The Evolving 3PL Landscape with Scott Weiss of Maersk

Scott Weiss 00:43

Thank you for having me. Great to be here. Looking forward to the conversation.

Scott Weiss 01:45

Yeah, yeah, for sure it goes up and down, but I always tell every anybody that listens to me real estate rates only go up. They never go down when you look at the chart over time. It goes up. There's some down years, but over time it's always going to go up. But you're right. Post COVID 2021. If we all remember imports or record volume, the country had a big appetite for purchasing footwear apparel and the like. So a lot of brands at that time, N3PLs, took down a lot of space in 2021 in particular. And lo and behold, here we are. We're coming to 2026. And as you know, Justin, leases are usually five years. So I'm getting calls, four, five, 10 calls a day. What should I do? Should I resign? Should I downsize? For those that insource, should I outsource? This is a very probably the hottest topic I'm seeing right now as companies look to 2026.

Scott Weiss 02:54

You know the answer is not the same answer for every customer every customers unique. It's not a one size fits all model So you really have to look at the whole global supply chain obviously tariffs have really changed things Before everybody was making products and maybe one country China, but now they've really branched out to multiple countries So you have to look at your inbound flow in the global supply chain. The real estate is a really important part of it But you also have to look at the labor availability in the region you're considering. And you have to really consider the outbound transit, the time and the cost. So what I tell them is you need to look at the whole end-to-end global supply chain and not just one part of it to make an informed, educated decision.

Scott Weiss 03:55

Yeah, I went to a facility recently in the middle of I won't say what state it was in the middle of nowhere and the customer was so proud they got a big tax break on the real estate. It was one penny from the governor governor, but they couldn't get labor for the facility because it was in the middle of nowhere. Six hours away from the closest port. that's kind of an example of where brands and three PLS really need to consider the end to end aspects of the.

Scott Weiss 04:24

of where their warehouse should be.

Scott Weiss 04:43

And then once you find out where the warehouse should be, you have to think about how many you should have and how big it should be. So that's a whole other exercise. So it's just not one answer of, want to be in Southern California. Do I want to be near the port? Do I want to be in the Inland Empire where the real estate's less but the drayage is higher? Do I need a million square feet? Do I need 500,000 square feet? These are big decisions. We work closely with our customers to help them as any way we can.

Scott Weiss 05:22

We do, we do. Maersk is a global logistics provider, so we're unique. We provide asset-based end-to-end global supply chain services. About a $60 billion revenue company. We're in 130 countries, so Maersk is very unique. Not many brands have the power of Maersk, where we can literally look at a customer's global supply chain. see what factories they're shipping from, what the volume is, air freight, ocean. We obviously are one of the biggest steamship lines. We have our own airplanes. We have over 550 warehouses globally. So yes, we have a whole supply chain design team that can do center of gravity analysis. The key is to get the data from the customer and we can look at the inbound the real estate, the labor and the outbound because we also, in addition to the warehousing, provide final mile through Maersk ground freight with our own Maersk trucks, thousands of Maersk trucks and also our small parcel agreements with all the major outbound carriers. So I call it the power of Maersk and it's pretty cool. yes, we can absolutely support customers with this need.

Scott Weiss 06:49

I like to say the great thing is that Maersk is a great steamship line. And the bad thing is Maersk is a great steamship line because most brands know Maersk and associate the Maersk name with being the ocean and moving product on the water. But especially post-COVID, we're so much more. We acquired 270 warehouses in Asia with LF Logistics. We have those Maersk airplanes. acquired

Scott Weiss 07:17

performance team for the US, which was a leading omnichannel, privately held 3PL, very reputable. And then we acquired Pilot a few years ago for the outbound final mile. And we acquired Visible Supply Chain for the small parcel shipping. now we are all one Maersk a few years later, and companies are pleasantly pleased and And surprised but pleased with all we can offer once they get to know Maersk and the end-to-end global supply chain value we offer.

