How a 3PL Saved $470K in 12 Weeks

Growth Wasn’t The Problem. Margins Were.

The company had been operating for five years and had grown steadily. They ran a single warehouse on the West Coast and specialized in multi-client fulfillment, mostly in the apparel space. More than 80% of their revenue came from a single customer.

Two years prior, they had upgraded to a bigger facility to accommodate rising volumes. With orders increasing and space to scale, things should have been improving. 

But margins never caught up.

The owners had a background in supply chain, but not in operations. They could sell and build relationships. What they couldn’t do was confidently say where time and money were being spent inside their warehouse.

They needed outside perspective - not to overhaul everything, but to understand where the leaks were coming from.

A Walk Through The Floor & A Dig Through The Numbers

TAC’s first step was a full diagnostic. 

No assumptions, no solutions yet - just observation.

The team walked through the building to understand how product moved through each stage. 

They watched how items were received, staged, picked, packed, and shipped. They tracked how staff were assigned and how tasks were being executed. And they asked basic but important questions: 

• Why is this done this way? 

• Who owns this function? 

• What’s being measured?

From there, TAC paired what they saw with what the data showed. 

They reviewed ten months of financials and a sample of labor hour tracking. The goal was to map how labor was allocated across functions - and how that lined up with the revenue those functions were generating.

A few issues became clear:

• Labor was the biggest cost, but wasn’t being tracked precisely

• Supervisors were managing people, but not performance

• The pricing model didn’t reflect the true cost to serve

• Picking and packing workflows were especially inefficient

Nothing was broken beyond repair. But a lot of it had never been built the right way to begin with.

Two Low-Cost Changes That Moved The Needle

TAC identified eight possible improvements, but focused the first sprint on two: labor productivity and pricing structure. 

Both could be tackled without major disruption and would create room to address larger issues later.

1. Cluster picking to reduce wasted motion

The team realized that the 3PL’s picking process was built around single-order picking - employees walked the floor pulling one order at a time. That created long travel paths, repeat touches, and unnecessary labor spend.

The order mix was well suited to cluster picking: batching multiple orders together in a single pass. 

With some configuration changes in the WMS, a few carts and totes, and updates to the layout of the packing stations, TAC helped the team move to a more efficient model.

This reduced travel time and sped up packing. Within weeks, they saw a 32% lift in productivity.

 2. Pricing changes based on real data

In parallel, TAC took a hard look at how the company was pricing its services. Fulfillment was profitable. Storage, handling, and account management were not.

There wasn’t a standard way to quote new business or review existing accounts. Most pricing had been set based on rough estimates of effort — not actual time, labor, or space usage.

TAC developed a pricing tool that modeled margin by service type and customer profile. It factored in the cost of direct and indirect labor, storage capacity, and workflow variation.

The team didn’t apply the new pricing retroactively. Instead, they used it for new clients and upcoming renewals. That gave them time to test and adjust - without jeopardizing current relationships.

Building Management From The Ground Up

Operational improvements only work if leadership can reinforce them. That was a sticking point here.

Most supervisors had grown into their roles by being dependable - not by being trained to lead. 

They didn’t have tools for labor planning, performance tracking, or team development. And because many had previously worked alongside the team they now managed, accountability conversations were rare.

TAC stepped in to provide coaching and structure. 

They worked with supervisors on how to run daily huddles, how to set expectations, and how to respond when work wasn’t meeting standard.

Some team members stepped down. Others stepped up. And for the first time, there was a shared language around what “good” looked like on the floor.

Daily service metrics were posted. Labor plans were reviewed at the start of each shift. Conversations became clearer and more consistent.

A More Profitable Business Without Adding Tech or Headcount

The impact of these changes added up quickly. 

Within 12 weeks, the 3PL had shifted from reactive to intentional - and started to see results in every area of the business.

• Productivity increased by 32%

• Cost per unit dropped by 26%

• SLA performance improved from 93% to 99.5%

• Employee turnover decreased by 20%

• $200K saved by reallocating four indirect functions

• A standardized pricing tool was built to protect margins moving forward

Total estimated annual savings: $470,000

How To Replicate This In Your Own Operations

What made this project work wasn’t a bold transformation or a clever piece of software. 

It was clarity. 

The team figured out what mattered, what could move, and what could wait - and then executed on that, week by week, with discipline.

