Ever since the COVID-19 pandemic, online shopping has been growing steadily. While brick-and-mortar stores are slowly making a comeback, e-commerce is here to stay. The increased demand for online fulfillment, changing customer behavior, and increased competition have put a strain on 3PLs. Under these circumstances, more and more businesses are going with third-party logistics (3PL) companies to consolidate rising costs and generate more value across diverse business models.
Multi-client 3PL warehousing allows businesses to choose from various operational models based on unique service offerings, technological dependence, and commercial objectives. They allow 3PL companies to address the growing demand for online fulfillment with services like bulk packing, cross-docking, order consolidation, kitting, and more. However, the logistics costs have also been growing steadily, making it more expensive to maintain delivery speed and delivery time. According to McKinsey, logistics costs represent approximately 12-20 percent of e-commerce revenues.
Under these circumstances, warehouse management systems (WMS) allow multi-client warehouses to improve warehouse processes without a significant overhaul. WMS helps with intelligent management of inventory and smart resource allocation. It accommodates various business models by integrating with different client systems to make room for client segregation, reporting and analytics, and consolidated order fulfillment operations.
Challenges in Multi-Client Warehousing Faced by 3PLs
The increasing demand for online commerce, growing logistics costs, and scarcity of warehouse space have posed unique challenges for multi-client warehousing operations. Some of the challenges that we have seen multi-user warehouses face are:
Lack of Visibility Into Inventory
In a multi-client warehousing model, individual clients might have unique inventory requirements based on product classes. Multi-user warehouses need to accommodate various factors like specialized storage conditions, handling procedures, limited equipment, and more.
- Physical Segregation: It is necessary to prevent the commingling of time-restricted, temperature-controlled, or hazardous materials.
- Cross-contamination: Warehouses must account for sensitive and regulated products during storage and movement across the fulfillment pipeline. Mix-ups, spills, or unintentional contact between different product classes can result in accidents.
- Quality Control: Maintaining appropriate quality control across multiple product classes is a significant challenge for multi-user warehouses. Warehouse managers need to perform routine quality checks to monitor the integrity, quality, and shelf-life of individual products in the warehouse.
- Recording and Documentation: Accurate documentation is essential in a multi-client warehousing framework. It keeps a record of inventory movement, picking, put-away, and shipping activities that have taken place. However, traditional paper-based processes tend to be unreliable while recording warehouse operations spanning multiple clients.
Ensuring a Seamless Flow of Information Across Sales and Procurement Channels
Integrating IT and communication systems is necessary to streamline the flow of information across sales and procurement. Individual clients will have their own ERP or OMS with varying technologies, data formats, and protocols.
Mutli-user warehouses have to exchange information with multiple clients on a daily basis. This includes sharing information related to order receiving, inventory updates, client-specific requests, order fulfillment data, and more.
Warehouses must consolidate the streaming data to make it compatible with their in-house systems. It requires extensive data mapping and customization, which is a challenge in itself with manual processes.
Any disruption or errors in the two-way flow of information can cause a complete breakdown of sales and procurement channels.
Manual Reconciliation of Billing Activities
Multi-client warehousing operations, especially mid to large-sized ones, deal with massive volumes of clients, orders, and SKUs. Under these fulfillment models, 3PLs have different billing structures, pricing agreements, and invoicing guidelines for individual clients.
Manual reconciliation of transactions without a WMS to automate billing activities make it challenging to accurately account for varying rates, discounts, storage fees, handling charges, and other billing components.
Depending on traditional, paper-based methods introduce the risk of human errors and omissions, resulting in incorrect or incomplete data. Manual intervention is also more time-consuming, leading to delayed invoicing and revenue recognition in an already competitive sector.
Lack of Visibility to the Clients
In a single-client model, it’s considerably easier to customize your warehouse operations according to client requirements. However, in multi-client warehousing, 3PLs have to expose information to multiple clients in real time.
Lack of visibility makes it challenging for clients to monitor inventory levels and warehouse activities to update order fulfillment metrics accordingly. Clients need a continuous flow of information to accurately forecast demand and plan around stock availability, order backlogs, or replenishment timelines.
Having limited insights for decision-making inevitably hinders the drive to improve and enhance the supply chain performance. Relying on manual updates and communication exchanges can erode trust and transparency, leading to customer dissatisfaction.
