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Warehouse Management

3PL Automation: Key Trends, Solutions, and Strategies

A latest guide to mastering 3PL automation: Get the latest on emerging trends, technologies, and strategies for optimal 3PL warehouse automation logistics

Team Hopstack
January 31, 2024

In this blog

The volume of trade and commerce has exploded over the last few years, putting tremendous pressure on third-party logistics (3PL) companies to meet heightened customer expectations for faster and more accurate deliveries. 

With warehouse real estate prices at a historical high, 3PLs must improve efficiency and cost-effectiveness to maintain a competitive edge intelligently. 

3PL automation allows warehouse owners to overcome chronic issues with low storage density and manual labor dependence with the use of technology. Automation for third-party logistics works with the ground labor to intelligently optimize operational processes and make it easier to deal with increasing workloads.

What is 3PL Automation?

3PL automation streamlines logistics by automating traditionally labor-intensive and highly interactive tasks and minimizing human intervention in a third-party logistics environment. It integrates hardware, like robotics and automated storage and retrieval systems (AS/RS), with software, such as advanced warehouse management systems (WMS). This combination enhances efficiency and reduces labor costs.

The hardware components efficiently manage large-scale orders and complex tasks, while the software aspect provides crucial real-time data for inventory and order management services. Together, they ensure a smooth workflow between physical tasks and strategic management.

Recent advancements in IoT, AI/ML, and cloud computing have further improved the capabilities of 3PL automation to handle complex workloads. These technologies improve inventory management, reduce errors, and allow remote operation. Innovations like pick-to-light systems, sortation equipment, and Autonomous Mobile Robots (AMRs) specifically target processes like picking and packing, significantly boosting operational efficiency in 3PL environments.

How Does 3PL Automation Work?

The level of 3PL automation within a warehouse is often determined by the complexity of the operations it handles. For instance, warehouses dealing with high-volume, fast-moving items may employ more advanced 3PL automation technologies than those handling less complex tasks. A more tailored approach to 3PL warehouse automation is necessary to ensure that each warehouse operates optimally.

Let's break down how 3PL automation works at different levels of complexity and how it interoperates with other components within a warehouse environment:

Low Complexity

At this level, businesses leverage 3PL warehouse automation to complete basic and routine tasks. This includes:

  • Automating Task Allocation: Simple 3PL warehouse automation solutions allocate tasks to warehouse staff, reducing manual planning and coordination efforts.
  • Data Entry and Reconciliation: Automation of data entry reduces dependence on pen-and-paper-based methods and minimizes human error. It ensures that information about inventory, orders, and inbound consignments is accurately captured and reconciled in the warehouse management system (WMS).
  • Routine Tasks: Basic tasks performed in the warehouse, such as updating inventory levels or processing orders, are automated, leading to improved efficiency and accuracy.

In a low-complexity setting, these automated systems mainly operate independently, with minimal interaction with more advanced systems.

Medium Complexity

At this stage, third-party logistics providers integrate various systems within the warehouse to implement more sophisticated 3PL automation:

  • Advanced Data Relaying: Automated systems now relay data across all connected services, ensuring seamless communication and data flow between different departments and software systems.
  • Automated 3PL Billing: The 3PL billing process is automated, reducing manual work and increasing accuracy in invoicing and financial tracking.
  • Basic Robotic Automation: This includes technologies like automated storage and retrieval systems (AS/RS) and parcel sorting systems, which enhance storage efficiency and speed up the sorting process.
  • Preliminary Intelligence Role: The system leverages predictive analytics to enhance operational efficiency, offering data-driven recommendations for optimal picking routes and ideal storage locations for goods. A predictive approach streamlines warehouse activities and anticipates future needs to ensure more efficient use of resources.

In medium complexity, there's more integration between different systems, leading to a more coordinated and efficient workflow.

High Complexity

High-complexity 3PL automation involves sophisticated orchestration of systems and high levels of machine intelligence:

  • Centralized Control System: A central control system manages and assigns tasks to both workers and robotics, ensuring that each component of the warehouse operates in harmony.
  • Complex Robotics Integration: This includes advanced technologies like automated guided vehicles (AGVs), robotic pickers, autonomous mobile robots (AMRs), smart shelves, and multi-level conveyors.
  • High-Volume Fulfillment: This level of 3PL warehouse automation is typically required for warehouses dealing with very high volumes of orders, a wide range of stock-keeping units (SKUs), or specialized product categories.

At this stage, there's a high degree of interoperation between various systems. The central control system effectively coordinates the activities of humans and machines, ensuring that the warehouse operates at peak efficiency. 

