Having a network of flexible warehousing options with multi-functional capability can be a powerful tool for companies looking to stay ahead of the curve. The goal of this type of network is to reduce overhead while improving supply chain performance. However, whether cultivating your own 3pl relationships to create your network or relying on a broker to source it for you, there are some pitfalls to how many companies approach this setup.
Dynamic Network vs. Siloed Network
Namely, becoming too transactional in your relationships. The idea behind building a network should be to have a firm grasp on your inventory and fulfillment capability while remaining agile and, of course, cost-effective. Many times, as companies add vendors they are forced to negotiate terms based on only a portion of their inventory. With this as their only bargaining chip with a new provider, the opportunity they present can seem like one to pass on for some warehouses. Unless they have massive stock to wield across multiple locations, these companies are often forced to accept far less than favorable terms to get the space they need.
How The Small Fish Can Win
Beyond just pricing, being a small fish in a large pond of a 3pl warehouse typically means that service levels can suffer. Your inventory typically would not be prioritized over larger, more tenured tenants. Exceptions management, communication, and reporting are all harder to manage when you do not have dedicated attention, adding to the already precarious role of managing your network.
Working with a 4pl to manage these relationships and relying on their ability to source new locations can help to take some of these issues off your plate. However, most 4pls operate in a pure brokerage model. They arrange the introductions and make suggestions on who to use but leave the day to day interaction to the customer and the warehouse. Logistics is an imperfect business and mistakes can and will happen. Most 4pl models leave you to fend for yourself with issues like rerouting of incorrect orders, filing claims, negotiating rate increases, and other issues that come about.
A Larger, Better Team
A 4pl model that truly incorporates management of these relationships and day to day operations can ultimately become an extension of your team. Outsourcing supply chain as a whole can only effectively be done with the right partner who is committed to your success and well versed in your product and requirements. Along with this world class service, there should be a technological benefit plus added flexibility and buying power that improves your current supply chain. This type of complete service can be a game changer as you build your network with intelligence.