After 2 years with a no vacancy sign up, SCS has decided to expand again. Its been hard turning away business opportunities but it has been great consolidating after 13 years of relentless growth. The consolidation period has provided a good opportunity to review core operational and H&S systems as well as organisational capability and working with customers we’ve been able to increase our lowest paid full time staff to 16.30 per hour a great achievement when minimum wage was 14.25 in 2014; with the tight labour market, continually increasing minimum wages and relentless increases in cost of living our next target is to raise this to between 16.90 and 17.10 by mid next year.
New business update, in the last 8 weeks we’ve been delighted to welcome on board a number of great new accounts including Bikes International and Fitbit, an awesome start to our 16th year in business (SCS turned 15 in August 2016 – where has the time gone!).
SCS now has 35,000 pallet space equivalents under management including 4,000 that are due to be released for April 2017 and whilst net margins for 3PL remain low circa 4% we continue to hold our own and are enjoying better returns in our consulting division which is delivering some truly great results for our customers.
35,000 pallets makes SCS the largest pureplay 3PL in NZ, but what is a pureplay 3PL and why is it important to 3PL buyers?
Pureplay 3PL are 3PLs who core business is 3PL as opposed to traditional 3PL providers in AU and NZ who are typically International or Domestic Freight forwarders. In NZ, Pureplay 3PLs tend to dominate in complex pick/pack and cross dock business for B2B and B2C customers because the focus and investment in technology and people is usually a lot higher than freight based 3PLs (e.g. SCS have the best training in our industry and some of the most advanced IT solutions with 4 full time IT staff dedicated to our 3PL division). Where traditional freight based 3PLs can do a great job with e.g. high volume pallet pick accounts our experience over 15 years is that they generally struggle with the complexity of erratic volume accounts that have a lot of split case picking requirements and orders that require a high attention to detail – the area we thrive in.
For complex order profiles (lots of SKU, mixed orders and high velocity B2C and volatile demands) we believe dedicated Pureplay 3PLs deliver the best value, Pureplay 3PLs do not support our own “asset based” freight networks, we favour leveraging the skill and capability of experts whose core business is freight, this leaves us unencumbered to develop solutions that are fit for purpose and best for the customer.
At SCS we align ourselves with “Best of Breed” providers (e.g. we are one of Courier Posts top 10 National accounts) who can demonstrate excellent service deliverables, we then manage this relationship on behalf of our customers. Not being locked into any one provider provides 3 key benefits:
- Freight companies often buy, sell, acquire and merge, where change is not managed brilliantly our first priority is to work with them but if service levels are not restored within a reasonable time frame we will manage a change (this has happened twice in the last 6 years) to ensure high service levels for our customers are maintained.
- Customers leverage our aggregated spend, instead of rocking up to a provider with say 200k annual spend they form part of our 6m annual spend, usually this means they enjoy an overall cost reduction with industry leading freight providers.
- When something goes wrong, instead of trying to negotiate with an e.g. 200k/annum annual spend they get to leverage the weight of a 6m annual spend which typically yields better results.
Freight based 3PLs (naturally) are forced (locked in) to support their own asset based freight networks. Their core business is either International or Domestic freight and this is where the grunty investment and management focus is placed. The 3PL division is always a poorer cousin (in NZ) from what we see and hear.
80% of our clients come from freight based 3PL providers, who commonly they tell us they are good at large scale full pallet movements but struggle with split case picking and volatile order profiles.
For complex pick/pack order profile accounts many freight based 3PLs divisions frequently end up distressed, loosing customers forces them to drop prices to attract customers to cover rent, a common freight ‘ploy’ is to pitch low rates with a view to lock in a customer with a strategy to ‘crank’ up the rates later banking on the fact it will be too expensive and risky for the customer to move.
Ultimately a freight based 3PL’s main goal is to ‘fill’ trucks or support international freight networks and the customer usually ends up with a good freight solution but an underperforming 3PL service. Again this comment relates to complex multi SKU order profiles, high velocity and erratic volumes – most 3PLs do a good or even brilliant job with single SKU pallet order picks. Low costs looks good initially to a newbie 3pl buyer who is unclear how to value the rates but it typically ends up with unhappy customers, a deteriorating relationship and a bad name for our industry. Which is a shame and frustrating for quality 3PL providers because a well run 3PL is a brilliant partner and can do wonders for an importer, distributor and/or retailer.