Scott Weiss 08:35

Yeah, my operations team would say they would hate me for this, but I always say picking the product is the easy part. The real thing is the value that we add. A great 3PL doesn't just fulfill and process orders. They give you best practices and tell you how you can do things better. And because we handle so many great brands and names from Fortune 500 to DTC brands, we can really give the customers and hold their hand. great value and best practices and make them better. And that's what a great 3PO provider does. They don't just fulfill orders.

Scott Weiss 09:23

The ones that come to mind are the ones that, you know, they might be using one facility right now in Southern California. And maybe, you know, the world's changed. Maybe their business was historically all wholesale shipping to the likes of Walmart, Target, and Nordstrom. So when it's collect payment, it makes sense to keep it at the closest port of entry, which is generally Southern California. But then now the D2C world where e-commerce is so important and there's very few brands that are only wholesale now. You really have to do D2C and many have their own retail stores. We can start playing with things. Should you have a D2C in Southern California and New Jersey to fulfill the East Coast D2C from there and the West Coast from Southern California and the wholesale from there?

Scott Weiss 10:14

Should you be in Savannah? Should you have one DC in Cincinnati to fulfill the whole country in two to three days? So we have a lot of levers to pull, so we look at the key is the outbound freight. Actually, when you're deciding where the warehouse should be, who's paying for the outbound freight? How much wholesale do you have? How much DTC do you have? So you kind of start there and then you work your way back. So that's one story that comes to mind. I mean, I've made a living off failed 3PL relationships. I hate to say that, but we...

Scott Weiss 10:57

Yeah, know, marriage, I think, is 50 % divorce rate. And the reality is 3PL is about a 65%, 70 % divorce rate. So I always like to say the most important thing in the contract is not in the contract. And I also like to tell customers we interview them as much as they're interviewing us. They don't realize that, but it's true. So not every partnership is a great fit. So a great 3PL.

Scott Weiss 11:25

will realize that this is the type of customer that I'm a really good fit for or is a really good fit for us. And some are not a good fit. And that's important to realize as well as you do the research process. Not everybody is a customer for Merse. Some are better fits for regional smaller providers and the like. that's very important when you're researching who to partner with for any partnership. let alone a 3PL warehouse partnership.

Scott Weiss 12:05

Yes, congratulations. Oh yeah, I I give you a few examples. I mean, I like to say there's nothing too big for Maersk and there's there's things that are too small. So if we get a smaller opportunity, maybe it's 5000 square feet, 10,000 square feet. We're not a good fit for that size customer, so I'll just refer them to a more regional smaller provider. Maybe we get a fit a request for pharmaceuticals. We're not really that strong in pharmaceuticals. We're really great in apparel, footwear, accessories, housewares, retailers. We work with a lot of the leading retailers, D2C, things like that. So we know what we're really great at and just have to go through the checklist and look for any, I don't want to say red flags, but I think it's very important, especially in my role, to identify. who's a good fit and who's not a good fit and be honest with the customer. But when they are a great fit, which many are, you get really excited. And then we run the Maersk machine is what I call. And we have operations, engineering, real estate, implementation, IT. The days of implementations, I've been doing this in the business 30 years, are a lot different 30 years ago from what they are today.

Scott Weiss 13:36

I like to tell companies were in the IT business. The IT is such a big and part important part of the implementation, so we really need a lot of different experts from the different disciplines within MERSC to make what we like to tell customers that go live and non event.

Scott Weiss 14:06

I think that's a good story actually to answer your question about another story. When a customer calls us and says, I need to be live in 30 days, that is pause for concern. Because a really effective implementation, you really need 90 days to do everything right. They're transitioning from another 3PL. You have the IT.

Scott Weiss 14:34

If it's wholesale, have routing guide compliance, UCC labels, you have racking, capex, maybe some automation. So that would be like an example of I might tell a customer we're not a good fit. They're with a 3PL now, things are going really bad and they need to get out of there and be up and running in 30 days. As much as big of a business or need they might have, I might tell them in that situation, We're not a good fit. We really want to do this right. We want to everything to go right and we really need 90 days for a proper implementation and sometimes they'll say they'll go with another three PL that tells them they can do it in 30 days. So that's OK like it's important to not catch every ball that's thrown your way as much business as it might be in as eager as we might be to win it. We have to be honest and truthful. and have the customer's best interests in mind.

