3PL

What’s in store for 3PLs in the New Year?

As another year starts it’s a good time not to just reflect on what has taken place over the last year but understand, anticipate, and get excited about what a new year holds. For businesses, it is always a good time to take stock and see what direction to chart. For industries as a whole, there is a combination of both competition but also options for collaborating and discussing new technologies, ways of working and forming ties to create win-win situations. 3PLs are no different and there are a number of directions and trends that they could take over the course of 2019.

Technology

Of course, one of the most important points not for just 3PLs but across businesses is the use and implementation of technology. Here, there are numerous options, which are already being tried and tested and regularly used while others still are being explored.

Automation

Probably one of the most used tech terms today is automation. However, though its use within 3PLs is already being witnessed it appears that more businesses will take a closer and harder look at automation implementation. This doesn’t mean staff layoffs in the face of machines; rather it involves a better way of working to reduce human errors, save time and, essentially, free-up space for humans to be involved in work that matters and delivers value.

Big Data & Analytics

Another buzzword over the last few years, the idea of extracting relevant customer data easily and quickly in order to gain valuable insights is still something most companies are trying to figure out how to do. Given their importance, big data and analytics are poised to receive greater attention in 2019.

As 3PLs thrive on services across the value chain, today’s customers are looking to get the same professional experience across all touch points, channels and platforms. They want consistency and would like to know that their providers clearly understand their needs and requirements, wherever they are.

For internal sales and marketing teams, ensuring analytics can help plot, understand and enable customers to follow them is something most companies are yearning for. In fact, most 3PLs that do not invest at least part of their budgets into analytics will surely feel like they are being left behind.

Sustainability

Sustainability is a subject, which is gain more ground every day and customers are now clearly looking at buying-in to companies that are more sustainable, do more for the environment and take their responsibilities towards the planet much more seriously. This could be through energy-saving products or devices, CSR initiatives, or reducing carbon footprints. 3PLs will look more closely and take serious steps towards sustainable practices in the face of customers whose minds are on saving the planet.

3pls

 

Partnerships & Collaboration

2019 will witness an increase in 3PLs taking on newer partners for specific tasks. This could be within technology through smart systems integration, mobile apps developers or even companies for internal IT restructuring through cloud implementation. Further, as there will also be a push towards increased cyber security, partnerships will be formed to create a specific space to encourage greater IT security across supply chains, logistics and distribution. This will also be coupled with more sharing of information through real-time feeds, device-driven information via the Internet of Things (IoT) as well as through predictive analytics.

Supply Chain Integration

To deliver the best results, all players across the value chain need to be in sync. 2019 will witness more integration through data sharing, insight-driven strategies and possibly, a greater shift towards blockchain technology, to encourage visibility, transparency and accountability by all parties involved. Thus, the greater good purpose is poised to be served and taken into account, especially within an industry that involves such a large number of players at any given time.

Last-mile delivery

An obvious but overlooked concept, which many players don’t always get right, last-mile delivery looks set to become a game-changer for many providers within the new year. Focusing on customers through added efforts, value and taking the extra step will be key in customer retention, loyalty and satisfaction. In many cases, last mile service could make or break companies.

Conclusion

2019, in many cases, could be a big year for 3PL providers. Many companies are looking to revamp their IT infrastructure and embark, continue or fructify their digital transformation journeys. The points above are factors, which could support this path and, for many such players, could even change their entire business structure.

Digital age

Supply Chains In The Digital Age: A Competitive Perspective

A dynamic and fiercely competitive market, along with a not easily tied down and demanding customer, are posing challenges to businesses, including to supply chain vendors and Third Party Logistics Providers (3PLs). A proliferation of channels and customer touch points is another challenge. Many retailers are opting for omni-channel approach.

From their point of view, the customer has become center of all transactions and conversations. Customers are asking for a single view across different channels and touch points, as well a unified and cohesive customer and brand experience. They are asking for single-day delivery, green supply chains, and integrated supply chains.

There are opportunities, created by advancement in information technology in the area of Internet of Things IOT and the amount of data and intelligence that can be are available from information systems, for optimization, better decision making and increased returns and better profitability.

It’s not as if supply chain companies have been slow to join the digital movement. Some have automated certain sections of the supply chain. Robots have begun to be used to perform labor intensive and routine tasks. While this has mostly happened to warehouse and distribution tasks, like order picking and selecting, it has also happened in customer facing tasks such as purchasing, invoicing, accounts payable, and customer service.

