January 01, 2015
Supply Chain Basics: Managing Third Party Logistics and Embracing Technology
by Noel Datko
Defining Today’s 3PL Relationship
Meeting the demands of an ever-changing global marketplace is a challenge for many of today’s businesses. Changes in the transportation landscape, advancements in technology and globalization are pressing business leaders to analyze their operations and achieve new efficiencies to minimize risk. As a result, top companies around the globe are increasingly leaning on third party logistics companies to manage their supply chains.
According to an Armstrong & Associates report, 86 percent of domestic Fortune 500 companies use 3PLs for logistics and supply chain functions. Initially, companies outsourced these functions in order to increase in-house efficiencies and reduce their overall logistics spend. Next was the need to expand to foreign markets, reduce waste and answer to a growing number of impatient customers. Today, technology plays a much larger role in the operations of successful 3PLs, and is integral to the success of their clients.
What does this modern-day third party relationship look like for your business? Here are a few things to consider when selecting a provider.
Going global is complex and presents many hurdles for businesses. Unfamiliar sources of supply, transportation and economic regulations, advanced security processes and international compliance issues are all considerations when doing business internationally. Successful 3PLs are able to leverage global partnerships to provide the resources, expertise and infrastructure necessary for expanding your global reach.
Investments in Technology
Companies looking for a 3PL to help expand their market should look for providers with advanced technical capabilities and solutions. The diversity of technology required to track products from manufacturer to consumer, particularly with international supply chains, is costly and prohibitive for many businesses. A truly global 3PL makes regular investments in technology to support the unique supply chain strategies posed by different regions of the world.
Partnerships in today’s environment are becoming more consumer-centric. A modern-day 3PL should be committed to providing value to the customer and looking out for their best interests. This requires an emphasis on building long-term relationships and offering ways to transform and collaborate. By communicating on a regular basis to talk about the client’s business and how it’s being impacted by changing market conditions, both parties will achieve greater success, and the partnership grows.
Important Skills for Your 3PL
Your 3PL partner is crucial to your success in the industry; evaluation of potential partners needs to go far beyond basic cost, to look at what skills and knowledge your 3PL can truly offer.
Consider these five skills when you’re evaluating potential new partners.
- Adaptation and Evolution. Your 3PL must demonstrate a commitment to continuous improvement right out of the gate. Look at things like how many continuous improvement projects your potential partner has in the works, how many they initiate and how many they complete. Consider also whether they invest in formal training programs, how many Six Sigma Black Belts they have on staff, and any industry awards they’ve received for their continuous improvement projects and innovations. If your potential 3PL doesn’t have the ability, and the drive, to not only keep up with industry standards but exceed them, your relationship is set up for failure.
- Visibility. One of your biggest challenges is gaining and controlling supply chain visibility—especially as supply chains go global and processes become even more complex. You need insight into every stage of the supply chain, including lead times, landed costs, inventory carrying costs, and obsolescence costs, as well as the quality of your 3PL’s customer service. Can they give you that kind of visibility? Do they have the technology and skills in place to provide real collaboration, or are you likely to be left groping in the dark while they try to get their act together when you need information?
- IT Innovation. Why do companies complain about the length of time it takes their 3PL to make or enable process changes? Over and over it’s the fact that their 3PL uses an old, outdated, slowly dying IT infrastructure. The 3PL you choose should show that they are up-to-date with their software, and that their staff, both in the server room and on the floor, is familiar with technology innovations and can keep pace as they continue to evolve.
- Smart Hiring and Smart Retention. There’s a shortage of supply chain and logistics talent. Is your potential 3PL facing that issue? Or do they invest in hiring smart and fostering talent internally? Do they focus on developing their employees’ communication and relationship management skills? Do they understand the importance of having skilled and knowledgeable people at every level of the organization, who understand your industry thoroughly?
- Business Intelligence and Insights. Your 3PL needs to offer more than just access to business intelligence dashboards. Every piece of software nowadays offers that. What you need from your 3PL is insight. They should be staying on top of leading industry practices and trends, plus be able to offer networking and knowledge-exchange possibilities with other shippers. They should have the ability to conduct extensive market research and both share and implement their findings. If your 3PL has a dashboard but no idea how to leverage it, in the end you’re gaining very little from that relationship.