Managing Order Prioritization and Service Levels Across Multiple Clients
Handling multiple clients means managing multiple SLAs and varying customer expectations. At any point in time, you’re simultaneously juggling various service levels, order fulfillment timelines, delivery requirements, and more. It requires constant coordination, communication, and collaboration.
Managing expectations under such circumstances can be extremely challenging if you’re relying on paper-based processes. In a multi-client warehousing environment, several factors come into play.
- Order Prioritization: Inevitably, in multi-user warehouses, there will be scenarios with conflicting priorities. To ensure fair treatment for all clients, you’ll need more data on order volumes and the level of urgency to make decisions.
- Dynamic Order Volumes: Clients might have fluctuations in order volumes, depending on seasonal peaks or unexpected surges. Navigating these surges or fluctuations effectively while maintaining optimal service levels can become challenging without insights into reallocating storage space, adjusting labor schedules, or allocating resources.
- Resource Allocation: Every client in a multi-client framework requires specific resources like labor or equipment. You have to be flexible with resource allocation to meet varying client demands and prevent bottlenecks. However, that requires having the visibility necessary to plan, schedule and commit warehouse resources effectively.
The Role of WMS in Simplifying Multi-Client Warehousing for 3PLs
As you have probably realized by now, manual intervention makes it difficult to overcome most of the challenges of multi-user warehouses. In most cases, having a WMS is necessary for multi-client warehousing operations. A warehouse management system can underpin the success of your warehousing operation in several ways.
1. Omnichannel Capabilities To Serve Both Wholesale and E-Commerce Fulfillment
A warehouse management system provides multi-user warehouses with granular control and real-time visibility over inventory across all levels.
In turn, the omnichannel capabilities help multi-user warehouses improve several operational aspects and serve wholesale and e-commerce clients more efficiently.
- Centralized Inventory Management: a WMS connects both wholesale and e-commerce sales channels to a centralized inventory management system. It automatically updates omnichannel sales data in real time to ensure accurate stock information. This benefits wholesale clients who often order in bulk and need to be aware of stock availability beforehand. For e-commerce fulfillment, you can reduce instances where products appear available online but are actually out of stock in the warehouse.
- Streamlined Picking, Packing, and Shipping Operations: Wholesale orders often involve larger quantities and complex pallet arrangements and require a different approach to pallet picking. On the other hand, in e-commerce fulfillment, there are fewer SKUs per order, and warehouses ship the items directly to the customer. A WMS helps identify the fastest picking routes, picking and packing strategies, and sorting methods for faster fulfillment.
- Built-in Integration for Faster Fulfillment: A WMS can integrate with a wide variety of systems, including e-commerce platforms (like Shopify or Magento), marketplaces (like Amazon or eBay), ERP systems, and shipping carriers. This helps automatically update order and transaction data for e-commerce fulfillment. Wholesalers can directly integrate their ERP or OMS for bidirectional synchronization of orders, inventory levels, and financial data.
- Scale Along With Your Clients: The volume of orders in e-commerce fulfillment tends to vary based on seasonal peaks or demand fluctuations. Similarly, you have to be ready if and when your wholesale clients expand into new markets or add new product lines. A WMS can help you navigate these varying client requirements with automated tasks and optimized workflows.
- Reporting and Advanced Analytics: a WMS can collect operational data on sales, inventory levels, order processing times, and more for both e-commerce and wholesale clients. Analysis of this data can help to identify trends, pinpoint bottlenecks, assess performance, forecast demand, prepare targeted marketing or promotional efforts, and more.
Multi-client warehousing operations cater to a wide range of clients. A WMS enables multi-user warehouses to move diverse products for wholesale and e-commerce fulfillment without incurring additional logistics costs. However, it’s not a magic pill that can automatically improve your warehouse performance. You’ll still need to train your workers and invest in the right technologies to enable your warehouse resources to work smarter.
2. Flexibility Over Location Configuration
The demand for warehouse space has steadily outpaced the supply, leading to a rise in warehouse rent. Under these circumstances, it’s important to be flexible with storage locations in multi-user warehouses. Dynamic product classes mean you have to account for unique handling requirements, dimensions, form factors, and demand when figuring out the best location for specialized storage and movement.