Scott Weiss 16:18

I think that's a good segue to a question you were asking or comment you made. The landscape of the 3PL warehouse industry has really changed in the last 30 years. in the 90s when I started, there was just a lot of mom and pop, a lot of regional providers. The big names were not in there, certainly not Steamship lines. They didn't offer any warehousing. I started in 98 and this is when companies started. closing their US manufacturing. Sorry, President Trump, you don't want to hear that. But then moving to Asia. And when they moved to Asia, they needed warehousing and outsourcing. So in those days, there was probably 7,000, 8,000 regional providers, some that had been in business for 30, 40, 50 years at the time. Now flashing back to 2025, the landscapes really changed. You have about 15 major players of really big size. These are multi billion dollar companies like MERSC. MERSC is in the top 10 warehouse footprints in the US. We have 29 warehouses in Southern California. We have 172 warehouses in the US and about 30 million square feet. So there's around 10, 12, 15 of us that can handle these big programs, if you will. And then the next level is your regional provider, someone that maybe has been in Southern California since the 1920s and has like five or six warehouses. So it's, don't want to say the haves and the have nots, but the landscape has really changed because these 10 or 15 have acquired these regional providers like Maersk where we acquired Performance Team in 2020, which was a great.

Scott Weiss 18:12

US provider that been around for 35 years. So the landscape of 3 PL has really changed over the years and will continue to evolve, but the IT is the big one. It's the world's got complex. The D to C is grown. The routing guide requirements. If you're not correct, you're going to get a lot of chargebacks and this is where the world is today in the world of warehousing. It's. You got your 10 or 15 and then your several thousand regional providers.

Scott Weiss 18:50

Yes. Yeah, it's evolved over the years. Like think about when I started, we used to get orders faxed to us. How's that for dating myself? Then it went to EDI and we had the eight EDI transactions, electronic data interchange. That was in fashion for many years. And then the past few years, APIs came out. Now I can't even tell you what API stands for off the top of my head, but these are communications where

Scott Weiss 19:38

we can plug and play and integrate within days or even weeks versus the EDI, which is a timely integration. So that's been fascinating where you can truly send a customer like our mapping specs for APIs. They can map to those within a few weeks. And the world's kind of gone that way on the IT side. More for the D to C brands. The Omnichannel wholesale A lot of these brands will have a big ERP like SAP or the mid-size will have NetSuite. And they really need that ERP and send us EDI orders for their wholesale, D2C, and retail and allocate orders from the ERP. So to answer your question, yes, I've had to really evolve on the IT side and continue to evolve and try to understand the IT language.

Scott Weiss 20:49

One thing we have done at Merse is all of our IT is in house, so that's pretty exciting. We also have a proprietary warehouse management system that we control. We control the programming and that's pretty cool too. That's a real powerful tool. So having your IT in house and a proprietary WMS that a customer can use. Let's say they use us in 15 countries and they're on the same warehouse management system.

Scott Weiss 21:19

in all 15 countries, they could be integrated here in the US, and now they want to use us in China. The implementation integration is already done. And then we can roll them out to India and Taiwan and Philippines. It's pretty powerful stuff.

Scott Weiss 21:39

I just talked to the Scott from India today this morning. Yes, I can assure you. I told him you're the Scott of India. Yes, you read my mind.

Scott Weiss 22:26

I'm going to tell everybody there's no right or wrong answer. The 3PL model is not a one size fits all model. There's certainly brands that decide to insource all of their warehousing, and they do a great job at it. So that's one spectrum that we see. There's some brands that do their own warehousing and then outsource as well. So they might operate their own warehouse, let's say in New Jersey. They're based in New Jersey. They know the laws. They're comfortable. Maybe their offices are based where the warehouse is, but they don't want to operate a warehouse in the headaches of California, so they outsource in California. We see a lot of that. And then the third model is they want to, nothing to do with warehousing. They want to sell and market products and focus on what they do best, and they outsource all of their warehousing. So we see those three spectrums doing all the warehousing themselves.

