Over the past few years, third-party logistics (3PL) providers have increasingly embraced a new generation of software platforms that promise to increase the efficiency of core functions such as finance, planning, warehousing, and transportation. Yet, whilst many 3PLs today employ sophisticated software solutions within their businesses, there is one area which is often overlooked: the co-packing operation within their value-added services (VAS).
Why optimise co-packing value-added services?
Today’s brands are increasingly expecting greater responsiveness and digital sophistication from their contract suppliers. These demands are driving a need for competitive advantages amongst 3PL providers, prompting them to seek out new revenue sources, and one such growth area is their VAS operation.
As brands seek to differentiate their product offerings through late-stage customisation, co-packing has become a prime opportunity for 3PLs strategic growth. As such, more and more are focusing more intently on this part of their warehousing activities, eager to win a larger share of work traditionally undertaken by specialist providers.
The co-packing myth
Contract packing, however, is often overlooked in the digital transformation strategies of many 3PLs, and often for misguided reasons. Co-packing typically involves highly labour-intensive production lines in which goods are reconfigured into new formats or displays often by hand – gift packs, retail displays, multi-packs and so forth. And this heavy reliance on handwork in the co-packing workflow is perhaps one reason why this area of logistics has been neglected when it comes to digitalisation. Rather than being perceived as an activity that can be easily automated, co-packing is perceived as enabled primarily by people, rather than by technology. Machinery may be in place to augment and accelerate steps, but people are frequently the main actors.
This perspective, however, exposes a blind spot in 3PL digitalisation strategies. Contrary to the assumption of many, the labour-intensive nature of co-packing does not preclude purpose-built software solutions from adding significant value to the process.
As a result, many 3PL value-added services often fail to match the speed, accuracy and transparency achieved through other digitalised areas of their operations. A few may have historic systems running in the background, but only in a manner that increases risk and missed opportunities to increase efficiency and improve profitability.
The reality is that most 3PLs control and manage their co-packing value-added service operation through brittle legacy systems, spreadsheets and paper-based processes. Some have tried to extend their warehouse management system (WMS) to cover this area, but those who work closely in co-packing know all too well that the rudimentary kitting functionality offered by even the most advanced systems cannot adequately handle the nuances of co-packing workflows.
Because of the flawed assumption that co-packing can be adequately managed by legacy or peripheral solutions, 3PL organisations essentially neglect and orphan their co-pack services while digitalising the rest of their business – leading to a missed business opportunity.
Dispelling the myth
As a consequence, there persists the misconception that there is no purpose-built solution available to meet the needs of a 3PL’s co-packing VAS operation. Yet nothing could be further from the truth.
Cloud-based software platforms exist that are purpose-built for co-packing operations and can illuminate and optimise the labour-intensive lines, providing invaluable insights into productivity, materials and inventory, quality, and more. A system such as Nulogy can round out a 3PL’s digital landscape, augmenting and complementing many warehouse management systems such as Blue Yonder.
More specifically, purpose-built platforms can provide complete visibility over the production and fulfilment processes, with the ability to drill into data, perform live track-and-trace, and remove bottlenecks as they occur. This level of visibility helps planners stay on track for costs and fulfilment speed, ensuring KPI success.
In addition, the seamless integration with WMS and ERP systems, allows both 3PLs and their customers to collaborate more easily and make real-time, data-driven decisions. Similarly, powerful reporting and dashboard capabilities can identify areas of strategic value and design solutions to optimise cost-effectiveness and service delivery for customers, by using intelligence on historical performance and profitability on both a job and customer basis.
As a purpose-built co-packing software solution, Nulogy’s track record has been proven in the operations of many leading logistics providers and is used in the operations of five of the six ‘Leader companies’ in Gartner’s 2021 Magic Quadrant for Third-Party Logistics Providers.
Kuehne+Nagel is a global leading logistics company operating in more than 100 countries worldwide and has implemented Nulogy at several facilities in Europe to optimise operations and increase value to customers.
“It is a goal at Kuehne+Nagel to add value on each touch point with our customers,” said Bryan Beutels, Head of Business Development Contract Logistics, Kuehne+Nagel BeLux. “In the specific process where Nulogy has helped us, we were adding value, but were limited in the value we could add.
“Nulogy helped us improve management of our rework flow, cut down on manual work, improve the speed of data analysis, and allowed us to cut down on paper waste.”
CEVA Logistics is another global logistics leader, operating in more than 160 countries, that has adopted digitalisation in its network to standardise data flow and increase visibility and traceability amongst its co-packing sites.
“It was clear we had a strategic opportunity to leverage Nulogy’s cloud-based software to further optimise our production, improve materials and inventory management, and ultimately deliver even more agile and responsive service to our FMCG brand customers around the globe,” said Bart Beeks, Global Contract Logistics Leader at CEVA Logistics.
Illuminating the blind spot
To meet heightened brand expectations and stand out amongst competitors in an increasingly crowded market, 3PLs need to expand their view of digitalisation to more than just warehouse management systems. Innovative providers are adopting truly comprehensive digitalisation strategies that include their co-packing operations to unlock optimisation and growth. By digitalising their co-packing VAS operations, firms can differentiate through delivering strategic value to brands looking to rapidly innovate and customise their product offerings in a discerning consumer market. Faster, more responsive service, recall readiness through rapid traceability, and improved quality compliance are just some of the added advantages 3PLs can offer their brand customers through digitalisation.
By delivering value on the shop floor as well as the strategic business level, co-packing software is a hidden gem of opportunity for those looking to stand out from the competition and unlock strategic revenue growth.