Some multichannel and ecommerce companies have gained tremendous benefits from using third-party fulfillment partners. Some use a strategically located 3PL as an additional warehouse in their distribution network to reduce shipping time and cost.
Once you contract with a 3PL you must develop a well thought out plan, coordinating with your departments and the 3PL as well as merchandise vendors, carriers and IT. Here are 20 critical tasks you need to consider to get the most out of the relationship:
Project Management Tasks
Developing and managing a comprehensive transition plan gives you the best opportunity to finish the project within budget, on schedule and with minimal risk. Seven important tasks:
- Project plan: Include all tasks by all groups with start and end dates, accountability for each task and associated costs.
- Set go Live date: If you can, make the move when your inventory is at its lowest point. Review long lead time tasks such as inventory movement and IT programming before setting dates.
- Plan status updates: Updates will require frequent communication with all parties and stakeholders. Don’t delegate this to the vendor. They don’t know all the parties and stakeholders. It’s your responsibility to control the project, costs and management reporting.
- Project timeframe: It depends on the number of SKUs, the volume of inventory to be moved and any complexities/uniqueness of the fulfillment process and systems. Simpler projects may take 90 days; complex projects four or five months or more.
- Have a full-time project manager: We recommend a full-time project manager with excellent knowledge of your fulfillment and good relationships with purchasing, inventory control and IT. They need to have the confidence of management and authority to direct the project.
- Establish liaison position: This part-time or full-time person will interface with the 3PL account management on a daily basis. Choose that person early and give them major project responsibilities.
- On-site visits: Be at the 3PL for the first week of go live to answer any questions and observe the operation. Be sure to establish contractual metrics to deliver results.
Moving Inventory Accurately
Here are five critical considerations involved in moving inventory to the 3PL:
- Quantities to move: Start by evaluating how much inventory you will need to keep at your existing warehouse. You can calculate the average unit demand for the last set number of weeks by SKU or from the previous year’s unit demand for the same time period. Give yourself a few weeks’ buffer in case there are any delays in go live.
- Don’t move dead stock: Evaluate aged or obsolete inventory and liquidate it. Remember the high cost of moving slow sellers to the 3PL.
- Inbound new receipts: Depending on the move-in date, modify the addresses of existing purchase orders. Typically, this will be product arriving within a week or two of go live.
- Receipt of inventory at 3PL: To minimize 3PL receiving costs on the initial inventory, discuss how the 3PL wants to receive it. Having accurate counts and documenting inventory to be moved greatly assists the 3PL’s receiving process and accuracy.
What is the maximum pallet height at the 3PL? Palletizing back stock with a single SKU per pallet or a slip sheet to separate SKUs will reduce the effort and costs at the 3PL. Mark cartons with SKU/item identification and barcode.
Identify every outgoing pallet with a corresponding bin/slot location in the 3PL. Mapping this out in advance minimizes the receiving and put away.
- Arranging truck transportation and scheduling: For larger fulfillment centers, it may take far more trucks to transport inventory to the 3PL than you realize. Accurately estimate number of pallets and contract early.
Many 3PL projects provide an all new array of systems functions and platforms requiring integrations/interfaces. Generally, IT tasks require longer lead times and several testing iterations to ensure data is being loaded/communicated accurately. Here are three types:
- 3PL data map: At a minimum, you will need to supply the 3PL with your SKU/item file with all data fields. Generally, a data template will be provided for programming the load.
- System interfaces: What systems do you need to integrate with? If your website will be interfaced directly to the 3PL, you will need their order data format. Are there other corporate systems to interface?
- Other outside services: Are you implementing Amazon’s Fulfillment by Merchant (FBM), EDI, new credit processors, big box retailers or a sales portal? These are complex interfaces that need programming, data mapping and testing? Will these interfaces require compliance and test certifications? Add realistic schedule timeframes for these complex systems.
Setting Up 3PL Processes
The 3PL will do a thorough analysis of your fulfillment processes. Here are five essentials:
- Define processes and procedures: Any of your training and procedure manuals will help convey written requirements to the 3PL to replicate your processes. With pre-assembled kits, for example, we recommend the 3PL visit and understand how you create them. If not documented, put as much in writing as you can.
- Shipping orders during the transition: In order to minimize lost sales from downtime, work out how to ship orders during the transition.
- Added labor cost: What labor and overtime will be budgeted for counting, palletizing and transporting merchandise? If you’re shutting down internal fulfillment, what labor is needed to complete the facility’s clean out and removal of fixtures and racks?
- Stay current with inventory updates. In order for you to monitor your inventory, receipts and shipments, you need to access 3PL’s client portal. Don’t wait until the last minute to review these reports/queries – this is an excellent task for the liaison.
- Processing returns: Coordinate with marketing for any content changes to the website and printed materials, such as new address and effective date.
Moving your fulfillment to a 3PL is no small task. A well-developed plan and updating tasks and schedule to all stakeholders weekly is essential.
Brian Barry is President of F. Curtis Barry & Company