Secure and Efficient Logistics
Until recently, companies that outsourced storage and distribution to third-party warehouses focused more on price than protection. Today, they are giving more consideration to preventing market share loss and disrupted distribution.
Shippers who use third-party logistics (3PL) providers to inventory and distribute their product may wonder how to select an adequately protected facility. You can begin by making sure your service provider addresses the following issues to keep your goods safe.
Fire. All facilities should be protected by a National Fire Protection Association-approved sprinkler system. No fire company will fight a warehouse fire if the existing sprinkler system cannot contain it. Instead, they will act to contain the fire and prevent it from spreading to adjoining facilities or property.
In addition, all sprinkler systems must be central-station monitored. Too often, a sprinkler head goes off during the night and significant damage occurs because no alarm sounds.
Theft. Do the facilities have adequate alarm systems to help prevent break-in and theft? Alarm systems also need to be modified to address the type of products stored. High-value and high-target products require above-average alarm systems that include motion detectors and video surveillance. As with fire protection, all systems should be central-station monitored.
Inventory Shortage. Product disappearance is a leading cause of loss in all warehouses, not just 3PL facilities. Eighty percent of these losses are employee-related. Ensure that the facility conducts employee screening and periodic drug testing. Background checks of all new employees are a must.
Also ask what form of “count systems” the 3PL employs. High-target products, such as electronics, health and beauty aids, pharmaceuticals, and highly marketable consumer products, should have at least a three- to four-count system.
Emergency Response Plans. Most well-managed 3PLs have a written disaster plan, also known as an emergency response program. The 3PL should be happy to share the contingency plans it has established to ensure minimal service interruption if its facilities go down.
During Hurricane Rita, one 3PL sustained damage to 12 of its buildings. Fortunately for its customers, the operation was well-prepared. It had contractors on call to make temporary repairs and emergency generators to provide electrical power for the buildings and computer systems. The company even had provisions to house employees who had lost their homes or were unable to commute to work. Even with a major disaster such as Rita, the business remained functional.
Insurance. Request that your insurance carrier or risk manager physically inspect all proposed facilities prior to moving in. Too often, contracts are signed and product is moved in before the insurance carrier is notified. Your insurance carrier can order a loss-control inspection to determine if the facility is adequately protected. The inspection could result in some major recommendations that would entail significant investment by the 3PL, assuming it is willing to comply.
Be aware that 3PLs do not insure your product for loss or damage unless required in your contract. Professional 3PLs do carry Warehouse Legal Liability, but that coverage only protects the 3PL for loss or damage to your product as a result of its negligent acts.
By doing a little security homework, you can help protect your company from losing product, market share, and customers.