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Dean Maciuba

Order Fulfillment 3PLs Are Still Processing Amazon Shipments

By | Shipping

Here’s a quote frequently tied to Jeff Bezos with respect to focusing on the customer relationship:

“If there’s one reason we have done better than that of our peers in the Internet space over the last six years, it is because we have focused like a laser on the customer experience, and that really does matter, I think, in any business. It certainly matters online, where word-of-mouth is so very, very powerful.”

The Amazon founder’s commitment to the customer experience grew partially from a disastrous 2013 holiday shipping season when Amazon experienced unexpectedly high shipment volume which swamped the parcel carriers. When some gifts didn’t arrive before Christmas, Amazon’s reputation took a beating.  It should be noted that the carriers faced an incredible challenge with Amazon far exceeding project volume, and that was not the fault of the carriers.

Soon after this ugly experience, Amazon committed to eventually taking control of logistics, and specifically, home delivery. Since that time, hundreds of fulfillment, sortation, and local delivery terminals have been constructed to feed their own last-mile delivery carrier, Amazon Delivery Service Partners.

3PL Companies Fulfilling Amazon Orders

Today, according to MWPVL International, Amazon delivers over 70 percent of their own orders, not including the shipments of marketplace customers that self-fulfill.  MWPVL also says that Amazon could very well be fulfilling up to 85 percent of their own orders within the next 18 months. On the surface, it sure looks like Amazon is abandoning all 3rd party logistics service providers.

However, that is not the case. Amazon still uses e-commerce 3PLs to fulfill product orders under the following circumstances:

  • To fulfill orders for Prime marketplace merchants that use Fulfillment by Amazon. These orders are usually shipped via UPS.
  • Prime marketplace merchants that self-fulfill still use 3PLs to ship their products across UPS, FedEx, and the USPS.
  • Amazon still fulfills a portion of their own, non-marketplace merchant orders via 3PLs.

Now, these definitions are nuanced and a bit confusing. To simplify this, just understand that Amazon has not seized total control of fulfillment and still uses 3PLs, like my partners at Newegg Logistics, to fulfill retail orders.

By placing restrictive rules on sellers, Amazon is also making it harder for Prime Marketplace Merchants to self-fulfill in-an-effort to drive these self-fulfilling marketplace merchants to the Fulfillment by Amazon solution.

Final thoughts

While Amazon has greatly reduced its reliance on 3rd party logistics service providers, the e-commerce giant still needs help from order fulfillment vendors and some 3rd party carrier support, especially through the busy holiday-shipping season.  Yes, Amazon has morphed into a logistics giant, but still needs some help from the 3rd party order fulfilment business community.

West Coast Port Pileups Trickle Down to E-commerce Fulfillment Providers

By | Supply Chain Management

The number of container ships parked off the Los Angeles-Long Beach port complex now total over 70. The reasons for the delays in the cargo off-load process are numerous and include:

  • COVID-19 safety protocols add more time to off-loading.
  • Newer ships are two or three times larger than legacy platforms, and as a result, take longer to unload.
  • A post-pandemic consumer buying frenzy, driven by a recovering US economy, is resulting in increased e-commerce volume—outside of normal volume increases specific to the holiday shopping season.

Bloomberg is telling us that door-to-door ocean freight transit times from Asia to the US have increased by 43 percent. Those transit times are growing daily due to port driven off-load delays.  Freightos says that container-based transportation costs between the US and have increased five-fold year-over-year. Ponder that for a few seconds!

In addition, unrelated supply chain challenges are impacting all of us. These result in partially empty store shelves and shortages in automobiles, electronics, and construction products. The net outcome favors neither merchants nor consumers: both are paying more for consumer goods and waiting longer to receive them. The trickle-down of the port situation negatively impacts the primary component parts of the e-commerce supply chain.

E-commerce Supply Chain Challenges

Destination port delays are negatively impacting all parts of the e-commerce supply chain. Here’s how:

  • Origin ports will need to start delaying shipment of products to destination ports, driving additional supply chain backups.
  • Distribution from port warehouses to regional warehouses and national fulfillment centers is delayed via rail, truckload, and LTL modes.
  • Product shortages have delayed distribution from regional warehouses and DC’s to big-box stores, 3PL order fulfillment centers, and smaller, micro-fulfillment center delivery.
  • E-commerce consumers are realizing poorer product selection and increased back-order delays.

These conditions are creating backed-up consumer demand as we enter the holiday shopping season, the busiest time of the year.

Unrelated Challenges to Supply Chain Service Providers

Service providers and merchants are also having to deal with challenges unrelated to port delays.

  • High employee turnover
  • New worker shortages
  • Increased labor cost driven by worker shortages
  • COVID-19 safety protocols
  • Truck driver shortages resulting in trucking capacity limitations.
  • COVID-19 recovery driving increased consumer purchasing with limited carrier resources to support increased business.
  • Integrated parcel carriers walking away from marginally profitable e-commerce business and raising rates.

