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Ask a 3PL Expert: WMS and Outsourcing

Posted By Administration, Thursday, February 9, 2017
Updated: Tuesday, February 7, 2017



by Scott Weiss, Port Logistics Group


Advice on routing guide compliance, 3PL relationships, and domestic logistics topics creating supply chain challenges for your organization. If you have a question or challenge please send your questions to sweiss@portlogisticsgroup.com.

Question
Should you use your own WMS or your 3PL's when you outsource?
-Danielle, Torrance, CA

A good warehouse management system is an essential component of a company's distribution strategy, especially in the increasingly complex world of omni-channel fulfillment. Efficiently planning, waving, and optimizing orders to be processed in a day or shift reduces cost per unit and drives high levels of customer service. While all but the smallest players require such capabilities today, the question of whether companies need to own the WMS or use that of a logistics service provider's confronts most 3PL customers at some point. A good 3PL will recognize the importance of this decision and help prospective customers work through the WMS decision early in the sales process.

Ideally, a company will want to manage all of its information within a single WMS platform, so it has the same system, processes, and inventory visibility, regardless of whether it owns the warehouse management system or relies on a 3PL's. Some companies choose to stay with their own packaged or proprietary system for the following reasons:

  1. Integration costs – they may not want to invest the time and IT resources to integrate with a new WMS
  2. Control – fear that they will lose control of how the system is updated and upgraded over time

These are legitimate concerns and a 3PL should be prepared to work with clients no matter which avenue they decide to take, since the new processes and procedures may result in higher costs for a 3PL, at least for some time. Moreover, the customer retains responsibility for uptime, maintenance and user administration. When a customer does decide to retain its own system, a 3PL must have the trained staff and expertise to accurately and efficiently execute operations as if they were an extension of the customer's supply chain network. For example, a national retailer of women's specialty clothing lines opted to use its WMS at all of its facilities and to require each of its 3PL partners to use it as well. They wanted to have complete inventory visibility in one system. Additionally, they wanted a very specific quality control process built into their warehouse processing and they decided it would be beneficial to implement their own system at all facilities. When they dropped that system into a dedicated warehouse operated by the 3PL, the 3PL brought in trained experts for that particular WMS and the result was a very seamless integration and a facility that looks and operates just like every other in their network.

Implementing a customer system in a 3PL's warehouse does, however, have its drawbacks. Customers in many industry verticals experience spikes in volume and retail is certainly no different. The retail environment often sees very high quarter end demand in volume. There are four major advantages to relying on the system of a chosen 3PL provider:

  1. Faster implementations
  2. More flexibility in choosing or changing locations in the future
  3. Relief from the burden of maintaining and updating a WMS
  4. Ability of 3PL to move trained labor from account to account in a shared warehouse environment

When a logistics service provider uses a single, consistent WMS across all customers and within their facilities, it increases flexibility to move labor around on its customers' behalf. Change is a constant in retail and not only in volume. For example, fashions and tastes dictate new product introductions and discontinuations of older lines. System modifications have to keep in step, but WMS changes can be costly. The customer that retains its own WMS foots that bill whereas the 3PL pays when its system is used. Of course, there are fees involved when using the provider's system, but they should be much lower when that investment is outsourced to the 3PL as the costs are spread across multiple clients.

A very important factor to consider is the competence of the client's IT staff. Implementation can be as quick as 30 days if the customer's IT team is good, but even complex scenarios should rarely take longer than 90 days. Flexibility is key in every facet of a 3PL/customer relationship. A client that gives all of its business to a provider, for instance, is advised to align itself with that 3PL's WMS. Not only is it a low cost solution for them from an annual maintenance standpoint, but it allows for customization designed specifically to meet the client's needs. Moreover, it more easily permits system changes as those needs evolve. For example, a retailer that changes its business model to do more e-commerce will require a different approach to picking. A flexible 3PL that can accommodate those changes quickly is indispensable.

In conclusion, every organization manages its supply chain differently and some operators contend that there is loss of control when they utilize the WMS of their logistics service provider. Here are some key takeaways when deciding to use your WMS or the 3PL's:

  1. You never get a second chance to do things right the first time. You have to do due diligence to see that the 3PL is capable of doing what they are promising and that they have a robust IT department that can deal with anything.
  2. Identify and address issues when a relationship is first contemplated.
  3. Once the relationship begins, you must always keep your eye on the ball. When you transmit documents, make sure you have the right process in place – what has been picked, packed and routed for shipment. It is your duty to monitor all of this on a daily basis. You cannot just wait to see what happens.

Scott is a 20 year veteran of the 3PL industry and 14 year member of RVCF. Port Logistics Group is the nation's leading provider of gateway logistics services, including value-added warehousing and omni-channel distribution, transloading and cross-docking, eCommerce fulfillment, and national transportation. With 14 Distribution Centers and 5.5 million square feet of warehouse space strategically located by the Ports of LA/LB, NY/NJ, Seattle/Tacoma, and Savannah, Port Logistics Group provides the critical link between international transportation and the last-mile supply chain. He can be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

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Tags:  3PL  WMS 

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