3PLs Create Simpler Supply Chains with Elastic Logistics

Explore the ways 3PLs are using technology to make frictionless, flexible global supply chains with elastic logistics

Today’s world is complicated. From supply chains bogged down by regional wars to product shortages forced by climate crises, pandemics, and port congestion, supply chain disruptions have been all too common these days. Therefore, to mitigate the effects of these disruptions, businesses have begun utilizing elastic logistics.

What is Elastic Logistics?

Elastic logistics involves the ability to increase or decrease warehouse resources to adapt to dynamic changes in demand. In addition, elastic logistics enables businesses to scale their supply chain operations up or down based on current market demands. This helps businesses adapt to rises in production and orders, ensuring supply chain efficiency during the peak or holiday season and cost-effectiveness during periods of lower order volumes. For example, while overstocking has the potential to increase business expenses, underestimating inventory needs could lead to stockouts that disrupt supply chains and result in a poor user experience. With elastic logistics, businesses can store exactly the correct number of products to meet the actual demand of customers.

By expanding their 3PL partnerships, businesses can:

Improve visibility
Diversify transportation and distribution
Expand manufacturing relationships
Decrease lead and wait times

Supply chain leaders that have implemented elastic logistics feel that it helps them achieve perfect order fulfillment (POF). In recent years, this metric has become important because it helps determine the overall effectiveness of a value chain and its logistics process. In turn, this lowers costs while creating a faster and leaner supply chain.

How Elastic Logistics Works

Some of the most prevalent goals of supply chain managers are to lower costs, minimize waste, and meet inventory requirements. To meet these goals, elastic logistics works to “fill in the gaps” that many businesses have in warehousing and last-mile delivery. As a result, implementing elastic logistics ensures supply chains can effectively respond to disruptions while decreasing costs and producing as little waste as possible. Therefore, by reducing a business’s carbon footprint, elastic logistics also helps to improve supply chain sustainability.

As a supply chain management strategy, elastic logistics is focused on optimizing the supply chain by adjusting processes on the fly. Moreover, the flexibility of elastic logistics enables businesses to better handle potential problems such as overstocked warehouses or under-utilized space in shipping containers. Implemented correctly, elastic logistics can enable more efficient use of warehouse space, which can improve throughput. As a result, businesses can enjoy greater supply chain stability and create a competitive advantage.

Elastic Logistics is the Future of Supply Chain Management

Elastic logistics is a far cry from the business models that traditional supply chains utilize. Typically, traditional supply chains are built around fixed shipping and inventory capacity. Subsequently, this can make it difficult for businesses to respond to change. So, in the world of e-commerce, being unable to respond to issues quickly can lead to negative consequences for a business.

Having “elastic capacity” is the business model for future supply chains. Furthermore, elastic logistics can be utilized to reach every facet of supply chain business operations from cost control to last mile delivery. Simply put, these capabilities enable companies to constantly rebalance logistics planning across the supply chain. This is especially beneficial to the retail industry, where seasonal demand causes fluctuations in shipping, warehousing capacity, and delivery needs.

Let’s look further at elastic logistics and how it is being used to optimize the supply chain.

3PLs Are Utilizing Advanced Technology to Enable Elastic Logistics

Elastic logistics has become a popular supply chain model for warehousing and transportation logistics providers. For 3PLs that work with online retail where market fluctuations are common, it is important to have supply chain resilience. Elastic logistics makes supply chains more resilient, enabling businesses to quickly adapt to unexpected market demands or other external circumstances. However, elastic logistics cannot work without technology. The good news is that 3PLs have the technological capabilities to implement elastic logistics.

Due to the unexpected growth of e-commerce and the increased need for flexible business logistics, having a 3PL business partner can be especially advantageous. Therefore, by utilizing 3PLs, businesses reduce the risks of investing more in internal operations.

Datex Fast Fact

Drop shipping is enabled by elastic logistics practices

Supply chain forecasting refers to the process of predicting demand, supply, or pricing for a product — or a range of products — in a particular industry. It is utilized to help businesses make decisions around planning, budgeting, and stock inventory.

The Customer Experience

As e-commerce has proliferated around the world in the era of COVID-19, many businesses found that they were at the mercy of one or two manufacturers. Shutdowns, specifically in China, have resulted in massive delays in the production of both raw materials and finished products. Consequently, stockouts occurred, which ultimately impacted customer satisfaction and the customer experience.

Third party logistics companies utilize technologies like cloud computing and artificial intelligence to engage in supply chain forecasting.

Forecasting enhances supply chain transparency and visibility, which helps to:

Reduce costs
Improve efficiency based on the current supply network needs
Enable customers to see where their products are across the entire supply chain

For example, once an online retail business expands its customer base, more products are required to be on hand to meet increased demand. In addition, customers want to know where their products are in the supply chain and when their products will be delivered.

Working with 3PL service providers helps businesses better manage these operations. Therefore, by getting products shipped at the lowest cost as soon as a customer places an order and informing them of their products transit status businesses can improve the customer experience simply by immediately shipping out products to fulfill orders and keeping them informed of delivery status.

