4 min read

During the height of the pandemic, retailers desperately asked suppliers to send more product to stock their shelves. That led to an inventory glut that lasted a couple of years, which retailers have finally begun working through. As these inventory issues stabilize, retailers are taking some hard-earned lessons to heart.

One of the biggest lessons learned involves cutting the amount of inventory on hand to reduce warehouse footprints and inventory carrying costs. As a result, retailers expect their suppliers to hold more inventory and ship smaller quantities to their warehouses when requested. In advance of the 2023 peak season, some stores and warehouses were so stuffed that there was no room for new products or seasonal merchandise.

Also, while some suppliers can hold inventory at the point of manufacture, such as factories in China, many suppliers may not have the warehouse space to accommodate customer requests to hold more inventory and may be challenged to ship anything smaller than a full truckload or container of product.

Shifting those burdens to suppliers comes with its own risks, such as harming supplier relationships. Yet, when the usual flow of inventory gets interrupted without much time to prepare, it’s cost-prohibitive to rapidly scale up a warehouse footprint to accommodate this shift in strategy. This is where a quality 3PL can help.

How a 3PL Can Help

For suppliers facing this abrupt challenge, a 3PL can assist on many levels. First, a 3PL can offer scalable warehousing space. As inventories rise and fall, the supplier pays for only the space they need. There’s no need for long-term leases at exorbitant prices (if warehouse capacity can be found at all).

Many suppliers ship in truckloads to the retailer’s distribution center. Adapting to smaller quantities requires an investment in infrastructure and staffing. The 3PL provides flexibility in shipping FTL, LTL, and parcels — or even dropshipping directly to the retailer’s customer if desired.

Drop shipping allows the retailer to service customers directly without holding or fulfilling merchandise. The 3PL accepts and fulfills the order on behalf of the retailer, maintaining the relationship with the brand.

Some retailers want only full truckloads delivered at their distribution centers, but the product doesn’t have to be from the same vendor. A 3PL can implement a retail consolidation program with several suppliers to build a truckload of product bound for the retailer’s DC. Suppliers get better transportation rates and service, and the retailer receives the freight most efficiently.

A 3PL with a nationwide warehouse footprint can store inventory close to the retailer’s distribution center for a faster delivery schedule and lower cost of transportation. This practice lets retailers unlock opportunities for growth with fulfillment support for multiple channels and new product introductions.

Adapting to the New Normal

In the meantime, retailers are still responding to the inventory buildup. They have become more disciplined about ordering and improving inventory flows to the store floor and are less likely to hold products from season to season, such as apparel and home goods.

Suppliers must continue to adapt as well. Some suppliers are curtailing their production plans to avoid another inventory glut and working with their vendors to offset inflationary pressures.

If your company has been tasked with storing inventory for your retail customers, talk with a 3PL about scalable warehouse space and fulfillment options. Look for a 3PL that can simplify your supply chain with flexible solutions to accommodate your specific requirements. With an experienced 3PL partner, these new retailer requirements could be an opportunity for growth.