Digita Age

So, what exactly does the new digital wave hold out to supply chains as advantages or benefits?

Firstly, digital places certain constraints before it offers benefits. The operations of the entire business, including the supply chain, needs to be connected and integrated.  Next, all the processes or work flows need to be optimized for the supply chain to leverage the advantage of digital, through speed of execution and responsiveness to customer requirements.

Supply chains have traditionally relied on information to be efficient as well as for customer satisfaction – information about expected delivery, information about status, etc. Most of this information traditionally was related to order execution and customer service. However, digital allows supply chains the unprecedented information that helps them to anticipate orders and demands, to purchase and inventorize based on these predicted and anticipated demands. Artificial intelligence allows supply chains to model the order cycles, frequencies of cycles, fulfilment of cycles, seasonal factors, and so on, and to predict and to anticipate emerging demand. This helps them plan, schedule, purchase, store better and thus provide better customer satisfaction. Digital enables supply chains to become proactive and more engaging with customer, rather than the traditional reactive mode of operation.

With the rise of omni-channels, companies usually handle many channel providers. The result is that the supply chain operational space for the company has become fragmented and very unwieldy to manage. Digital offers remarkable capability here, by integrating all the channels and providing the customer and the client with one single view of the supply chain, across channels and touch points. For a supply chain provider, offering this could mean significant competitive advantage over other players, who are still in the traditional mode.

Also, even though retailers have opted for omni-channel retail experience for their customers, the experience for the customer is not a unified one.

Digital offers a truly unified experience that includes:

•      Automation and integration of sales, marketing, business operations and the different locations and people
•      Personalized customer service
•      Real time customer analytics and metrics for decision making
•      Mobile integration
•      Easy intuitive interfaces across web and mobile devices
•      Simplified checkout process and payment

Finally, digital makes the customer truly the center of all operations and decisions.  It could well be the strategic differentiator and competitive advantage that supply chain companies are looking for.

Using Artificial Intelligence in Supply Chains

Advances in storage, computing power, algorithms, and the advent of the Internet to Things (IoT) have given rise to different forms of Artificial Intelligence being applied to address challenges posed by businesses, organizations and customers.

Supply chains are one such area. Supply chains are evolving from linear supply chains to digital supply networks, where numerous automated systems, such as sales, inventory, production and logistics are integrated with each other. This means that logistic systems now have access to much more enterprise data and business and customer patterns such as buying behaviour, seasonal order placement, fast moving stock, average time for delivery according to geography and so on. Business owners potentially, can use make sense of this data and turn into business intelligence i.e. insight that can drive business decisions and actions.

IOT

In the case of supply chains this would mean better anticipation of orders, better planning of logistic, developing ‘cognitive’ capability in logistic systems i.e. a logistics system that can not only detect patterns and make useful knowledge constructs, but also learn from the application of this knowledge and understand business and customer situations better. This could also result in lowering of costs and overheads and improve the agility, responsiveness of logistics, improve turnaround time, and greatly improve customer satisfaction. Already, autonomous vehicles and robots are operational in large supply chains around the world.

 

Without taking advantage of the benefits that technology affords them, supply chains can become inefficient, out-dated and unable to keep up with the pressures of competition and demands of the customer.

A McKinsey study estimates that businesses could earn anything from 1.3 to 2 trillion dollars a year by using artificial intelligence based logistic systems.

Restaurants were the first businesses to embrace AI tools. They began by analysing Point of Sale data. From this data, they were able anticipate and forecast customer demands and plan better for it. This benefit cascaded throughout the supply chain to suppliers, and vendors who delivered quickly and ‘in time’.

Another illustrative example is that of a telecom manufacturer. The manufacturer analysed historical data of its production, sales and logistics and customer feedback, along data about season and weather. With this intelligence it was better able to tell its channel partners what products were available and when they could be delivered, at the earliest. This made for a more integrated and responsive supply chain, translating into better customer satisfaction and improved profitability.

Another area pertaining to supply chain, where Artificial Intelligence proves very useful is when it comes to preventive maintenance of equipment. Data generated by sensors on mission critical equipment along with maintenance reports can be interpreted by artificial intelligence to predict when it would be a good time to do a maintenance ‘check in’ and when it would be a good time to do preventive maintenance and when it would be a good time to repair. Such intelligence has shown to improve the productivity of the equipment and improve maintenance costs by nearly 10%. For mission critical equipment, this could mean significant savings, reduced down time, satisfied customers and even competitive advantage.

