside the logistics sector who understand direct-to-consumer needs, will enter the industry.
Given the changes on the horizon, both 3PLs and shippers need to rethink their roles. Logistics providers must work with clients to establish more resilient, adaptable flows of goods from manufacturers to consumers. This includes both the physical handling of products and the intelligence of the supply chain.
“Hang on to your hats,” Tompkins says. “It is time to think anew and reinvent the relationships between 3PLs and their clients.”