Supply Chain Basics: Managing Third Party Logistics and Embracing Technology
January 15, 2015 Leave a comment
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 … Click here to read the full article on Direct Selling News.
Noel Datko is Marketing Director at IntegraCore LLC, a company that offers outsource turnkey fulfillment center and distribution warehousing services.