Problem: An eCommerce retailer came to FW Warehousing with a problem. They were lured into a partnership with a 3PL who promised low rates and great service. Once the contract was signed and the product was moved into the warehouse, things began to change. First the service went south. Then the costs rose dramatically in a short amount of time. It was not long before the retailer realized their mistake.
Unfortunately in the warehousing and logistics business, low prices are often used as a hook to snag business. Once the retailer is captured and their product is stored away, then comes the new actual charges.
According to Inbound Logistics magazine there are six hidden costs of logistics:
- Labor: This can include customer relations labor, customer service labor, financial reconciliation labor, sales labor, traffic and shipping labor and receiving and warehousing labor.
- ‘Grey market’ items: This is where goods are sold outside normal distribution channels.
- Lack of visibility: Customers desire visibility of goods in transit.
- Inability to forecast accurately: When sales people can’t “see” enough to make accurate predictions.
- Credit reconciliation: Customers that calculate their credits and take debit on the next payment for it.
- Poor response time and brand toxicity: Customers expect a company to stand by the brand their trusting in.
FW Solution: FW Warehousing has been in the supply chain and logistics business for more than 50 years. The eCommerce retailer came to FW with their problem. The FW solutions team was not surprised by the revelation, they had seen this type of bait-and- switch many times before. During the first rounds of bidding on the contract, the FW solutions team was unable to match the low price of their competitor and eventually lost the business. However, FW could beat the actual price the 3PL was trying to charge the eCommerce retailer.
The eCommerce retailer made the decision to move their product over to FW Warehousing. Once the product arrived, the FW solutions team began to track the sales volume and other important information. The FW team discovered the majority of the orders were for the same few products.
Benefit: The FW solutions team implemented a way of grouping the most popular products together making fulfillment quicker and easier. By strategically setting up the fulfillment side, FW was able to improve their pricing. Eventually FW recognized that by preassembling the most commonly ordered items, fulfillment prices could be lowered even more. The ultimate benefit came when the retailer learned that the kitting improvements actually helped expedite shipping as well.
FW Warehousing is headquartered in St. Louis, Missouri with Midwest warehouse distribution centers in Kansas City, Indianapolis and St. Louis totaling more than four million square feet. Founded in 1949 with a focus on food-grade storage, FW later broadened its services to include contract warehousing, dry storage, hazardous material and chemical storage, temperature-controlled storage, product distribution and B2B and B2C fulfillment.
FW Warehousing has more than 50 years of experience in third-party 3PL logistics and has been ranked in the top 100 Third Party Logistic Companies in the country by Inbound Logistics magazine.
1. The Six Hidden Costs of Reverse Logistics (-Inbound Logistics) http://www.inboundlogistics.comcms/article/the-six-hidden-costs-of-reverse-logistics/