A WMS allows multi-user warehouses to exercise greater control over warehouse space.
- Pallet and Bin Storage Configuration: Serving multiple clients means warehouses need to accommodate pallets and bins of varying dimensions. There are different storage methods for maximum space utilization in multi-user warehouses. With a WMS, your warehouse managers can pre-define specific storage parameters based on the pallet or bin size, weight capacity, or storage methods like single deep, double deep, drive-in, and more.
- Dynamic Buffer and Staging Areas: Buffer and staging areas act as temporary storage zones for incoming and outgoing products. A WMS can proactively allocate and define buffer and staging areas based on client requirements. As a result, the warehouse can accommodate client-specific quality-control checks, cross-docking procedures, and more.
- Flexible Storage Areas and Zone Assignments: A WMS makes it easier to identify and configure optimal storage areas and zones for individual clients within the warehouse space. These dedicated storage areas are based on their product characteristics, handling requirements, or other criteria, allowing for easy access, segregation, and movement of products across the warehouse.
- Replenishment Area Configuration: With a WMS, it’s possible to define specific areas and workflows to restock picking locations or consolidate products in a timely manner.
3. Automated and Simplified 3PL Billing
A WMS-enabled approach to 3PL billing helps overcome many of the challenges associated with traditional paper-based processes.
A WMS can automate a considerable portion of the work associated with billing activities. By leveraging automation, you can eliminate the need for manual intervention entirely, leading to reduced errors and greater trust in your warehouse model.
4. Full Platform Visibility for Clients
Having a WMS makes it easier for your clients to view the status of their orders. It also allows them to collaborate and actively participate in warehouse operations if needed. According to a study by NTT Data, 53% of 3PLs can provide real-time data to their clients in more than half of their supply chain services.
Client-specific login credentials and access privileges on the client-facing platform also ensure controlled access and data security at all times.
In a multi-client warehousing framework, your clients can create and manage inbound consignments and enter Advanced Shipping Notices (ASN) to intimate advanced information about incoming shipments, delivery dates, quantities, and product details. They can also place orders directly through the client-facing platform, eliminating the need for manual intervention.
A warehouse management system also provides clients with real-time visibility into inventory levels and product details like stock availability, SKU attributes, batch/lot numbers, expiration dates, and storage locations. This feature makes it easier for them to communicate and collaborate via built-in messaging systems to submit inquiries or requests and receive updates on order status.
And finally, client-facing dashboards. A client-facing platform makes it easier for your clients to access dashboards, and reporting and analytics to measure important metrics and KPIs. The visual representation of metrics like fulfillment efficiency, inventory aging, dock-to-stock time, order lead times, order accuracy, and more can help them assess their performance, analyze trends, identify patterns, and make data-driven decisions for continuous improvement.
5. Pre-Built Integration for Client Systems
A WMS can integrate with clients’ ERP, accounting, EDIs, and inventory management systems to automatically exchange information and provide real-time status updates.
Bidirectional data synchronization between the client’s sales and procurement channels allows them to generate automated replenishment alerts or suggestions based on predefined inventory thresholds.
Having a WMS in a multi-user warehouse means you can integrate with any sales channel, be it e-commerce platforms, marketplaces, or direct sales systems. This provides warehouses with greater flexibility in the processing of order information. Integration ensures you can automate multiple tasks like allocating inventory, initiating picking processes, generating shipping labels, and triggering notifications to clients and carriers.
Built-in integration for client systems ensures you can generate instantaneous alerts and notifications to clients during exceptional circumstances. Having an early warning system during stock shortages, order delays, or mass order cancellations can potentially mitigate the impact of these disruptions.
Next Steps
In a multi-client warehousing framework, you are continuously juggling diverse client portfolios and requirements. Relying exclusively on traditional paper-based methods to onboard clients and meet customer expectations can strain financial and operational bandwidths. In a multi-user model, having a WMS takes a significant load off your warehouse resources by automating and digitizing many activities.
WMS offers some major and many minor improvements that are crucial to improving operational and financial margins. It helps onboard clients faster and encourages collaboration and transparency across multiple processes. In today’s fast-paced logistics environment, having a WMS can solve many of the complexities of multi-client warehousing; it has the potential to be a true strategic differentiator.
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