Building an Automation Business Case for 3PLs

Flexible Automation for Third-Party Logistics

Third-party logistics (3PL) companies continue to be one of the fastest-growing sectors of the logistics industry. 3PLs offer an attractive alternative to traditional warehouse operations, where a company outsources its entire inventory, distribution and shipping operations. While 3PLs have some of the same challenges as conventional distribution centres (DC), 3PLs have unique issues such as service level agreements (SLAs), multiple client requirements, accurate reporting systems, ERP and value-added software integration and the availability of labour. 3PLs also carry the weight of caring for and managing inventory and customer satisfaction for their contracted partners and transparency in their operations.

With the demand for 3PLs continuing to rise, the 3PL market was valued at $976 billion in 2021; by 2028, it is expected to rise to $1,701 billion¹ making facility planning and operational design essential. Optimised facilities and flexible automation paired with scalable operations can lead to growth as new customers and contracts are acquired.

The Need for Flexible Automation

3PLs are unique in that their product mix can grow and shrink quickly. Radical changes in product dimensions, weight and characteristics can cause significant issues within a 3PL, as previously used automation tools might not fit current needs, leading some organisations to hesitate in investing in automation. However, with the labour market continuing to tighten, flexible automation and technology are becoming more imperative to drive cost controls, inventory management and productivity.

Kevin Smith, CEO of Sustainable Supply Chain Consulting, recently commented, “There aren’t enough people to do these jobs, and the only way to supplement the amount of labour you need is to automate what you can. 3PLs are willing to make that investment because they can sell it.”

Automation Right for Any 3PL

The start of any automation process begins with the management of inventory. Real-time inventory and order fulfilment is imperative in any operation, but vital for 3PLs and while investing in a new technology comes with some degree of unease, there are proven automation solutions that 3PLs can leverage to begin moving from a manual to an automated operation.

• Warehouse and Inventory Software – Since 1975, when JCPenney created the first software to manage their inventory, many different types of warehouse management software have been introduced to the market: from slotting software to a warehouse control system (WCS), a warehouse management system (WMS) and a warehouse execution system (WES). Many offerings align with the number of orders per day, inventory turns or the ERP it integrates into. Warehouse management software can provide vital business information and real-time data on inventory, productivity and throughput. Utilising the right supply chain partner can help analyse and select the right software to streamline operations today and into the future.
• Wireless Scanning Devices – Much like software, wireless scanning devices come in a wide variety. Laser barcode scanners, RFID, 2D scanners and wearable mobile devices can all be utilised in receiving and picking activities. Using a data-driven, technology-agnostic approach can allow an operation to select the right technology.
• Shipping Software – Another critical piece of software is shipping software, also called transportation management system (TMS), which allows an operation to rate shop for the best cost shipping options among carriers that still meet customers’ delivery expectations.
• Picking Technologies – Picking continues to be the most labour-intensive part of a distribution centre operation. Utilising pick-to-light or pick-to-voice technologies can significantly impact productivity and accuracy.

The Goods-to-Person Solution for 3PLs

With the unique needs of a 3PL and the changing supply chain landscape, a goods-to-person system (GTP) is a good fit for expanding operations with a new greenfield site or revitalising an existing brownfield site. High-density storage, paired with a GTP station, can be an attractive automated solution as it is scalable, eliminates labourious picking operations and creates operational efficiencies in productivity, accuracy, capacity and throughput.

A GTP solution consists of three main pieces of automation:

• Automated storage/retrieval system (AS/RS)
• A picking or goods-to-person workstation
• Conveyor or autonomous mobile robot system (AMR)

GTP Automated Process

1.  Order received through warehouse management system software.
2.  Order assigned to a picking station.
3.  Product totes for order automatically brought to the picking station (AS/RS) by robots or shuttles.
4.  Picker picks, scans and places product in order tote.
5.  Product tote automatically sent back into AS/RS to be stored.
6.  When order is complete, the picker places the order tote on a conveyor or autonomous mobile robot (AMR).
7.  Order travels to pack and ship station.

While automating most processes within the four walls of the warehouse will improve productivity and throughput, a GTP solution can magnify the benefits for a 3PL. As SLAs become more inflexible and filled with performance penalties for not meeting expected levels and delivery times, a GTP system allows an operator to scale up for peak by offering more SKUs significantly increasing order fulfilment time while controlling inventory with less dependence on temporary or seasonal labour.