August 22, 2022

Fulfillment Labor Shortages: How a 3PL Can Help

Fulfillment Labor Shortages: How a 3PL Can Help

The supply chain struggled with labor issues long before the rest of the corporate world caught on to the trend. Unfortunately, those numbers haven’t improved after several years of unprecedented supply chain volatility. For example, warehouses struggled with a 49% turnover rate in 2021, while transportation has famously suffered from a truck driver shortage for almost two decades.

Industry-wide labor shortages make it difficult for fulfillment centers to stay properly staffed, and logistics operations aren’t alone. More than 4 million U.S. workers quit their jobs in June 2022, despite indicators that a recession is coming. In addition, with the 2022 retail peak season ramping up, many fulfillment operations fear that they won’t be able to scale with higher demands.

How 3PLs Can Help Address Your Logistics Labor Shortage

To combat recruitment and retention problems in fulfillment, many shippers have turned to their third-party logistics (3PL) partners. These organizations also have some advantages, such as:

  • Distributed labor costs. While a shipper running an in-house fulfillment operation must bear the full brunt of the higher wages and better benefits packages warehouse associates now demand, 3PLs can spread those costs across their entire customer base to lessen the financial impact on all parties. This capability enables a logistics partner to offer more competitive salaries and compensation that encourage warehouse workers to stay.
  • Better technology. A good 3PL makes the technology investments necessary to operate at peak efficiency. While 84% of 3PLs use a warehouse management system as the central technology hub for their business, many enhance their WMS with voice picking, light picking, and various semi-automated and automated technologies that make the efforts of each warehouse associate stretch farther.
  • Established training practices. Years of experience in fulfillment allow 3PLs to onboard new warehouse employees quickly and efficiently. This skill also applies during peak seasons when most fulfillment centers bring in temporary labor to scale up with higher order volumes. An ability to quickly bring new talent up to speed is essential to running a successful fulfillment operation.

The Benefits of Letting Your 3PL Handle Warehouse Labor

With labor shortages across business verticals, your HR department is busier than ever. Prolonged pressure about warehouse staffing can ultimately cause stress and burnout among your talent management and HR teams. Passing fulfillment center labor problems over to your 3PL offers numerous benefits, including:

  • Freeing up HR bandwidth. As if a supply chain labor shortage isn’t enough, your HR department is dealing with a lack of available talent across all positions in the company. Handing off concerns about some of this hiring to a fulfillment partner can help to reduce strain on your internal resources and give HR some breathing room.
  • Labor costs. Replacing a warehouse associate can cost thousands of dollars. Given the high turnover rate in warehousing, these costs may get out of control quickly for a business. Passing labor over to a 3PL also passes off the warehouse turnover costs. Furthermore, the 3PL is responsible for salaries, healthcare, insurance, and other perks and benefits that employees may want or need. Therefore, using a 3PL ultimately turns your warehouse labor into a fixed cost rather than a variable one.
  • Scalability. A solid logistics partnership allows you to scale up the labor force during peak seasons or demand spikes without directly incurring the high costs associated with rapid hiring and contract labor.

If you’re concerned about the 2022 peak season and how the labor shortage may impact your ability to prepare, you should consider onboarding a 3PL before it’s too late.

About Phoenix Logistics

Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.

Mr. Frank P. Crivello began his real estate career in 1982, focusing his investments in multifamily, office, industrial, and shopping center developments across the United States. From 1994 to 2008, Mr. Crivello assisted Phoenix Investors in its execution of its then business model of acquiring net lease commercial real estate across the United States. Since 2009, Mr. Crivello has assisted Phoenix Investors in the shift of its core focus to the acquisition of industrial real estate throughout the country.

Given his extensive experience in all aspects of commercial real estate, Mr. Crivello provides strategic and operational input to Phoenix Investors and its affiliated companies.

Mr. Crivello received a B.A., Magna Cum Laude, from Brown University and the London School of Economics, while completing a double major in Economics and Political Science; he is a member of Phi Beta Kappa. Outside of his business interests, Mr. Crivello invests his time, energy, and financial support across a wide net of charitable projects and organizations.

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