Warehouse Automation for 3PLs: Key Capabilities to Look For

Most warehouse operations are complex. But that complexity can get multiplied several times over for 3PL (third-party logistics) providers. Often, you’re not just dealing with one customer base, one online channel for ordering, one product type or category, one delivery region, etc. Instead, you might need to be dealing with multiple product types, all with different storage and picking requirements, compliance regulations, and so on.

So, while overall efficiency and optimization goals are much the same for all warehouses, 3PL providers usually have additional considerations compared to regular warehouse operations. If you’re a 3PL operation, with a manual warehouse, you are likely to be contending with managing multiple existing customers and/or product segments. This can mean individual storage and fulfillment areas for separate clients or product lines, each with their own workflows and equipment.

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To maintain or grow your business, you constantly need to find ways to remain competitive in your contract pricing without diminishing quality. Which means it’s all about turning up your revenue per square meter while driving down your operating cost per pick. This enables you to cut costs and offer more attractive pricing.

Whether you want to expand your offering to new product lines for a single large client, or you’re looking to make room for new customers on your warehouse floor, you need to avoid a detrimental effect on your revenue per square meter struggling to squeeze in additional stock and making room for yet more handling processes.

Balancing costs and quality

So, when considering warehouse automation for 3PL warehouse and distribution operations, what features and capabilities should you be looking for to make an automation investment transform from good to great? There’s a broad range of automation technologies applicable to many different use cases, so it’s easy to feel overwhelmed by all the different choices you could make.  

Alongside trying to speed up, improve, or automate individual tasks and processes, you can have an overall aim to combine and condense as many processes and workflows as possible. By combining multiple customers or product types into single workflows, you can optimize several key areas of warehouse performance and productivity to help deliver improved operating margins.

In this blog, we have put together an overview of warehouse automation capabilities, focusing on how they can be effectively utilized to improve the performance of 3PL providers. This guide aims to provide you with actionable insights on optimizing your operations, highlighting key strategies to enhance the service you deliver to your clients.

1. Storage capacity & better space utilization

Maximize your potential revenue per square meter and grow your service offering.

A 2022 survey showed that capacity is the top challenge globally facing 3PL providers.  

Traditional warehouse layouts with aisles and shelving leave a huge amount of potential storage capacity untapped.

Density

One of the “easiest” ways of increasing the revenue potential of an existing warehouse facility is to increase the storage density – i.e. store more items per square meter. An automated storage and retrieval system (AS/RS) such as the AutoStore Cube Storage solution can increase the storage capacity of a typical manual warehouse by up four times.

By adding more storage, you have a lot more flexibility to reduce your operating costs.

• Depending on your needs, you can make room for other processes, add more stock depth for existing customers, or create room for more new customers and segments without needing to expand your floor space.  
• Look for solutions able to handle large, diverse product ranges, to make it more feasible to house multiple product categories or customer operations in a single setup.
• By aiming to reduce the required footprint for storage with high-density automated storage, you reduce the need for multiple zones segregated for different customers and product types.

Flexibility

Of course, it’s not always 100% possible to get all SKUs into a single solution. Say you have some large, oversized products, or a customer with strict storage requirements, such as pharmaceutical goods, you might need to adapt.

• Some larger equipment needs a minimum amount of space to operate. Look for flexible solutions that can work well alongside other equipment if required.
• For example, because it’s super flexible in how it can be configured for almost any floor plan and made to fit around non-uniform floor shapes and corners, many of our customers use their AutoStore to handle the bulk of their product storage, alongside a smaller area dedicated for non-standard items, for example with some equipment for heavy goods handling.

Modularity for scaling

As your business scales up, the need to augment your storage capacity will likely become a critical aspect of supporting and sustaining this growth. But, increasing your overall storage should ideally have minimal or no impact on your daily operations.

• Look for modular solutions that meet your current needs, but also make it easy to add new capacity without large installation requirements that will halt operations or substantially reduce productivity for extended periods.
• Try and choose systems with no single point of failure. You don’t want operations for multiple clients to be shut down because one piece of equipment failing shuts down an entire workflow.

2. Deliver better customer experiences with rapid order fulfillment

Capabilities to reduce your cost per pick and make your operating margins more competitive.