If you're a 3PL, warehouse, or operations team and are facing similar issues - labor costs rising faster than revenue, pricing misaligned with effort, floor teams unclear on expectations - this playbook is for you.

Each part below breaks down the principle, the thought process behind it, and the practical ways to act on it.

1. Start by learning how your operation actually works

Many teams think they know how their ops run - until they try to map it. 

This was the first unlock for the 3PL: realizing they had blind spots not just in metrics, but in daily execution.

Instead of looking for a tool to tell you what’s wrong, start by going to the floor yourself.

• Follow a product from inbound receiving to outbound shipping.

• Ask who owns each step and what decisions they make.

• Track how many times a product is touched - and why.

• Sit in on shift planning meetings (if they exist).

Behind every broken KPI is usually a broken decision, not a broken metric. You won’t fix the numbers until you understand the flow.

How to do it:

• Map each workflow stage (Receiving, Putaway, Replenishment, Picking, Packing, Shipping).

• Ask: Where are people waiting? Where are they guessing? Where are they redoing?

• Create a simple table of what you observe vs. what leadership believes.

What to watch for:

• Misalignment between stated process and observed behavior.

• Supervisors spending time putting out fires, not improving systems.

• Touchpoints that don’t create value but eat labor (double handling, excessive walking, etc.)

2. Tackle labor productivity before you touch layout or tech

It’s tempting to jump straight to re-slotting inventory or investing in automation. But the biggest savings often come from better task design and fewer wasted motions - not new infrastructure.

In this case, the fix was cluster picking - but the principle applies broadly: redesign how people move through their work before redesigning the building.

What to evaluate first:

• Are workers picking one order at a time?

• How far do they walk on average to complete a task?

• Is the WMS configured to support batching or route optimization?

• How often are workers crossing the same zone more than once?

Cluster picking worked here because:

• The order mix was predictable.

• The WMS could support it with light reconfiguration.

• Carts and totes were easy to roll out.

Implementation checklist:

• Identify top 2-3 labor-heavy workflows.

• Evaluate whether those tasks can be grouped or batched.

• Pilot one change in a small team, measure impact, then scale.

What to be careful of:

• Making layout changes before fixing labor motion - this often leads to false efficiency.

• Rolling out a batching model without a communication plan - it will fail without manager support.

3. Stop measuring productivity like it’s a black box

One of the biggest issues at the 3PL was that no one could answer a basic question: “Where is our labor going?” Not because they didn’t care - but because their systems weren’t set up to show them.

The answer wasn’t a full LMS rollout. It was smaller: clearer job codes, structured task tracking, and daily visibility into indirect time.

Start with this:

• Break out your payroll codes into 5–7 meaningful task types: receiving, putaway, picking, packing, VAS, indirect, etc.

• Track paid hours by team and task for 2–4 weeks.

• Separate “on task” vs. “indirect” time - meetings, travel, waiting, etc.

From there, calculate:

• % of time spent on value-adding tasks

• % of time unallocated or miscoded

• Output per labor hour by task

The insight: The team here found their productivity loss wasn’t in how hard people were working. It was in how little of their day was spent on value-creating activity.

What to avoid:

• Tracking too many KPIs. Start with 2–3 that matter and build from there.

• Assuming indirect time is fixed — it’s usually where your biggest gains lie.

4. Rebuild your pricing based on how work actually happens

Pricing wasn’t the core issue here - but it was the silent drain. 

TAC discovered that while fulfillment was profitable, services like storage and account management were dragging margins down.

The fix wasn’t to raise prices blindly. It was to understand cost-to-serve per service, per customer, and use that to design a pricing structure with guardrails.

How to approach it:

• Separate pricing inputs into three categories: volume-driven (picks), space-driven (storage), and people-driven (account support, exceptions).

• For each category, map out how labor is consumed.

• Build a margin model that reflects actual costs — not market rates or competitor benchmarks.

Rollout strategy:

• Apply the model to new customers first.

• Use contract renewals to phase it in gradually.

• Have proactive conversations with clients - and be ready to walk from unprofitable business.

What not to do:

• Avoid blanket changes without modeling impact.

• Don’t tie pricing only to volume, if a low-volume customer eats up space or support time, it needs to be priced in.

5. Fix the frontline layer before scaling anything else

A lot of 3PLs promote from within - and that’s good. 

But promotion without training often leaves new supervisors in a difficult spot: managing former peers without the structure or skills to lead.