Impact on E-commerce Fulfillment

These e-commerce supply chain challenges that I have detailed, along with the trickle-down impact of port delays, have some e-commerce fulfillment service providers concerned about receiving an avalanche of product late in the holiday shipping season.

Typically, merchant warehouses and fulfillment centers receive much of their holiday season inventory during September and October. Port delays moving delivery of that inventory to November and December is a concern and fulfillment centers need to be planning for such an event right now.

Newegg Logistics Services (NLS) discussed with me how the company plans to manage the possibility of receiving high-volume new product late into the holiday-shipping season and still fulfilling outbound orders on time.

“Delivery appointments for receipt of inbound product are critically important so we can plan to have the resources in place to unload trailers and containers and place product into inventory,” says Alvin Chin, NLS senior business development manager.  “If we know in advance when the product is arriving—whether that is in September or November—we can manage almost any amount of product with no impact on our outbound fulfillment services.”

Newegg, which is headquartered outside of Los Angeles with several facilities across the region, has a geographical advantage in the current shipping climate. Chin adds: “We have a large fulfillment facility in Sothern California that is not exposed to transit time and line-haul delays once product has been unloaded at the port.”

Still, the situation outside of U.S. ports creates a tall order to fulfill up and down the supply chain. Geographic and technological advantages aside, if West Coast port delays can’t be addressed in the very near future, I anticipate that product availability and on-time delivery will be negatively impacted during the holiday-shipping- season.

Fulfillment center

Merchants: How to Choose the Best Ecommerce Fulfillment Model for You

By | Shipping

The growth of e-commerce has driven major change in the fulfillment center (FC) landscape with faster item-processing speeds and improved speed-to-market (delivery).  Additionally, enhanced electronic communication and notifications originating at the FC level are benefiting the merchant, carrier, and customer. However, it is still a challenge to find the FC that best serves a merchant’s unique requirements as one size does not fit all.

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The Great E-commerce Fulfillment Center Squeeze

By | Supply Chain Management

The pandemic has impacted nearly all parts of the global supply chain and e-commerce fulfillment is not immune to the condition.  Covid-19-driven consumer behavioral change has resulted in staggering e-commerce growth, which in turn, is putting tremendous pressure on e-commerce fulfillment centers (FCs).

The immediate impact has been FC demand almost exceeding capacity. The shortage of FCs is resulting in greater competition for limited capacity, which is driving increased rent. Labor and facility rent are the two most costly components of operating a fulfillment center.

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23 Factors to Consider When Deciding to Outsource Order Fulfillment

By | Shipping

The decision to outsource order fulfillment is a critical one for many growing e-commerce operations. Businesses have many order fulfillment service provider (SP) options. Each SP has a unique service offering and ways of conducting business. The steps below will help guide your decision-making process so your ecommerce company can outsource order fulfillment profitably and in line with customer needs and expectations.

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Putting the ROI in Robotics: Task-Specific Warehouse Automation

By | Supply Chain Management

Robotic fulfillment solutions are a hot topic right now. There are numerous YouTube videos out there demonstrating how merchandise racks are autonomously moving about in fulfillment centers, on the backs of tiny robotic transport vehicles. These robots are taking merchandise racks to their human counterparts for individual items to be picked, packed, and shipped.

Large merchants like Amazon would have you thinking that nearly all their fulfillment centers operate with robots that pick, pack, and ship their merchandise orders. However, that is not the case.  Human hands are still picking, packing, and shipping most e-commerce merchandise orders in both large and small fulfillment centers across America.

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How Does Intelligent Fulfillment Improve the 3PL Service Offering?

By | Shipping

Intelligent Fulfillment (IF) is the use of various integrated technologies and best-in-class processes to perform product fulfillment in the most cost-efficient manner possible in line with clients’ needs and expectations.  It is one of the earmarks of a modern, tech-empowered 3PL.  Ideally, an order fulfillment service provider implements intelligent fulfillment practices to differentiate their service offering from their competitors and better position their organization to retain and gain new business by offering a superior client experience.

Implementing and integrating advanced technology can cost a lot of money and smaller fulfillment service providers may believe that intelligent fulfillment solutions are not within their budgetary reach.  However, there are lower-cost component parts of an IF solution that can serve as a starting point for small organizations to slowly move forward towards embracing intelligent fulfillment with the goal of protecting their competitive standing.