Order Fulfillment

Third party logistics companies ensure that orders are fulfilled on-time in the most cost-effective way. This is because technologies like warehouse robots and automated sortation systems eliminate not only wasted warehouse space but also human error.

By reducing human error, businesses can operate more efficient picking and packing processes. This enables businesses to adjust appropriately when changes in demand occur.
By eliminating wasted warehouse space, businesses can manage the throughput of products in a warehouse or distribution center better. This can result in greater inventory control, enabling just-in-time order fulfillment and the flexibility needed to respond to new or changed orders.

Route Optimization

Powered by the Internet of Things (IoT), route optimization brings several advantages. By utilizing a supply chain control tower and cloud technologies, 3PLs can find the fastest, most sustainable shipping or delivery route and communicate the route in real-time. As a result, this is beneficial during forecasts of inclement weather, congestion at ports or on roadways, and even construction.

Route optimization can also lower a business’s carbon footprint because it not only finds the best route, but also keeps unnecessary trucks and shipping vessels off the road and out of the ocean. In addition, route optimization lowers greenhouse gas emissions, which helps to produce a more sustainable supply chain.

Elastic Logistics Makes a Worldwide Connection

Elastic logistics helps businesses mitigate negative effects from external influences, whether it be political, environmental, or technological. This has proved beneficial, as global supply chains are diversifying to withstand disruption. For example, many businesses are expanding supply chain operations to other countries amid growing U.S. – China trade tensions. Some are nearshoring and even reshoring. However, this is not possible without elastic logistics.

Global supply chains require flexibility and connectivity. The Internet of Things (IoT) enables members of a global supply chain network such as:

3PLs

Shippers

Raw Materials Suppliers

Manufacturers

Retailers

Transporters

To communicate the entire supply chain in real-time from anywhere in the world. Furthermore, this not only gives businesses the power to see everything that is happening along the supply chain, but also the ability to make changes to any supply chain process in real-time.

This promotes a global supply chain where:

Information is shared quickly

Products cross borders seamlessly

Operations run efficiently

In addition, 3PLs can enable businesses to distribute their inventory across distribution and fulfillment centers located around the world. For instance, with the use of supply chain forecasting technology like artificial intelligence and cloud computing, 3PLs can record data based on the highest concentration of orders that go to specific regions. This enables them to determine the best geographical locations to store and move products, which cuts down on products traveling through multiple shipping zones. This results in lower costs, not only for businesses but also consumers.

Cost-saving

One of the benefits of elastic logistics is that it can greatly lower costs. It does so by expanding or reducing warehouse, transportation, and delivery capacity to match the current demand of products. As a result, this capability enables supply chains to operate more efficiently during external disruptions, so that businesses do not lose money due to overstock and are not missing out on sales due to understock.

Elastic logistics can also help businesses that offer free delivery save money by ensuring that product orders are fulfilled at the nearest fulfillment center to the customer. This reduces last-mile delivery distance and time, saving the business money. As a result, the money that businesses save by reducing their shipping or delivery expenses can translate to lower product costs for customers.

Labor Force Optimization

Human workers are still critical to today’s supply chains. Although The Great Resignation has negatively impacted the workforces of several supply chain industries, warehousing and storage businesses have not fared poorly recently. According to the Bureau of Labor Statistics, the warehousing and storage sector added nearly 100,000 jobs over the past year. Likewise, employment in the sector has doubled since 2016.

3PL companies that utilize elastic logistics hire temporary workforces to meet warehousing and order fulfillment needs. This is highly beneficial to online retailers, as temporary workforces can meet rising and falling supply chain needs.

Conclusion

There are several different types of supply chains. However, those that operate based on elastic logistics are taking the world by storm. Elastic logistics is proving to be an effective supply chain management system for modern supply chains. The supply chain strategy is a flexible model that not only improves supply chain sustainability but also helps create a more resilient supply chain. This is accomplished by enabling businesses to reduce or increase their operational capacity based on market demand.

Supply chain leaders are placing more focus on core competencies instead of their logistics capabilities. Experts feel that this change in focus will help businesses be more proactive and responsive in crisis situations. It will also make supply chains more resilient and sustainable. As a result, the demand for services from third-party logistics providers will continue to expand. Third party logistics companies are valued for their implementation of new digital technologies, order fulfillment efficiency, and last mile logistics management. By partnering with 3PLs and implementing elastic logistics, businesses can focus on the other aspects of their business processes.

Additional Information

Without advanced technology, elastic logistics would not be possible. Technology has brought never-before-seen insight into digital supply chains. With the power of technology, elastic logistics can manage processes where the supply chain begins to where the supply chain ends due to its flexibility. Therefore, the supply chain strategy not only enables enhanced inventory management in individual warehouses but also optimizes storage and stacking processes for shipping containers. Supply chain operations management software enables real-time visibility into customer demand while data analytics of product movement helps businesses predict order volumes faster. This can improve transparency in the supply chain, which can result in processes that meet customer expectations