At this 3PL, the issue wasn’t lack of effort. It was a lack of tools. No coaching frameworks, no performance reviews, no huddle cadence.

The solution: treat frontline leadership like its own function and invest accordingly.

How to do it:

• Set daily huddles and shift planning as non-negotiables.

• Teach supervisors how to lead performance conversations.

• Provide a scorecard that shows them how their team is performing - and give them the authority to act on it.

Why it matters:

• Most operational improvements break down at the middle: between plan and execution. 

• If your leads can’t translate strategy into consistent behavior, the rest doesn’t matter.

Watch out for:

• Managers who avoid accountability conversations. They need to be coached, or replaced.

• Lack of visibility - if team leads don’t see metrics, they can’t own them.

6. Sequence for momentum, not perfection

You don’t need a master plan on day one. 

What you need is a clear place to start - something that creates confidence, frees up capacity, and builds trust for bigger changes.

In this case, TAC focused on two moves: cluster picking and pricing visibility. 

They skipped re-slotting, automation, and technology investments - not because those didn’t matter, but because they weren’t what the business needed most urgently.

If you’re not sure where to start, ask:

• What’s costing the most and easiest to measure?

• What can we test in 4 weeks, not 4 months?

• What would free up time or cash to reinvest elsewhere?

Good starting points usually look like:

• Labor-heavy processes with low productivity

• Manual workflows that can be standardized quickly

• Unprofitable service lines that can be priced more intentionally

Avoid:

• Starting with software or automation without nailing your fundamentals

• Trying to fix 10 things at once

Q&A With Zack Napolitano

If you want to go deeper on this project, here’s the full conversation I had with Zack Napolitano, Founder of The TAC Group.

We cover the entire journey - from how a small 3PL went from break-even to $470K in annual savings, to the tactical changes around labor, pricing, and floor operations that made it happen. 

Zack breaks down how they identified inefficiencies, prioritized low-cost improvements, trained up the leadership team, and rebuilt internal accountability - all in just 12 weeks.

It’s a detailed look at what it really takes to make a struggling 3PL profitable, without adding automation or new headcount.

Table of Contents:

1. Why this 3PL needed help

2. On-site diagnosis & walkthrough

3. The full assessment process

4. Finding the quick wins

5. Fixing labor, pricing, and leadership

6. Results: productivity, cost, turnover

7. Lessons for other 3PLs

This conversation has been edited for length and clarity.

1. Why This 3PL Needed Help

Can you start by giving us a snapshot of the 3PL and how they came to you

Zack: Absolutely. This 3PL was a family-owned operation based in LA, focused primarily on apparel and accessories. Their annual revenue was around $3.5 million, and they had been in business for five years. They had recently moved into a larger building to accommodate growth and had a good volume of business, but they weren’t making a profit. The client was referred to us by a partner who had worked with us before. They knew something wasn’t working and felt like they were close to building a successful operation—but missing a few key pieces. That’s when they brought us in.

Did the founders have operational experience?

Zack: Not really. They had been in supply chain for a while, but not from an ops background. Running a 3PL day-to-day is very different from just being in the industry.

2. On-Site Diagnosis

What did your first engagement look like? What’s your process for diagnosing a facility like this?

Zack: We happened to be in LA quite a bit at the time, so we were able to meet in person. That first visit was all about listening and observing—asking questions, understanding their model, and hearing from them directly what challenges they were facing. Then we walked the facility. That alone gives you a lot of insight.

But you can’t stop at observation. We always follow up with a full operational assessment. It’s a two-part process: we review data and we talk to people. You need both. The numbers tell one story, but the people doing the work fill in the gaps. It’s in those interviews—frontline workers, supervisors, the owner—that you understand what’s really happening day to day.

What stood out during your walkthrough?

Zack: We start at receiving and follow the entire flow—receiving, putaway, replenishment, picking, packing, and shipping. We’re looking at process flow, wasted steps, storage layout, cube utilization, how organized the space is. In this case, it was a very manual operation, which is common for small 3PLs. There were clear inefficiencies.

We also assess storage methods—are they using the right storage for their SKUs? Are they over-slotting? Is there a logical product layout? From the walkthrough alone, you can often tell where you're losing time and space.

How big was the team?

Zack: About 35 full-time employees, and they would flex up or down based on seasonality.

3. The Deep Dive Assessment

Once you have your initial observations, what comes next?

