The Future of Retail Logistics Hinges on the Vertical Integration Model
Adapt or fail. That's a choice retailers are often forced to make given the pace of change in the world today — especially when it comes to logistics. It's more important now than ever for retail leaders to ensure critical aspects of business, like their fulfillment operations and last mile delivery, are streamlined. Fortunately, this is where a vertically integrated, third-party logistics (3PL) provider comes in.
A vertically integrated 3PL partner is one that: 1.) employs its workers; 2.) utilizes proprietary and customizable technology; and even 3.) owns and operates its own warehouses and delivery assets. This is critical, especially for retailers that need a logistics provider that can support every aspect of their inventory, warehousing, order fulfillment and delivery operations, giving companies complete control over their end-to-end logistics services.
As an extension of a brand, logistics partners should be able to meet clients where they are instead of forcing them into a standardized mold. Such 3PL partners offer more flexibility in their fulfillment and last mile delivery operations, which allows them to provide brands with an experience tailored to their business needs. That’s important for these seven reasons:
- Brand Knowledge: Every brand has their own way of doing things, which is why their logistics partner should be able to execute their preferences seamlessly. With a vertically integrated 3PL provider, the same fulfillment employees work on the same brand each shift. The same drivers make a brand’s last mile deliveries, too. This translates to things like packing orders in the same way and having the product knowledge to expertly assemble furniture with white-glove delivery service. It’s built-in brand knowledge and consistency at every step.
- Personalization: While it sounds stringent, logistics providers that adhere to this vertical integration strategy are actually very agile. The vertical integration model enables flexibility and customization at every touchpoint. With this type of 3PL partner, retailers can customize their logistics and fulfillment operations down to every detail — e.g., including a handwritten card, a gift during the holidays, or specific packaging requirements, to name a few.
- Company Values: Logistics partners represent brands out in the world. That’s why it’s critical they embrace their customers’ core values and execute their operations in a way that preserves a retailer’s reputation. Take eco-friendly practices. If a brand is built on being environmentally conscious, then partnering with a logistics company that provides packaging made from recycled materials or has an all-electric vehicle fleet will help retailers and their customers make a positive environmental impact.
- Issue Resolution: There are so many pivot points along the logistics and fulfillment journey where something can go wrong. By partnering with a 3PL provider, especially one that employs its own fulfillment and delivery teams, retailers can cut through the red tape to quickly resolve issues that arise. It’s one call to an account manager or customer service representative who can directly contact warehouse workers and delivery drivers to check on orders, answer questions and swiftly solve problems.
- Tracking: Retailers retain visibility of their entire fulfillment and delivery operations with 3PL partners. With a provider overseeing inventory management, brands can track thousands of SKUs stored within their logistics partner’s central warehouses. That leads to smooth order fulfillment. When an order is shipped, brands and customers have access to fast, one-stop tracking that provides a clear delivery path right to the doorstep.
- Peak Planning: When retailers work with a consistent account manager who is equally invested in their success, they can more accurately plan for seasons of high online traffic and sales. For example, this model allows for forecasting by the day, week and month. It also means brands can quickly adjust their forecasts based on promotional changes and actual sales, not just historical data and projections. With precise forecasts, this type of logistics partner can staff accordingly to meet a brand’s volume and maintain agreed upon service levels.
- Cost Lines: By partnering with one logistics provider to manage inventory, warehousing, packaging, delivery and, even, product setup, retailers can effectively cut overhead costs that would compound when using multiple partners to fulfill services individually. However, with a vertically integrated 3PL partner, all operating costs are straightforward and transparent. It’s one company and one consistent price tag free from additional markups.
Logistics partners are uniquely positioned to help retailers navigate persisting issues in the supply chain. However, not all are up to the challenge. 3PL partners offer retailers more control, visibility and cost efficiency when it comes to outsourcing their fulfillment and logistics operations. With a 3PL partner that’s fueled by vertical integration, retailers can effectively streamline their operations to remain adaptable and navigate continued disruptions.
Related story: 4 Ways Retailers Can Embrace Sustainable Last-Mile Delivery