The use of advanced analytics and machine learning helps in making predictive decisions, such as forecasting inventory needs or identifying the most efficient paths for robots. Research indicates approximately 80 percent of modern warehouses are merely mechanized and lack sophisticated 3PL warehouse automation solutions and equipment.

Benefits of Automation For Third-Party Logistics

Because of factors like increasing competition, rising customer expectations, capacity constraints, technological disruptions, talent shortages, and global economic uncertainties, 3PL automation is quickly becoming necessary to remain competitive and efficient. Statista expects the global automation market to grow at a CAGR of about 15 percent in the following years and reach the size of 41 billion U.S. dollars in 2027.

3PL warehouse solutions offer a cohesive solution to improve operational efficiency, increase storage density, and meet the rising demands of customers. Let’s discuss some of the primary benefits of automation for third-party logistics operators.

Faster Fulfillment

3PL automation significantly speeds up essential warehouse operations such as receiving, storage, picking, packing, and shipping processes. The efficiency and processing time of automated systems are significantly better compared to traditional methods. As a result, automation for third-party logistics, providers can process and fulfill orders much quicker, leading to a more efficient turnaround time and enhanced customer satisfaction. This is especially relevant for retail, where according to Shopify, an estimated 67% of US consumers expect same-, next- or two-day shipping

Better Attainment of 3PL SLAs

3PL warehouse automation allows providers to establish reliable and standardized warehouse processes, making it easier to consistently meet service level agreements (SLAs). Software automation enables these systems to intelligently prioritize tasks, offer greater visibility, and cater to specialized requirements — all of which reduce manual errors and unexpected delays. The integration of real-time tracking and advanced communication tools further supports proactive task management, ensuring businesses strictly adherence to SLAs and elevate the overall service quality.

Enhanced Worker Productivity

3PL automation liberates workers from routine, mundane tasks, allowing them to concentrate on more complex and value-added activities. This shift reduces the physical strain on workers, as machines handle labor-intensive tasks, and leads to improved job satisfaction and workplace safety. Consequently, the overall productivity of the workforce is enhanced, contributing to smoother and more efficient operations within the warehouse.

Accurate 3PL Recordkeeping

3PL automation notably minimizes human error, especially in record-keeping, leading to precise inventory tracking and management. Automated systems ensure precise tracking and management of inventory levels, enhancing the accuracy of order fulfillment and stock management. Moreover, electronic data interchange (EDI) maintains the integrity of data and ensures that all reports, audits, and analyses are reliable, standardized, accessible, and accurate. This accuracy extends beyond the warehouse, directly benefiting clients by ensuring they always have the latest, most reliable information readily available. Software-driven 3PL warehouse automation in record-keeping creates a transparent and informed environment for both the warehouse operators and their clients.

Cost Savings

3PL warehouse solutions lead to considerable cost savings across multiple areas of the order fulfillment pipeline. It reduces labor costs by minimizing the need for manual labor in repetitive tasks. Operational efficiency is heightened, which in turn, decreases overhead costs. Additionally, modern automated systems are often designed to be energy-efficient and optimize resource usage, further contributing to cost reduction.

3PL Client Savings

For 3PL clients in particular, automation leads to significant savings by reducing the costs associated with errors, returns, and inefficient processes. The enhanced accuracy of automated systems lowers the likelihood of costly mistakes. Efficient space utilization in automated warehouses can also reduce storage costs for clients. Furthermore, the scalability of automated systems supports client growth without necessitating substantial additional investments, providing long-term financial benefits and reducing  OpEx.

Essential 3PL Automation Solutions

With the 3PL automation industry evolving rapidly, most providers face a tricky balance in choosing what technologies to implement.

3PL warehouse automation technologies, categorized by development stage and adoption rate. (Source: McKinsey and Company)

There are a few essential 3PL automation solutions that businesses use to improve operational efficiency and reduce manual errors throughout the supply chain and logistics pipeline. Broadly speaking, they can be broken down into the following segments:

Warehouse Management and Control Systems (WMS/WCS)

WMS and WCS are 3PL warehouse automation solutions that manage and control operations in tandem with the floor workers. WMS handles inventory management, order processing, and overall warehouse logistics, while WCS acts as an intermediary between WMS and the physical automation environment. These systems are typically software platforms integrated into a warehouse's IT infrastructure. They provide a user interface for human operators and connect to various automated systems for data exchange.

Warehouse management and control systems optimize warehouse space, streamline inventory management, and reduce order fulfillment costs. Real-time data tracking enhances decision-making and operational efficiency.

Within a warehouse space, a 3PL WMS might be used to track inventory levels and provide restocking alerts, while a WCS coordinates with an automated conveyor system to ensure the efficient movement of goods through the warehouse.

