Efficient inventory management helps organizations keep up in today’s fast-paced business environment, and this is especially true for businesses that rely on third-party logistics (3PL) providers. Roughly 66% of consumers will take their business elsewhere if a product they want is out of stock. So, inventory control issues can cost businesses valuable sales and bog down their operations with excess overhead costs.
In this article, we'll take a look at the ins and outs of 3PL inventory control. First we'll explore what it entails, then examine its importance for the rest of your business processes, and offer some essential strategies to optimize your inventory control.
We'll also look at some key challenges to your 3PL inventory control processes and how to evaluate them — and how QuickBox can help.
Understanding 3PL Inventory Control
Also known as stock control, inventory control refers to all of a company's workflows that affect the storage and shipping of their goods. It's similar to inventory management in that both seek to optimize your inventory-related workflows. But there are important differences between the two.
For example, inventory control is confined mainly to the storage and tracking of the stock in your warehouse, while inventory management includes broader supply chain processes, such as procurement and establishing alternative supply lines.
Some small businesses may choose to conduct their inventory control processes in-house. But organizations looking to scale their operations may leverage a 3PL provider to handle their inventory levels for them.
Some 3PL inventory control duties include:
- Inventory tracking: Keeping an accurate record of all the stock in your warehouse.
- Allocation: Assigning inventory to specific shipping orders and routing them to the customer from the nearest retail store or warehouse.
- Replenishment: Obtaining new inventory from the proper supplier when product levels are low, and predicting when re-orders should occur.
3PL order fulfillment providers take a hands-on approach to your inventory control processes. They ensure:
- Your stock is picked and packed according to your specifications
- Transport your products from shipping centers to the end-consumer
- Provide warehousing solutions to let you make the most of your available space
Maintaining a strong relationship with your 3PL fulfillment provider is, therefore, essential if you're going to make the most of their services. A 3PL provider should keep close tabs on your shipping needs to make sure that they're meeting customer demands. And they should equip you with the leading inventory technology to give you maximum visibility over your stock.
The Importance of Effective 3PL Inventory Management
3PL inventory control offers many advantages over in-house inventory processes. Some of the main 3PL inventory control benefits are:
- Less overhead. Supply chain thought leader Myos estimates that resolving inventory issues such as stockouts and overstocks can reduce overhead costs by as much as 10%. Effective 3PL inventory management can optimize your stock components and keep you from having too much or too little of your products — reducing your overall costs in the process.
- Greater cash flow. 3PL inventory management doesn't just save you money by reducing overhead costs. It ensures that your products will be available to your customers upon their demand. The result is more sales and greater profitability.
- Enhanced customer satisfaction. Shipping has a significant impact on customer satisfaction. Of customers, 23% say they won't buy from the same brand after a delayed delivery, and 21% say they lose trust in a brand. Strategic 3PL inventory management keeps shipping errors to a minimum, and customer satisfaction to a maximum.
Another key benefit of 3PL inventory control and management is the improved agility and resilience that it provides. 3PL providers possess industry-leading technology that can track your stock more accurately and deliver insightful data that gives you better visibility into your shipping processes. As a result, companies that work with 3PL providers can better adapt to market changes such as seasonality or shifts in consumer demand. This makes them more resilient than businesses that choose to go it alone.
3PL providers have a network of warehouses and distribution centers strategically located across the country. Because of this, they can ensure that your products travel the shortest distance to reach your consumers, improving your business' sustainability.
Key Strategies for Successful 3PL Inventory Control
3PL providers offer many services to their clients. So, it's important to align your operations in a way that makes the most of what they provide. The main strategies you can use to optimize your inventory control processes involve the implementation of technology to track incoming and outgoing products. And to forecast demand based on historical data.
Consider these tactics:
- Implement real-time inventory tracking: Real-time tracking tools such as radio frequency identification (RFID), QR codes, and barcodes provide valuable insights into your inventory. These include expiration dates for consumable items while reducing manual errors for greater stock accuracy.
- Leverage AI and the cloud: Artificial intelligence and machine learning (AI/ML) tools employ advanced algorithms that help merchants anticipate demand fluctuations more accurately. And cloud-based software provides the capacity to ingest the massive data inputs it takes to make such predictions. Combine the two to gain greater visibility over your entire supply network, and to optimize your operational efficiency.