Overall the benefits of using Artificial Intelligence in supply chains are many. In the sum, they have the potential to make the supply chain more responsive, more integrated with the demands of the customer and the objectives of the business, and finally more productive and profitable.

4PL

To 3PL or 4PL, that is the question

With changes being witnessed within the supply chain, logistics, and distribution spaces choosing the right provider can be a difficult and cumbersome process for businesses. Owning to technological advancements, increased carrier movements, and heightened delivery models, providers now can take up many different shapes and forms.

For businesses it is imperative to understand their own specific provider needs and requirements as well as what they would like to expect from a provider. Unfortunately, many businesses have experienced problems with their providers and have borne the brunt of these through either financial losses, diminished reputation, or worse, negative customer service levels. With these significant implications in mind, businesses need to first take stock of what they would like their provider to do vis-à-vis the business and what exactly their capabilities are.

This is where the level of the provider comes into play. From 1PL to 4PL (and even beyond) the scope is vast. It is clear that businesses need to carefully understand what each “party” stands for before making any decisions that could significantly impact the entire supply chain management.

1PL – First-Party Logistics

The simplest and most basic logistics enterprise, which moves goods from one location to another.

2PL – Second-Party Logistics

Here, the enterprise directly owns the transportation to move goods from one location to another. An example of this would be “a local farm hiring a 2PL to transport their eggs from the farm to the grocery store.”

4PL

3PL – Third-Party Logistics

3PLs are currently the most common providers within the industry. Though as technology, transport, and innovation increase there is room and scope for much more. Basically, 3PLs manage and oversee major parts of the logistics operation, though in many cases, some parts of the execution are outsourced or given off to subcontractors or external vendors. Here, it is not always clearly marked which parts of the supply chain 3PLs work on directly and which are outsourced but part management and responsibility rests with them. One example could be (using the farm-to-grocery store analogy), “a 3PL may be responsible for packing the eggs in cartons in addition to moving the eggs from the farm to the grocery store.”

4PL – Fourth-Party Logistics

As the levels increase so does the responsibility. The 4PL model gives all of the activities of the logistics to an external party. This includes not only the execution of the supply chain but also responsibility and management. Such providers directly work with the company’s organization and inventory in terms of strategic inputs, long-terms goals, and business operations and functioning.

5PL – Fifth-Party Logistics

5PLs are a direct result of current technological innovations and rely on newer methods to optimize the supply chain. Such providers explore and leverage the use of blockchain technology, RFIDs, AI, Bluetooth, automation among others to create solutions, which are new-age and ahead of the curve. At present such providers are still not the norm and have not entered the mainstream market.

With this in mind it is clear that as provider level progress the amount of responsibility handed over to the logistics provider increases. For the sake of today’s most commonly-used providers – 3PLs and 4PLs – each one has its own distinct advantages and disadvantages.

3PLs

The most common provider level, 3PLs have been tried-and-tested and at present and are the go-to supply chain method. There is just enough role and responsibility for both parties without infringing on each other’s roles. In fact a well-working 3PL can create a seamless, efficient and effective logistics partner. However, businesses need to realize that some direct control will be lost. This means keys areas like customer service and reliability can suffer. Here, customers expecting impeccable service, will raise their voices at businesses, leaving providers largely unscathed. Further, when looking to revamp operations the 3PL model can become difficult when changing providers or looking at taking back some of the work in-house.

4PLs

4PLs are a rung over 3PLs in supply chain management and provide a “control tower view of their supply chains, overseeing the mix of warehouses, shipping companies, freight forwarders and agents.”

The jump from 3PLs to 4PLs stems from the use of the phrase “a single interface” coined by the global consulting firm Accenture. Here, businesses are looking at long-term, strategic, high-performance logistics providers. In many cases, 4PLs do not own specific assets e.g. transportation, warehouse infrastructure, etc. but still manage the entire process. This does not matter to businesses as they rely on a single point of contact with the 4PL provider and communicate directly through a common dashboard (interface). This also frees up time for businesses to work on their core competencies knowing that they don’t have to look into the day-to-day running of their supply chain.

3PL or 4PL?