10 Intelligent Fulfillment Goals and Opportunities for 3PL Companies

  1. Integrate existing technology platforms to drive a better synchronized fulfillment experience for the organization and client.
  2. Implement new technology that extends real-time inventory views to the client and results in an overall, improved inventory management experience for both the fulfillment service provider and the client.
  3. Embrace technology upgrades that support omni-channel marketing/fulfillment solutions to best support clients operating across various marketplace platforms.
  4. Focus on improving order management technology first, and ensure that new technology supports various customer delivery, store pickup or carrier access point delivery options.
  5. Work towards identifying all fulfillment related costs and embrace technology platforms that support management of those identified costs.
  6. Constantly work with your management team on long-term planning and identifying process optimization/best practices.  Implement those practices across the workforce and seek out technology solutions that support and measure the results of newly implemented best practices.
  7. Seek out the best professional talent possible, and understand that retaining legacy employees in key positions that lack the necessary skillset are detrimental to the long-term success of the organization.
  8. Understand that the up-front cost for implementing new technology should result in lower unit processing cost down the line.  It is all about leveraging those up-front costs against future operating cost reductions.
  9. Engage in demand forecasting and link projected increases/changes in business to proactive capacity improvements, ahead of actual volume increases. AI based technology can support this function but can also be costly.
  10. Do not resist up-front investments in technology designed to protect the long-term competitive positioning of the organization or  to survive in an increasingly competitive environment.

The continued growth of e-commerce presents a tremendous opportunity for 3rd party order fulfillment service providers to prosper.  However, the competitive environment is intense and failure to embrace Intelligent Fulfillment goals and objectives could lead to organizational failure, even in the midst of amazing e-commerce growth. Finally, if you can’t measure the results of change, don’t implement change, just for the sake of change.

Curbs have great appeal

Curbs: Critically Important and Costly Real Estate

By | Shipping

It has been a bit scary to watch the decline in business activity in our cities this past year, due to pandemic driven restrictions. The good news is, restrictions on business operations are being lifted, COVID 19 infection rates are declining and maybe, “normal” is just around the corner.

Unfortunately, part of that “normal” will be the return of traffic congestion and the challenge to find curb-space to legally park cars and service vehicles, as we rush to visit our favorite restaurants and shops in urban centers.

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Beyond LTL: Faster Solutions for Palletized Freight

By | Shipping

We live in an era where e-commerce parcel delivery service commitments have morphed from the standard 2-day ground delivery to the option for same-day, free delivery in the largest metro markets. Some carriers and e-commerce merchants are now offering 2-hour delivery windows in the largest markets, and we are also seeing incredibly fast, 2-hours transit time commitments for both grocery and restaurant food delivery.

However, there have been limited transit time service improvements in the Less-Than-Load (LTL) transportation segment for large and bulky/palletized goods. Why might that be the case?

  • Everything About LTL is BIG and Big Takes Longer to Move: The cargo is either secured onto large pallets or is so big, it does not fit on a pallet and must be manually handled, which takes a lot of time. The tractor-trailers are long and large, so navigating city streets and customer loading areas is a challenge that also eats up time.
  • Manual Sortation/Handling Process: Unlike the fully automated parcel sortation process, the cross-dock and pallet handling process in an LTL terminal and hub is mostly manual with a single fork-lift driver handling a single pallet. The manual sortation process also takes a lot of time and negatively impacts overall transit times.
  • Hub Bypass Strategy Not Embraced: The integrated parcel carriers are using teamed tractor-trailer drivers to travel long distances and bypass regional hubs. Going through fewer regional hubs improves transit times. The LTL carriers have not embraced this line-haul, time-saving strategy as aggressively as the parcel carriers.
  • Linehaul Via Rail: While moving trailers via rail is less costly than moving the same line-haul trailer using the interstate highway network, it also takes longer. Given the current driver shortage, the LTL carriers are less likely to move line-haul operations away from rail to the highway to improve transit times.

What are faster options for shippers?

It is not likely that the LTL carriers can dramatically improve transit times. However, there are options for shippers that need faster transit time solutions for large and bulky palletized freight.

  • Truckload Service: While faster than LTL, this dedicated truck and trailer service requires numerous pallet loads to be cost-effective.
  • Straight Truck Direct to Recipient Delivery: Shippers are becoming less satisfied with LTL carrier rate increases, and limited improvement in transit times. Recognizing the demand for faster LTL transit times, independent truckers are now offering direct-to-recipient straight truck pallet delivery. This service is faster than standard carrier-based LTL service and not significantly higher in cost. Digital freight matching technology also allows for more than a single shipper per truck.
  • Hot Shot Delivery: These on-demand delivery services for palletized shipments were used heavily during the on-set of the recent pandemic, to move urgent medical supplies. While more costly than that the direct to recipient model, it is faster and usually limited to a single customer’s product.
  • Critical Freight Logistics: This service is usually a combination of highway and air freight services to provide same-day and overnight delivery of large and bulky/palletized shipments. The service is costly and usually reserved for high-value goods or “plant down” scenarios where the cost of transportation is not a factor.

LTL service limitations and the digital management of freight loads is opening the door to alternate, pallet-based shipment solutions, and these services may be more easily accessed via a 3rd party logistics provider.

Pandemic Driven Change in the Workplace: More to Come

By | Shipping

COVID is driving disruption in the workplace, and parcel carriers and 3PL providers are not immune to that change. Whether driven by management, the employee, or government, the response to the pandemic has forever changed the way we live, work and play.  We are entering a period of hypersensitivity in the workplace, especially as it applies to preventing the spread of infectious disease while at work.   That hypersensitivity will continue to drive change.

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