- Optimize your warehouse space: Adding new warehouse space can be cost-prohibitive even for large enterprises. Making the most of the space that you have is a must. Flexible layouts let you alter your warehouse configuration when product demands change from small components to large. And systematic inventory categorization reduces picking and packing time by keeping related components nearby.
Autonomous drones and robotics are also critical for 3PL inventory control, as they improve shipping efficiency by reducing human error and downtime. Task automation software can also streamline tedious workflows such as reordering. Your 3PL fulfillment provider should possess all of these capabilities.
Overcoming Common Challenges in 3PL Inventory Control
Despite all their benefits, some challenges remain in implementing a comprehensive 3PL inventory control framework. Some common hurdles and their solutions are:
- Fluctuating Demand: Even minor fluctuations in product demands can create major swings in the supply chain. This "bullwhip effect" makes it difficult to anticipate inventory needs, as orders for certain products may change abruptly.
- Solution: Companies should not only leverage predictive analytics powered by AI to better prepare for demand fluctuations. Instead, they should maintain extra stock levels so that they can fill unexpected orders if they arise. They should also establish partnerships with backup suppliers, in case one should fall through.
- Managing Multiple Suppliers and SKUs: On average, an automotive company has over 200 tier-one suppliers in its supply chain — and some industries have far more. Having so many links in the chain can make consistency a difficult problem. And the wide number of SKUs that go into a single product compounds the problem even further.
- Solution: Adopt an inventory management platform to oversee the various components of your supply chain. Solutions like QuickBox can help companies oversee each link in their supply chain and integrate into other leading platforms. This provides a centralized hub from which merchants can manage each component of their operations.
- Addressing Inventory Inaccuracies: Human error, product returns, and even theft can contribute to inventory inaccuracies. The result is an increased rate of overstocks and stockouts — and greater overhead costs.
- Solution: Conduct regular audits and cycle counts to improve your inventory accuracy, and use automated tracking tools to minimize human error and maintain accurate records.
While the human element accounts for some of the challenges associated with proper inventory control, the main challenge comes from having inadequate technology to optimize your processes. 3PL order fulfillment providers possess both the technology and the supply chain optimization software needed to clear these hurdles. This is why working with them can be such an advantage.
Use them in conjunction with your human capital as you monitor your inventory levels so that you can stay on top of your inventory needs.
QuickBox: A 3PL That Delivers
Without a robust supply chain infrastructure in place, companies have no way of bringing their products to their consumers. And the rest of their operations would come to a screeching halt. 3PL inventory control seeks to optimize internal supply chain workflows such as picking and packing, reordering processes, and order fulfillment. This is so that companies can deliver the goods their customers need when they need them.
Get it right, and you can slash overhead costs while boosting operational efficiency and elevating customer satisfaction. Get it wrong, and you can lose valuable profits.
QuickBox is a 3PL organization that leads the way in modern-age inventory control. We build strong partnerships with our clients to help them assess their inventory needs. And we help them implement best practices for their inventory so they can avoid the pitfalls of stockouts and overstocks.
Our iQ Client Portal also provides users with in-depth data analytics functionalities to give actionable insights into their inventory status and integrates with the leading warehouse solutions. If you'd like to see how QuickBox can help you deliver your best to your customers, contact us today.
Sources
- https://www.globenewswire.com/news-release/2024/10/24/2968513/0/en/Out-of-Stocks-Drive-66-of-Consumers-to-Another-Retailer-New-AlixPartners-Study-Finds.html#:~:text=Out%2Dof%2DStocks%20Drive%2066%%20of%20Consumers%20to%20Another,66%%20of%20Consumers%20to%20Another%20Retailer%2C%20New
- https://www.quickbox.com/blog/the-essential-3pl-services-you-didnt-know-you-needed
- https://procurementtactics.com/inventory-management-statistics/
- https://www.sendcloud.com/predicting-delivery-delays-customer-satisfaction/#:~:text=Timely%20delivery%20is%20crucial%20for,discourage%20others%20from%20shopping%20there.
- https://hbr.org/2022/10/todays-supply-chain-fluctuations-require-systemic-solutions
- https://www.mckinsey.com/industries/industrials-and-electronics/our-insights/reimagining-industrial-supply-chains