Scott Weiss 23:24

a model where they insource and outsource, and then another model where they outsource everything. There's no right or wrong answers. I can certainly share the advantages and disadvantages of each model. But that's what I do with the customer. I'll review what we can offer, and they have to make an informed, educated decision what works best for their business. But I'm not going to tell you everybody should outsource warehousing. because that's not true. And I'm not going to tell you everybody should do their own warehousing because that's not true either. It's really customer by customer. And I can give you examples if you'd like. Yeah.

Scott Weiss 24:58

You actually brought up a fourth one that you reminded me of that I didn't mention. So you got the three, then the fourth one we actually are seeing a lot of where the customer leases the facility. They own the lease. They own the WMS and the CapEx. But as you mentioned, they outsource the labor and the management. That's actually a fourth option, and we're seeing a lot of growth in that.

Scott Weiss 25:50

That's why I'm going to get a t shirt that says it's not a one size fits all model.

Scott Weiss 26:46

Talk about a loaded question, So yeah, Merceca has an innovation home based in New Jersey. We have over 50 different robotics, automation, and innovation initiatives where we'll do a proof of concept to test it out. And then once it passes that test, it moves on to where we actually handle it in sometimes a smaller proportion within the facility. I will tell you some of the proof of concepts with the company's work.

Scott Weiss 27:15

don't make it to the next step, we find that they don't increase productivity and the trade off is not there. So Maersk gets very measured in what we do. We don't just go all in and throw 900 robots on a warehouse floor and say, this is going to be our solution for you. What we do is we have a very, very detailed, I'd say engineering and innovation team, lots of bench strength, lots of resources. where we'll look for each opportunity at a manual solution, a semi-automated solution, and an automated solution. And again, because it's not a one-size-fits-all model, there's some of our warehouses that are all manual with no automation, and some of our warehouses are fully automated with robots and $100 million in automation. It really depends on the customer's profile.

Scott Weiss 28:16

Also the length of the contract, how many SKUs they have, and it's all about here's what we can do, here's the payback, we show the customer the difference. If you sign a three-year deal, your cost per unit is this. A five-year deal, here's your cost per unit. And in some cases with the bigger automation, here's a seven or even a 10-year deal. So just a lot of cool things. I will tell you everybody asked for it. Like right up front, they'd love to see it. They want it on their business and it works really great for some customers and some profiles absolutely do not need automation because there's downside of automation. It's fixed a lot of times. It's in there. It's not movable, things like that. So we have a lot of examples. We have robotic arms. We have goods to person robotics. We have autonomous.

Scott Weiss 29:13

forklifts that unload the trucks and move it to the staging. We have stretch robotics that unload the cartons from an inbound container. Over about 50 different tools in our shed is what I would say. And we get an opportunity. We look at the 550 warehouses we operate globally, and we say, which two or three customers are most like this? We look at the customers that are most like this. and the solutions that we're doing for that customer, whether it be the US or Canada, India, China, look at the productivity, look at the payback and use that as a starting point. And look at that manual semi-automated and automated solution. And a lot of times we'll provide the customer options to show them it's almost like when you're in the restaurant and you want salad or potatoes with it, you want some dessert, here's the different options and here's the cost. and here's the payback. So we don't ever say this is the solution, take it or leave it. We give the customer options and we show them the different scenarios and the different tools we've considered for their specific profile. Some of our warehouses are as big as 2 million square feet. So we're operating big warehouses. We don't have many 50,000 square feet. Our average warehouse is around 500,000 square feet.

Scott Weiss 30:41

So these are big boxes. Sometimes it could be one dedicated customer, while other times it could be maybe three or four customers within a million square foot warehouse. So that's another factor that we have to consider. Is it shared or dedicated?