Zack: Then we get into data. Our assessment looks at six major areas:

Financial Review – We looked at a 10-month snapshot to understand profitability by service. In this case, fulfillment was profitable, but services like storage and account management were dragging margins down.

• Billing & Pricing – We reviewed how they were pricing services and found it was largely based on guesswork—no real cost-to-serve data.

• Paid Hour Analysis – We analyzed labor data by job code to see where hours were being spent and where there was waste.

• Inventory Review – We examined SKU count, inventory locations, and slotting logic.

• Process Review – We reviewed each stage of the fulfillment cycle to identify time loss and inefficiencies.

• Management Structure – We looked at how they planned, communicated, and measured performance across teams.

What were the biggest red flags?

Zack: They had the data - but they weren’t using it. That’s common. Everyone has a WMS or some tech stack today. But without the ability to mine, analyze, and act on that data, it’s useless.

They also lacked structure in labor and pricing. Their pricing was inconsistent and not aligned with actual costs. On the labor side, they didn’t track cost per unit or indirect time, so they couldn’t measure performance effectively. Their management team was stretched thin, and many supervisors were promoted from within but not trained to lead.

4. Choosing What to Fix First

How did you prioritize what to tackle?

Zack: We bucketed our findings. Some changes, like re-slotting inventory or renegotiating pricing, take time. Others, like improving picking efficiency or labor tracking, could drive quicker impact. We needed to move fast to reduce cost and improve profitability. So we started with cluster picking.

Why cluster picking?

Zack: It was the right fit. Their order profile supported it, their WMS could handle it with some configuration, and the capital investment was minimal—just new carts and some layout changes. We trained staff and updated workflows. It was a simple but powerful change.

5. Fixing the Pricing Problem, Labor and Leadership

What did you uncover in your pricing review?

Zack: They were underpricing key services. Their fulfillment was profitable, but other services were not. They didn’t have cost visibility by customer or service, so they couldn’t identify where they were losing money.

We helped them build a standardized pricing tool based on actual labor and service costs. It gave them a way to evaluate each customer’s profitability and simplify their billing model.

Were they able to roll that out right away?

Zack: Not immediately. They were hesitant to go back to existing customers with price increases—and understandably so. So the plan was to use the new structure for new business and implement it during contract renewals. They also started proactive conversations with a few close customers to give them a heads-up.

How did the team handle these operational changes?

Zack: Change is hard - especially when you start talking about labor and accountability. Their supervisors had been peers with the associates they were now managing. So holding people accountable for performance or attendance wasn’t natural for them.

We spent a lot of time coaching. I led some conversations so they could see how to approach performance discussions. Over time, some supervisors stepped down, and new leaders were brought in. That culture shift was necessary.

Did you face resistance on the floor?

Zack: A bit. When people see someone from the outside walking around and asking questions, they get nervous. You have to build trust. We made it clear that the goal was to help the business survive - and that required everyone’s buy-in. The owner also did a great job being visible and transparent, which helped a lot.

6. The Results

What were the outcomes of your 12-week engagement?

Zack:

• Implemented cluster picking, boosting productivity by 32%

• Reduced cost per unit by 26%

• Reallocated four indirect roles through process automation, saving $200K annually

• Trained leadership, reducing employee turnover by 20%

• Improved service levels from 93% to 99.5%

• Standardized a pricing model for long-term margin improvements

• Delivered $470K in total annualized savings

That’s incredible. Which KPIs did you focus on?

Zack: Cost per unit was the big one—they weren’t tracking it at all. We also focused on indirect time. In suboptimized ops, staff are only on task 70% of the time. We aim for 85%. That delta alone is huge.

7. Lessons for Other 3PLs

What should other 3PLs take from this case?

Zack: There are over 20,000 3PLs in the U.S., and many are started by entrepreneurs with limited ops experience. They’re great at selling—but not always at running tight operations. That’s where we come in.

If you're not profitable, start with what you already have. You don’t need to invest in automation right away. Often, the answers are in your existing data, people, and processes.

Any closing advice?

Zack: Everyone is selling a solution - whether it's software, automation, or AI. The challenge is knowing what fits your operation. That’s why bringing in a practical partner - someone who knows ops and can build realistic roadmaps - is so valuable. Our goal isn’t to hand you a 100-slide deck and walk away. We want to embed with your team, build capabilities, and help those changes stick.

In today’s uncertain market, with shifting tariffs and tight budgets, it’s the perfect time to focus on internal optimization. Fix your foundation first. Then build.