THIRD-PARTY LOGISTICS
How a 3PL can help you optimize your inventory management
August 3, 2022
Inventory management is a huge challenge for companies around the world and across all industries. The COVID-19 pandemic has ushered in an era of immense supply and demand volatility and severe supply chain disruptions, which have made it extremely difficult for businesses to effectively manage inventory levels across their end-to-end networks and avoid stockouts.
A recent survey revealed that “keeping more inventory” is the most common strategy that supply chain executives are currently employing to mitigate the impact of supply chain disruptions. But maintaining buffer inventory (which is also known as “safety stock”) can cause warehousing and distribution costs to skyrocket, tying up working capital and taking a tremendous toll on a company’s bottom line.
Indeed, inventory management today is a tricky balancing act: You need to keep the right amount of the right products in the right locations at the right times to satisfy customer demand, minimize operating costs, and prevent stockouts and overstocking.
More and more businesses today are engaging third-party logistics (3PL) partners to handle the complex task of managing their inventory, as these providers possess the logistics technology, network, and know-how that you need to achieve inventory optimization.
In this blog, we will highlight three ways that a 3PL can help you optimize your inventory management.
A recent survey revealed that “keeping more inventory” is the most common strategy that supply chain executives are currently employing to mitigate the impact of supply chain disruptions. But maintaining buffer inventory (which is also known as “safety stock”) can cause warehousing and distribution costs to skyrocket, tying up working capital and taking a tremendous toll on a company’s bottom line.
Indeed, inventory management today is a tricky balancing act: You need to keep the right amount of the right products in the right locations at the right times to satisfy customer demand, minimize operating costs, and prevent stockouts and overstocking.
More and more businesses today are engaging third-party logistics (3PL) partners to handle the complex task of managing their inventory, as these providers possess the logistics technology, network, and know-how that you need to achieve inventory optimization.
In this blog, we will highlight three ways that a 3PL can help you optimize your inventory management.
#1: A 3PL can distribute your inventory across a global logstics network
One of the main benefits of outsourcing your inventory management to a 3PL is that you can gain access to that provider’s worldwide network of fulfillment centers and other warehousing and distribution facilities as well as specialized logistics resources and personnel.
By partnering with a 3PL that has a global presence – like Amazon Multi-Channel Fulfillment (MCF), which has built the world’s largest fulfillment network with over 200 fulfillment centers, more than 200,000 operations staff, and over 85 aircraft – you can:
By partnering with a 3PL that has a global presence – like Amazon Multi-Channel Fulfillment (MCF), which has built the world’s largest fulfillment network with over 200 fulfillment centers, more than 200,000 operations staff, and over 85 aircraft – you can:
- Allow your 3PL to use their in-house analytics to strategically distribute your stock to fulfillment centers in various locations around the globe, so that your inventory is as close as possible to your customers and you can satisfy demand anywhere, anytime, and across any sales channel.
- Dramatically reduce shipping times (by offering deliveries speeds as fast as 1 day) and shipping costs (by minimizing the distance between distribution centers and customers’ doorsteps).
- Consolidate your inventory within a single 3PL provider’s fulfillment network, so you can expose your pool of inventory to multiple sales channels – thereby increasing the likelihood it will be sold and decreasing the amount of excess inventory you have taking up space (and racking up storage fees) in the warehouse.
- Eliminate the need to invest in expensive logistics infrastructure including warehouses, delivery vehicles, supply chain specialists, and cutting-edge inventory management technology.
Working with a 3PL with a global fulfillment network footprint can enable you to optimally position your inventory to meet customer demand today and optimally position your company for long-term growth as you expand into new markets around the world in the future.
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#2: A 3PL can automate your inventory management operations
Another way a 3PL can help you achieve inventory optimization is by driving greater automation across your warehousing and distribution operations.
A 3PL can work with you to implement a state-of-the-art, automated inventory management software system – so that you don’t have to rely on inefficient and ineffective manual processes and practices to predict customer demand and try to figure out which products to stock, where to store them, and when to pick, pack, and ship them to customers.
With an automated inventory management system in place, you (together with your 3PL partner) will be able to:
A 3PL can work with you to implement a state-of-the-art, automated inventory management software system – so that you don’t have to rely on inefficient and ineffective manual processes and practices to predict customer demand and try to figure out which products to stock, where to store them, and when to pick, pack, and ship them to customers.
With an automated inventory management system in place, you (together with your 3PL partner) will be able to:
- Gain a unified, accurate view of inventory across your end-to-end supply chain by seamlessly integrating this new inventory planning solution with your various sales channels (such as ecommerce websites and point of sale (POS) systems) as well as your enterprise resource planning (ERP) systems.
- Accurately forecast demand and automatically distribute the right amount of the right products to the right fulfillment centers at the right times – so that your 3PL can rapidly fulfill customer orders, while reducing inventory storage and shipping costs.
- Track your customer orders across your various sales channels and your inventory levels across multiple fulfillment centers in real-time to ensure you have enough safety stock to satisfy demand and avoid stockouts.
- Dynamically and automatically redistribute and replenish your inventory across your 3PL’s global fulfillment network due to sudden swings in supply or demand.
By automating your end-to-end inventory planning, warehousing, and distribution processes, a 3PL can eliminate your inventory management headaches and free you up to focus on those areas of your business that matter most to you, such as sales and product development.
#3: A 3PL can maximize your operational efficiency and minimize your inventory costs
A 3PL – with its global network, logistics expertise, and cutting-edge software technologies – can help you manage your inventory with the highest levels of operational and cost efficiency.
By entrusting your inventory management to a best-in-class 3PL provider (like MCF), you will be able to automatically:
By entrusting your inventory management to a best-in-class 3PL provider (like MCF), you will be able to automatically:
- Visualize a complete (and constantly changing) picture of inventory levels across your entire supply chain.
- Optimize the distribution of your inventory across your 3PL’s fulfillment network.
- Utilize your inventory to satisfy customer orders anywhere, anytime, and through any channel.
- Synchronize stock levels across multiple channels and across various fulfillment center locations around the world as supply and demand conditions fluctuate.
- Maximize your on-time delivery performance and customer satisfaction.
- Minimize your inventory storage, order fulfillment, and other operating costs.
Achieving inventory optimization
The way you manage your inventory can make or break your business. Indeed, in order for your company to succeed, you must be able to use your inventory to satisfy customer demand on time, every time, while avoiding costly stockouts and overstocking.
A 3PL partner can help you overcome these inventory management challenges by automatically and optimally distributing your inventory across their global logistics network and delivering it to your customers in the most efficient manner possible.
A 3PL partner can help you overcome these inventory management challenges by automatically and optimally distributing your inventory across their global logistics network and delivering it to your customers in the most efficient manner possible.
More from Amazon Multi-Channel Fulfillment
3 Key benefits of consolidating your inventory with a single 3PL provider
Read this blog to learn about the benefits of having a single 3PL provider manage your inventory and fulfillment operations.
Guide to third-party logistics (3PL)
This guide will give you everything you need to know about third-party logistics (3PL) – so that you can decide if your business would like to partner with a 3PL provider.
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