Scott Weiss 31:01

Absolutely. Yeah, we have some customers as mentioned, they own the lease, they have the capex, they have their own automation, AMRs and the like, and we run the labor and the management. So we have a lot of those deals as well.

Scott Weiss 31:30

Well, I always like to say it takes just as much work, if not more work, for the smaller size opportunities as the bigger ones. That's the reality of it all. So, know, one million, shoot for the stars. Yeah. I was going to say that. I let you say that. Yeah.

Scott Weiss 32:44

This is an important topic. On any given day in the US, Maersk has about 25,000 warehouse workers. We are in the people business. That's our tangible product. We don't make a pair of shoes. We sell people in service. So our focus has to be on HR, taking care of our people, making sure they work at a happy place. They come to work with five fingers on each hand.

Scott Weiss 33:11

and they leave work with five fingers on each hand. Safety is very important. The opportunity to get promoted. We have a DC manager, for example, I just went to our Mira Loma DC, 700,000 square feet. She started as a customer service representative there, and now she's managing the 700,000 square foot DC. We have one in Hisperia, a million square feet. The manager there started as an unloader.

Scott Weiss 33:41

You drive by it at 15, right? Beautiful facility. Now it's actually over 2 million square feet because we have a facility next door. The DC manager there started as an unloader 18 years ago and now he's overseeing 2 million square feet. So that's all to say we are in the people business. So now we have to look at each region because each region has a different story. Southern California will always be king of real estate.

Scott Weiss 34:11

You know this, I know this. The size of industrial real estate in Southern California has always been the biggest and probably will always be the biggest. Imports from Asia, 50 million people live here. We have a great labor force in Southern California. Hard working, motivated, but the world's changed in the past few years. My children can go work at Chipotle or In-N-Out. and make $24 an hour. They don't have to be on a warehouse floor eight hours a day. They can look at their phones during their job. You can't do that as a warehouse worker. So more than ever, the HR and the focus on taking care of the people and attracting great talent and keeping great talent, that is number one when a company is deciding, should I insource? And if I outsource, who should I be using? I think not enough brands ask that question. How do you attract and retain labor? So Southern California, in my opinion, is always a great labor market. We have a great labor pool to draw from. But there have been challenges of late with the minimum wage increases that workers can get. And this is a job where people have to drive to a place. They can't work from home. And so that's been...

Scott Weiss 35:38

A real big trend and the need to take care of people in Southern California attract great employees, especially like you said, the big box across the street is paying 25 cents more, 50 cents more an hour. Money and pay is one aspect of a job we know, but we also know people work for other reasons. New Jersey is another region. Southern California is our biggest warehouse region in the world. out of the 95 million square feet we operate. Merceca is the biggest footprint in Southern California. New Jersey is our second biggest region, and we have a great labor force there as well. Very similar story to Southern California, I would say, in terms of labor challenges, attracting labor and things like that. Dallas, we're very big there, and that's similar to New Jersey and Southern California. Great labor force, hardworking. competitors out there, but really great talent. Now you get to the other, all the other regions almost. Savannah is one of the biggest ports in the country right now. They went from like top 20, 15 years ago to top three right now. It's an amazing port. You get a lot of turns. The real estate is a lot less in Savannah than it is in New Jersey and Southern California. Beautiful.

Scott Weiss 37:07

The port's great. The drayage is less, because a lot of these facilities are just a few miles from the port. Drivers get like seven turns a day. LA Long Beach, I love LA Long Beach, but you'll be lucky if you get one turn a day. Not a lot of traffic, but how many people live in Savannah? Around 200,000 people. How many people live in Southern California? I don't know the exact number, but let's say it's 20 million.