Picking and Packing Robots

Picking and packing robots automate the process of selecting items from storage (picking) and preparing them for shipment (packing). Robots for 3PL warehouse picking automation come in various forms, including robotic arms for specific tasks and mobile robots that transport items between locations.

Picking and packing robots increase the speed and accuracy of the picking and packing process, reduce labor costs, and minimize errors.

Imagine a clothing distribution center — in such a setting, picking robots will retrieve items from shelves and bring them to a packing station where another robot packages the items for shipment.

3PL automation solutions
3PL robotic automation solutions

Sorter and Conveyor Belts

Sorters and conveyor belts automate the movement and sorting of goods within a warehouse. Conveyors are mechanical systems that transport items across different parts of the warehouse. Sorters are specialized systems that automatically divert items to different areas based on certain criteria (like destination, size, or weight).

They expedite the internal transport of goods, reduce manual handling, and increase processing speed, especially in sorting for shipping or storage. An average warehouse picker can pick between 60 to 80 picks per hour compared to a pick rate of up to 300 picks per hour after implementing sorters and conveyors.

In an e-commerce warehouse, conveyor belts move products from the storage area to packing stations, while sorters separate items based on their shipping destinations.

Automated Storage and Retrieval Systems (AS/RS)

AS/RS systems automatically store and retrieve goods from designated storage locations. They typically consist of automated guided vehicles (AGVs), shuttles, or cranes that move along racks to place or retrieve items.

These systems maximize storage density, improve inventory accuracy, and reduce retrieval times. They are particularly effective in high-volume environments where space optimization is crucial.

In a food distribution center, an AS/RS might be used to store and retrieve pallets of products from high-density storage areas, ensuring quick access and optimal use of space or even PIPO.

3 Trends in 3PL Warehouse Automation

3PL warehouse automation technologies are continuously evolving to bring even more transformative changes to the logistics and supply chain sector.

Human-Robotic Collaboration

The integration of human and robotic efforts, known as "cobots" (collaborative robots) allows 3PL providers to lower operational costs while improving productivity and efficiency. This approach combines the efficiency and precision of robotics with the critical thinking and adaptability of human workers for smart warehousing in 3PL picking automation. In applications such as picking and packing, robots undertake repetitive or physically taxing tasks while humans handle complex decision-making and quality control. This synergy not only enhances safety and productivity but also ensures a flexible and responsive workflow. Statista estimates cobot shipments worldwide will grow exponentially, from around 4,500 in 2022 to 42,000 in 2030.

Automated Identification of Opportunities and Risks

3PL providers are leveraging big data to gain insights into efficiencies, customer preferences, and market trends. By employing algorithms for pattern analysis in order data, tech-enabled 3PL providers can predict future demand more accurately, leading to optimized inventory management and better resource allocation. This proactive use of data analytics significantly reduces waste, improves response times, and enhances overall operational decision-making.

Comprehensive Automation of Internal 3PL Operations

The move towards comprehensive automation of internal 3PL operations marks a substantial shift in complete warehouse management. The impact of 3PL automation extends beyond physical tasks, encompassing the integration of various systems for seamless information flow across different operational domains. For example, linking a warehouse management system (WMS) with transportation and customer relationship management systems streamlines the supply chain, reduces errors, and saves time. 

Automated 3PL billing streamlines financial transactions and minimizes manual errors by automating invoicing and payment processes and reducing the administrative burden. It tracks billing activities in real time to provide transparency and consistency in financial dealings and deliver timely revenue recognition.These WMS integrations provide real-time operational visibility, which is crucial for efficient and agile management of logistics challenges.

Identifying the Best 3PL Software

The best 3PL warehouse automation software should offer key features like real-time inventory visibility and control, storage optimization, smart automation, scalability, and easy integration with existing tech stacks. When selecting a 3PL WMS, it's crucial to consider factors such as price, feature set, scalability, and user-friendliness. Cloud-based solutions are popular for their adaptability and scalability, meeting the fluctuating demands of warehouses.

Conclusion

3PL automation is a pivotal element that not only enhances efficiency and accuracy but also ensures scalability and responsiveness in the ever-evolving logistics and supply chain sector. To effectively adopt 3PL warehouse automation, it's crucial to understand and align with current trends and implement the right technology to adapt to market trends and maintain a competitive edge.

At Hopstack, we specialize in harnessing cutting-edge technology to bring comprehensive automation to every aspect of your warehousing process. Understanding the complexities of modern warehouses, we offer robust warehouse management systems tailored to elevate your operations. Connect with our industry experts to schedule a demo and discover how Hopstack can orchestrate your end-to-end needs, For 3PL warehousing, enabling seamless warehouse automation for unparalleled efficiency.

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