Third-party logistics (3PL) providers operate in a fast-paced, high-stakes environment where they must maintain high levels of efficiency, accuracy, and adaptability.
The challenges they face can be overwhelming, from managing fluctuating inventory levels to meeting evolving demands from the customers relying on them as one of their key vendors.
In this article, we’ll explore how advanced cloud WMS solutions can help drive key parts of 3PL success stories by streamlining operations, boosting visibility, and enhancing decision-making.
What Is a Cloud-Based WMS?
A cloud-based warehouse management system (WMS) is a digital solution hosted on the cloud that helps 3PL businesses track, manage, and optimize warehouse operations in real-time. Unlike traditional on-site WMS software, which requires local servers and IT maintenance, workers can access a cloud-based WMS anytime, anywhere, via the Internet.
How does it work?
Cloud-based WMS connects with warehouse technologies like barcode scanners, RFID systems, and IoT devices to track inventory movements and optimize storage and order fulfillment. This technology also integrates with e-commerce platforms, ERP systems, and shipping carriers to enhance efficiency and accuracy.
Let’s say a third-party logistics (3PL) provider who has multiple clients is away from the warehouse. This expert can use a cloud-based WMS like Da Vinci to manage clients and warehouses remotely. When a new shipment arrives, the WMS automatically updates inventory, assigns optimal storage locations, and notifies staff. When an order is placed, the system suggests the fastest picking route and syncs with carriers for real-time tracking, ensuring fast, error-free deliveries.
The Biggest Challenges in 3PL Operations
Third-party logistics providers are vital in helping businesses manage their distribution needs. However, they can run into serious challenges:
Rising Customer Expectations
Customers expect faster delivery times, real-time tracking, and top-notch service. 3PLs are under pressure to meet these expectations and can suffer significant losses, including lost clients, when they fall short. Especially working with e-commerce companies, a 3PL’s slightest error can lead to customer dissatisfaction and lost revenue.
Rising Costs
According to this 2024 study, 73% of 3PL providers cited rising operational costs as their top challenge. Rising labor, transportation, and fuel costs and evolving trade regulations are just some of the ways operational costs are constantly increasing for 3PLs.
Investing in New Technology
Almost two-thirds of 3PLs in the same study called technology investments the second-biggest challenge they face. Keeping up with new technology and tools can require significant investments, including complex and costly integrations involving training staff to use new tools and software correctly. As taxing as having to upgrade your technology can be, not giving your customers the best possible service brings equal challenges.
How Cloud-Based WMS Solves 3PL Challenges
With cloud-based WMS programs, 3PL providers can benefit from:
Lower Operational Costs
With real-time data and AI-driven analytics, this software can reduce overstocking, prevent stockouts, and make the picking process more efficient, which reduces labor costs and costly shipping errors. 3PLs can also simplify their logistics processes by optimizing delivery routes using data analytics. This can also lower operational costs.
For instance, if your current Tier 1 WMS is on-site, you’re likely dealing with high maintenance costs, expensive developer fees for customizations, and rigid systems that don’t scale easily. A cloud-based WMS removes these expenses by offering automatic updates, and flexible configurations without heavy IT involvement. It also offers a subscription-based model that reduces upfront costs. By moving to a cloud-based WMS, You can break free from the financial and operational constraints of old systems and get better value for money.
Better Client Services
Cloud-based WMS provides more transparency and real-time visibility into key 3PL operations, such as inventory levels and order tracking. It can also improve trust between 3PL providers and their clients, resulting in tailored services for clients and providing faster order fulfillment.
Competitive Advantage
If you’re still managing your warehouse with spreadsheets, paper-based tracking, or outdated manual processes, you already know how time-consuming it can be. Orders get delayed, stock levels are miscounted, and simple mistakes lead to costly fulfilment errors. A cloud-based WMS eliminates these inefficiencies by automating inventory tracking, order processing, and fulfilment workflows. Instead of spending hours manually updating records, your team can rely on real-time data, AI-driven insights, and automated order routing to speed up operations. With built-in tracking and analytics, you’ll reduce errors, improve accuracy, and ensure faster deliveries, giving your 3PL business a significant competitive edge. Plus, because cloud-based WMS solutions are scalable and don’t require heavy upfront IT investments, you can grow, take on more customers, and meet market demands without being held back by outdated processes.