Scott Weiss 37:34

So you just don't have the labor force in Savannah like you do in New Jersey or Dallas or Southern California. So a lot of three PLs and in-house companies really struggle in Savannah. We're fortunate because we have a big presence in Savannah, the biggest warehouse presence there. So we're able to attract employees in that market. Then you get to the other markets like a Memphis and a Louisville where we know UPS and FedEx are really big. That's a challenging labor market. Cincinnati, Columbus, really growing real estate markets. Middle of the country, lower real estate than Southern California and New Jersey, but not the labor supply. So you really have to attract employees there. And then maybe the other region I could think of is Seattle, where again, that's a high cost of living, great port, it's near the port, but attracting labor is... a challenge and something you really have to focus on because of the high cost of living in the Pacific Northwest. So those are kind of the regions that come to mind in the US and how I see the labor market playing out. Did that answer your question?

Scott Weiss 39:12

Yeah. Especially if you're like I hate to say it, but if you're in sourcing or using a provider, you have one warehouse. There's probably not too much opportunity for promotion, but I'll give you a couple of examples like yesterday was crazy sock day at our Dallas facility and then we have Thanksgiving potlucks dinners and that would be an example. Our Ohio regional manager started out as a. customer service person in Southern California. The opportunity she kept, she became a DC manager. There was a position for Ohio. She moved herself and her whole family out to take that job opportunity. So that's, these are like really great stories. But yeah, I mean, we're in the HR business for sure. And there's just, I could give you a lot of other examples. And I think that's probably one thing that

Scott Weiss 40:10

Some companies lose sight of is taking care of your employees and making them feel like they're part of a team and part of a family and not just there to get a paycheck. That's a very big piece of advice I give to any 3PL or any company that has their own warehouse.

Scott Weiss 41:06

You know, the best way to answer that question is that it's probably something we don't know about today because every year something happens, whether it be the ship getting stuck in the canal, the war, tariffs, COVID. Like every year there's something. that would lined up. Yeah. So.

Scott Weiss 41:31

That would be my number one advice is for brands to have a business continuity plan and try to think about things that could happen and not be caught unprepared and have like we're all in on this one thing, which is by the way, another value of outsourcing because there could be a hurricane in New Jersey or a port could have a lockout. And so a business continuity model thinking about what could happen. and having a plan to prepare for it. I will tell you, and I'm in the warehouse business, and we're incentivized to have warehouse employees and all that. I wonder 10, 15 years from now what the warehouse world will look like. Everybody is asking for touchless warehouse, autonomous forklifts. That's the warehouse of the future, because much like real estate, Labor rates only go up. They never go down. I've never seen anybody get a pay decrease. So the focus is how can we do things better, faster, cheaper? Continuous improvement is probably the number one thing I'm asked from customers. How can you handle the same volume in the same footprint at a lower cost next year? They're not looking for cost increase. They want cost decrease.

Scott Weiss 42:59

We have a whole, as you might guess, we have a whole continuous improvement division and we have to constantly look at how can we squeeze the lemon and the juice out of this to handle that same volume and not pass on a cost increase to the customer. And again, that's what differentiates a good 3PL from a great 3PL. So that's the trends I see next year is taking the same business you're handling now and seeing what improvements can be made. to improve productivity and reduce costs. So people will always be a part of warehousing, in my opinion. I am biased, but I truly believe that. But automation, robotics, and innovation will continue to grow, of course. But the two can coexist. And finding the perfect balance is what I see for 2026.

Scott Weiss 44:15

I mean, the best analogy, I am a baseball fan, but Babe Ruth was one of the greatest baseball home run hitters ever. He hit 714 home runs, but he struck out twice as much. Everybody remembers his home runs and every athlete, every business, every person, no matter how great you are, always has room for continuous improvement.

Scott Weiss 44:44

That's right. Maybe he could have had 800 home runs if he had better continuous improvement.

Scott Weiss 44:55

He ate too many hot dogs. boy, I just love turkey. mean, I could go with the gravy and the mashed potatoes and the croutons and the pumpkin pie, but I'm straight up protein and a nice Tom turkey, a nice 20 pound turkey carved up. I'm as easy as can be. Everybody's got the turkey and that would make me happy. A big plate of turkey.

Scott Weiss 45:31

That's right.

Scott Weiss 46:06

Thank you for having me. Appreciate the opportunity.

Scott Weiss 46:12

Okay, thank you, bye.