What are the latest supply chain trends influencing the evolution of 3PLs and their impact on supply chain?

JimHayden no bkgd 1 copyIt is common for companies to outsource their logistics planning to third-party logistics (3PL) companies as a strategic practice. With the evolution of 3PLs from only transportation and warehousing to including services for outsourcing just about everything, the functions performed by 3PLs are no longer singular. 3PL services may include all of the supply chain logistics processes or just a few selected processes across the supply chain. This expansion of services is largely in response to trends and developments in the supply chain industry.

As such, now is an important time in the history of supply chain as more and more companies are finding ways to leverage technology to optimize their supply chain logistics. As a result, it seems natural for 3PLs to expand their services to use advanced technology solutions to augment their logistics services and garner a competitive advantage over other 3PL companies.

In the early days of 3PLs, companies expected little from their 3PLs in terms of technology solutions. As the 3PL industry has broadened the functions that they perform, as well as in global scale, companies began to look to 3PLs to provide technology solutions to support logistics planning across their supply chains. Some of the technology solutions that 3PLs provided to companies included customer relationship management (CRM) systems, transportation management systems (TMS), and/or warehouse management systems (WMS). While these tools helped to improve logistics in the past, they fall short against advanced sensor analytics solutions that leverage Big Data and the Internet of Things (IoT).

Companies expect 3PLs to help manage costs, improve customer satisfaction, provide global expertise, and reduce risk. Yet with many challenges still existing around supply chain logistics planning, such as end-to-end visibility and accurate estimated time of arrivals (ETA), we anticipate that 3PL companies will turn to advanced technologies as a competitive advantage. 3PLs will be able to use advanced analytics technology solutions to optimize their current services, as a differentiated value-added service, or they can offer the technology to their customers to use.

Value-Added Services as Competitive Advantage

Advanced analytics technologies will allow 3PLs to have a much finer grasp on visibility across the supply chain. If a 3PL company decides to use technology as a value-added service to offer their clients, they will be able to offer better visibility and deeper knowledge of their clients’ supply chain performance based on the collection and analysis of real-time and historical data. 3PLs will be able to leverage historical data from TMS, WMS, and sensor devices and combined with real-time data to identify hidden trends and patterns in the data. Specialized machine-learning algorithms and analytics will turn this information into actionable information. 3PLs will have better fidelity on understanding the location of in-transit goods with near real-time updates, better planning with accurate estimated time of arrivals (ETAs), and better understanding of carrier performance.

With advanced analytics solutions, 3PLs will gain end-to-end visibility of in-transit goods that far exceeds milestone visibility. Near real-time updates allow 3PLs to know precisely where their consigned goods are located and the condition they are in. More so, with better visibility, 3PLs will be able to accurately estimate when goods will arrive at a port, distribution center, or retail center. Advanced analytics are able to predict arrival time based on a variety of factors including: historical transit data, time of year, time of day, weather, and traffic. Understanding this information will help 3PLs and/or their clients fill the inventory visibility gap to reduce out-of-stocks and demurrage charges.

3PL companies spend a large amount of time, money, and resources performing manual carrier reconciliations at the end of each period to validate payments and calculate carrier scorecards. Most of the time is spent manually researching when the carrier actually picked up the product, what they delivered, and when they delivered it. Sensor data and analytics solutions dramatically improve the accuracy and timeliness of carrier performance evaluations while eliminating manual processes and decreasing costs. With this information, 3PLs are able to evaluate schedule and lane efficiencies, on-time delivery performance per carrier, and end-to-end performance. Detailed analytics compares actual shipment data to planned and estimated arrival information to provide transportation and logistics managers with an accurate and current picture of carrier activities and performance.

Of course, 3PLs could also directly offer their clients access to advanced analytics technologies so that their clients will be able to receive the same benefits and operational intelligence from the technology.

Through the combination of real-time sensor data and big data analytics technologies, 3PLs now have the opportunity to gain a competitive advantage over other 3PLs. With the power to obtain complete, end-to-end visibility, 3PLs can offer their clients directly or indirectly the opportunity to gain dynamic operational intelligence that helps to reduce logistics management costs to obtain better visibility, more accurate ETAs, and improve carrier performance.

Jim Hayden is Vice President of Solutions with Savi

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