In a manual warehouse or distribution center you would normally have to maintain separate zones to execute order fulfillment for each client or different product segment. Then, depending on which client or category the order is coming from, items will have to be picked across varying distances and areas, making picking harder to predict accurately. To add the most value to operational productivity, the right warehouse automation solution should allow you to combine multiple workflows and processes for order fulfillment into one set up, helping to considerably boost efficiency. Additionally, this can help you reduce the number of different types of equipment you need on your floorspace.

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Speed

Alongside density, you also need to look for solutions that can help improve the speed of your order fulfillment. An automated picking solution can mean you can start measuring average pick time in seconds, not minutes, compared to a manual process.

With an automated picking solution:

• Items are located and brought to your fulfillment team, rather them having to cover large distances looking for and retrieving items physically.
• This effect is compounded if you can combine multiple areas for different product segments and/or customers.
• This helps you offer best-in-class fulfillment to your clients to help them meet increased customer expectations for faster deliveries.
• With an automated picking system such as AutoStore, inventories can be mixed within the storage Grid. The only criteria for deciding the location of an item is whether or not it’s a high-volume item/bin or not.
• No matter how many clients or product segments are combined in a single grid, all bins or totes are placed at the top of the Grid. So highly sought after items with high order frequency will naturally always be placed higher up on the top levels, making high-volume SKUs quicker to pick and shortening the time to order dispatch.

Accuracy, efficiency, and order quality

Beyond time savings, the automation solution should also boost workflow productivity by minimizing the resources needed to handle an equivalent volume of orders. You can look to replace multiple storage areas, each with their own equipment, as well as condensing separate replenishment and picking processes into one process.

Order accuracy is also hugely important to any fulfillment process, as error rates eat into your operating margins. But it’s impactful for 3PL providers since standard contracts usually include service level agreements (SLAs), with mandated penalties for failing to maintain agreed delivery rates and performance.

Solution:

• A single automated picking solution for multiple product or customer segments will help fulfillment greatly enhance order accuracy. Even as throughput and speed increase, this singular system proves more accurate than multiple parallel manual processes.
• Higher order accuracy across all clients will help you to reduce costs while delivering higher quality services.
• Fewer types of equipment mean fewer opportunities for potential downtime, so maintenance and servicing needs can be reduced.
• Fewer types of equipment and workflows help to reduce labour costs.
• You can pick the same volume of orders with fewer team members
• You can cut down the need for skilled workers to facilitate single processes for different clients or product categories.

3. Integrations and enhanced data visibility

Scale your operations with the right technology for true insights and optimization.

Whether you’re looking to retain existing contracts or grow with new clients or segments; accurate, real-time data helps you to improve the efficiency of your overall operations and warehouse performance. This again provides the ability to reduce your operating costs, in turn helping you to offer more competitive rates to clients or improve your margins.

Interoperability

Look for technology and systems that have interoperability at their core. As much as possible, you should be able to facilitate data visibility across platforms and processes.

• You should be able to integrate your main systems such as your WMS, ERP, etc. alongside your clients’ key ordering platforms in order to continually optimize inventory management and performance.
• Some solutions will provide standard integrations, but you should be able to take advantage of flexible open APIs to build custom integrations to get the exact data flows and functionality you want.

Quick recap:

For many 3PL providers, the time to automate has arrived. But an investment in automation shouldn’t be looked at as a short-term answer.

A considered and well thought-through investment project should be about exploiting opportunities to grow your business. Here’s is a quick summary of the main capabilities you should be considering as a 3PL provider to lay strong foundations for growth:

• Look to maximize your revenue per square meter as much as possible, identify solutions that help you to increase storage density
• Choose technology that can help you reduce your operating margins by optimizing overall productivity and throughput
• Try to combine multiple clients and/or product segments into a single setup
• Your automation should be able to support daily operations and fast operational growth to enable the addition of new clients and/or product lines quickly
• Look for solutions with modular designs, which make it simple to add to your total operating capacity.
• Choose solutions that are capable of supporting good data visibility across all your current systems and workflows.
• Choose solutions with true interoperability, to make third-party integrations work how you want.
• You should have possibilities for integrating with future technology as your operations scale in the future.
• You need to optimize performance and data management across all clients and product segments.