Regulatory Compliance and Security
Cloud-based WMS simplifies compliance processes through automated documentation and checks. It also secures data management, making sure that data is not lost, which is an effort to improve security.
Technology Adaptability
This software allows easy integration with the latest technologies and ensures that 3PLs can adopt innovations like IoT for better tracking and transaction security.
How to Successfully Implement a Cloud-Based WMS in Your 3PL Operations
Implementing a cloud-based WMS can be a time-consuming process, but by following these steps, you can be sure of a successful deployment of your cloud WMS:
Step 1: Prepare for WMS Implementation
Ensure that your warehouse is ready to integrate the WMS system. This involves defining the different warehouse locations, such as travel paths, work areas, and storage areas. Put barcodes on pallets, bins, and racks to make them ready for use. Also, acquire scanners, conveyor belts, forklifts, industrial scales, and other hardware for moving inventory.
Step 2: Share information with the WMS vendor
Your WMS vendor needs a range of information about your warehouse to sync with existing systems, and deliver a solution tailored to your warehouse’s exact needs. You must share critical information such as:
- the type of warehouse operations you perform
- steps involved in inbound or outbound processes
- hardware device list
- SKU bin mapping
- API requirements
- security protocols
- inventory information
- different integrations
- Accurate warehouse layout
And any other details they require. This enables the vendor to set the configuration and customization process in motion.
Step 3: WMS onboarding
The onboarding process starts when the WMS vendor is fully knowledgeable of your business and what it needs to fulfill its objectives. In this stage, the vendor assesses your goals, objectives, and the warehouse operation process. Then, they will set up a platform for onboarding.
Step 4: Configuration and customization
The WMS vendor then customizes and configures the Cloud-based WMS to cater to your warehouse’s unique needs. All necessary features and unique requirements must match your goals for the WMS and ensure that all inbound and outbound operations needs are fulfilled.
Step 5: Hardware and software integration
The WMS vendor should have a detailed idea of the hardware and software resources available in your warehouse for easy integration with the WMS. Essential hardware integrations include Lifting equipment, conveyors, storage equipment, packing equipment, and scanners. Software integrations include shipping software, an e-commerce platform and marketplace, ERP solutions, and accounting software.
Step 6: Onboarding users
At this stage, the vendor will onboard all warehouse staff, including warehouse managers, packers, pickers, admins, sorters, and receivers. The staff will be given their roles, their work will be properly defined, and they will be given permissions according to their roles. For example, if a staff member is allowed to sort items from a particular station, the system should be configured to permit such employees to enter that station.
Step 7: Testing the WMS
After customization and configuration, the system must undergo thorough testing before deployment. This includes testing all system components, such as user profiles, hardware, software, and workflows, in a simulation to ensure that everything is working as intended. The vendor simulates all processes to ensure that there are no hiccups along the way.
Step 8: Deployment
Once testing is complete and the WMS is functioning as it should, it is time to go live. At this stage, every member of staff must have been trained and is accustomed to the new system and procedure. It is also necessary to test the system in a real-world scenario and tackle any problems that might ensue early. When all problems have been handled, then the warehouse can use the WMS for its operations.
Setting Up Your 3PL Business With a Cloud WMS
Cloud-based WMS provides many advantages to 3PLs. It helps optimize operations while reducing costs and improving customer satisfaction. As 3PLs try to meet rising customer expectations, they should leverage cloud-based WMS to provide a secure but hands-on experience for warehouse managers and logistics professionals.
With Da Vinci’s cloud-based WMS, 3PLs can explore digital solutions that offer real-time visibility and improve operations through real-time data analytics. Request a Demo today.