Just as the world is constantly evolving and changing, so are your logistics needs. A modern-day 3PL will rise to the challenge and apply their supply chain expertise and resources to enhance your business operations. If you are ready to expand your market or make investments in new technology, reach out to an expert who can reduce costs, improve service and achieve better visibility of the components that drive a global supply chain.
Technology Continues to Transform Today’s Supply Chain
Today’s business leaders are faced with the task of creating more efficient processes while keeping costs down. In order to stay competitive in a digital age, they need to stay aggressive in transforming their supply chains, and budget remains a barrier for many. Even during economic slumps, however, companies continue to invest in technology with the goal of improving business processes and increased profitability when times improve.
A recent Gartner’s user survey reveals supply chain managers are fighting for a bigger share of the budget in order to keep up with a key business driver—the customer. As far as spending plans, they are planning to invest significantly more on technology over the next year to meet growing expectations.
How are these investments helping companies transform their traditional supply chains into integrated value chains? Here are three technologies they’re employing to gain an advantage and make their services more valuable, accessible—and affordable.
Cloud computing can have a transformational impact on the supply chain by enabling access to real-time data and mobility. Connectivity is one of the biggest advantages, providing end-to-end visibility and an intelligent supply network where analytics and smart apps provide the information needed for quick decision-making by leaders at all points in the supply chain.
Platform-based technology can help companies cope with the challenges and complexities of modern-day supply chain management. It gives users a high-level view over their supply chains and allows them to better function in a multi-channel world. By having complete visibility into your inventory, you can identify where to reduce stock without compromising customer service.
Analytic technology addresses demand variability and gives companies the power to respond more quickly to market trends that are redefining traditional supply chain networks. Surging data volumes are requiring companies to make investments in advanced analytics in order to sort through and make sense of it all. This data can generate powerful insights into your supply chain to improve operations.
Here the customer remains the focus for driving business for virtually every organization, and supply chain managers know that technology plays a big role in that experience.
Mobile Supply Chain Management
While you are investing in these technologies, one way to further improve efficiencies and reduce costs is to take advantage of new supply chain mobility devices and applications, especially at a time when the world is becoming increasingly mobile-centric. Gartner’s report says that mobile sales were expected to reach 1.9 billion units this year, a 3.1 percent increase from last year. Company leaders and team members at all levels are conducting business operations from their tablets or mobile phones—whether in the office, at home, or on-the-go.
One mobile supply chain management app out there, for example, helps companies with a range of supply chain activities—inventory management, order fulfillment, reduced operational expenses and transportation spend, and improved warehouse efficiency.
So what should you look for in a supply chain management mobile app? Here’s a checklist of five key features integral to supply chain apps:
1. Real-time Data
Your management app should provide capabilities for real-time reporting on an on-screen dashboard, providing complete visibility into your supply chain. Transaction accuracy can be improved with real-time data validation, and customers can track their delivery in real-time, improving the customer experience and giving your company a competitive advantage.
Having the right connectivity and integration capabilities in place for mobile devices is more important than ever. With all of the different points in your supply chain interacting with the same data on different platforms, it’s critical to control and secure the data being exchanged.
3. GPS Tracking
Transportation is increasingly becoming a focus for mobile device management. From proof of delivery to tracking vehicles and deliveries, dispatchers can receive more timely and accurate information regarding their assets. Geo-fencing, real-time traffic updates and optimized delivery routes can help cut costs and even improve driver safety.
4. Asset Tracking
Another supply chain function improved by mobile apps is asset tracking and inventory management. Mobile barcoding solutions enable better tracking and management as your products move through the supply chain and can drive inefficiencies out of existing, outdated processes. Real-time inventory updates can provide accurate information to customers about item and quantity availability, and data entry errors can be reduced.
5. Shipment Tracking
Many supply chain and logistics professionals are beginning to rely on mobile applications to access shipping data, including shipment tracking and tracing, getting rate quotes, and receiving shipment notifications. With added visibility into your supply chain and control over drop shipments, you can improve your lot traceability and reduce shipment errors, which results in cost savings and improved customer service.
Adopting technology within your organization is a big step, but if done properly, can result in the improvement of your overall supply chain performance and increase your bottom line. Before making a selection, seek out an expert. Work with partners who understand the capabilities of new technologies and can guide you in making the best decision for your business.
Noel Datko is Marketing Director at IntegraCore LLC, a company that offers outsource turnkey fulfillment center and distribution warehousing services.