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Outsourcing the backend of the supply chain begins with 3PL

Should you spend millions getting your warehouse right, or could third-party logistics (3PL) take your distribution journey to the next level?

Johannesburg, 16 Mar 2022
Tim Proome, Head of Supply Chain, Tarsus Distribution.
Tim Proome, Head of Supply Chain, Tarsus Distribution.

If there’s one thing that’s become clear, it is that the COVID-19 crisis has put the supply chain in the spotlight.

The importance of investing in a resilient supply chain has never been more important, especially when it comes to disrupted workforces and the importance of delivering goods in a digital-first world. 

“With everyone working from home, B2B deliveries are beginning to look a lot more like B2C deliveries,” explains Tim Proome, Tarsus Distribution’s Head of Supply Chain. “This adds increased complexity to the last mile owing to the fact that a delivery into a residential complex has a very different rhythm to that of a business location.”

One of the biggest struggles facing businesses today is being able to keep up with supply chain challenges, especially in areas like shipping, warehousing and logistics. The dynamics around supply chains are constantly changing and executing the last mile isn’t as simple as getting an item from point A to point B as quickly as possible.

While faster order fulfilment is the new norm, businesses are having to reconsider how they get to customers: “The type of truck going into a B2B environment may not be allowed to go into a complex. Now suddenly, you’ve got the wrong vehicles going into the wrong areas,” says Proome.

In a B2C world, digital integration platforms are often about survival and without the right management systems in place, organisations risk losing out to competitors if they cannot deliver goods accurately, timeously, cost-effectively and with real-time visibility.

“A good warehouse management system is critical. We worked with an e-commerce customer who took six months to deliver their Black Friday deals. We did their digital integration and when their Black Friday sale happened the following year, it doubled in volume but we were able to execute in a week,” adds Proome. “Being able to scale from 4 000 transactions in a month to 8 000 transactions in a weekend is only possible because the system is all digital and that makes the supply chain more flexible.”

The B2C shift has also impacted the visibility of business orders. Ordering from an e-commerce store, a customer is able to track a delivery from the warehouse to his house but in a business environment, this is not always the case. “It should be fully-integrated and fully visible,” says Proome. “You should be getting the same experience of a B2C or e-commerce environment in B2B - digital visibility is far more important than a physical warehouse because the supply chain is what makes or breaks customer relationships. You can have a warehouse sitting right next to you but if you don’t have the right systems talking to each other, what’s the point?”

In the logistics environment, there are usually two (possible) chargeable metrics - the actual weight of the product and the volumetric weight. Whichever is greater becomes the cost.

“From a cost perspective, companies are at the mercy of couriers but within a smart warehouse, there’s not only video footage, the data captured about the item contains all the necessary data and as a result, those cost queries go away,” says Proome. “In those economies of scale, it is easy to get bogged down by tonnes of operational exceptions where your core competency is probably marketing and selling your product. If you started an e-commerce website and began dispatching items out of your double garage, you would spend a lot of time dealing with customers and less time dispatching - something is always going to get sacrificed along the way.”

However, when a business outsources e-commerce logistic processes to a third-party business, those exceptions can become minimised. An experienced third-party logistics (or 3PL) supplier should be able to fulfil orders accurately and with full visibility, no matter the size of the business.

“A small customer that comes into an 3PL warehouse environment can get the same, speed-to-serve as a large corporate,” adds Proome. “A good warehousing management system is extremely expensive to implement, optimise and maintain and the outcome may be that after spending months implementing you only achieve parity with the market in terms of operational excellence.”

The e-commerce sector grew by 33% in 2021 which means there is an increased demand for logistics services. For Proome, he sees the future of the supply chain shifting into an ‘as-a-service’ model. “Services are becoming the big selling ticket as opposed to product. If everything in the backend supply chain changes to an as-a-service model, 3PL service providers will help businesses to scale more effectively while consolidating more shipments going forward.” 

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