Depending on the nature of the business both 3PLs and 4PLs have their strengths and weaknesses. 3PLs provide safety and security but the added responsibility of managing the supply chain in-house. 4PLs can take-over the entire logistics function but it can take time, effort and solid financial obligations to ensure the most appropriate provider. However, for more complex supply chain functions or for even bit part or agile functionality there are even niche 3PLs or 4PLs that can be used. Again this can be used as per specific business requirements, their models, financial health, and long-term goals.

What is clear is that finding the right provider is crucial to the success of the business – not just profitability and bottom line – but also customer satisfaction and reputation as well. In today’s highly competitive business environment every decision needs to be made with great care as it could make-or-break a business. It should be ensured that the provider – whether 3PL or 4PL – meets the exact requirements of the business, clearly understands its aims and goals, and can undertake, meet, and exceed expectations across the entire supply chain.

Customer

3PLs: Going the extra mile for customers

The customer is king! Long live the customer!

It is words like these that have become a constant for business across all industries. With customers being more discerning, fickle, and less brand loyal, coupled with the ease of product information and reviews online, it’s no wonder businesses have to constantly stay ahead of the curve to retain them.

To ensure greater customer experience (CX), companies have to regularly keep up-to-date with their clients. Through online discussions, social media chats, feedback, and word-of-mouth, the process of keeping customers satisfied all the time is no mean feat.

So what is CX? “Similar to, but different from customer service, customer experience is unique to your brand. It carries both a tone and an image specific to your company. It’s a feeling as opposed to a result and it is becoming an important part of both the retail sales process and the way service providers attract new customers. In addition to becoming an important part of the consumer facing aspect of retail, it is also an important way for service providers to build a relationship with both existing and potential customers.”

For 3PLs this is clearly the case. Depending on where in the supply chain the providers lies (or within more than one), is where they need to create positive customers experiences. Across the four main areas – Transportation, Warehousing, Distribution, and Shipping and Receiving – there are multiple areas of interest.

First, is the question of speed of delivery to the end customer. Here, location is key and if so, can express services be implemented. Also, even if the warehouse is suitably located the inventory needs to be in regular supply to ensure adequate stock.

Further, the issue of price is always pertinent. From a customer’s point of view there needs to be transparency on any additional costs incurred. From the 3PL’s standpoint, where the price lies is within extra services or “kitting (putting several products in special packaging).”

Customers also want to know whether their goods are properly insured. Also, “Will they be insured during delivery, return, and while in storage?” Is there a limit to the insurance or is there a cut-off for the insurance? These specifics need to be made clear upfront as it is evident that customers dislike surprise costs.

Customers services

For e-tail customers and online shoppers the experience is key. From the look and feel of placing an order, to the correspondence up to delivery, and finally, the delivery itself, the entire process can make to break loyalty. In fact, “the buying journey doesn’t end when they [customers] click ‘Complete Order’. They want the products delivered quickly and if there are any problems with their order they want to be kept informed. [Thus], the true shopping experience occurs after they’ve actually placed their order (consider the global unboxing phenomenon).”

Here, 3PLs can capitalize on the delivery process through clear communication, ideally, on-time (or early) deliveries (or direct channels of correspondence during delays including sincere apologies), and even extra customer incentives.

For the front-end to be worry-free the back-end needs to work smoothly. Thus, the technology, processes, and efficiencies must be seamless. Packing, loading, managing, and quick decision-making are key to the overall smooth operating of the entire supply chain and given that one hiccup can have a severe domino effect, it is imperative that the functioning of the chain continues regularly.

Just like retailers, hotels, and other direct customer-facing sectors, 3PLs also need to go the extra mile to out-run the competition. Incentives, gifts, loyalty programs, etc., have all been used but they can still change the perception of a company. These could be as simple as a birthday wish or greeting, a discount on a delivery, or even a free product. 3PLs, like all businesses, also need to rely on reputation management, especially online, and regularly monitor social media chatter and ensure that feedback is addressed quickly and efficiently.

Another standard for most 3PLs is the issue of tracking and reporting of goods. Though almost all companies provide customers with online tracking features through an app, website, or code, not every experience is the same. Here, 3PLs need to examine their customer experience through the look-and-feel, dashboard, ease-of-use, and user experience (UX). Customers who have not received goods already paid for or those whose parcels have been misplaced are not to be messed with! Thus, apart from simply tracking there are other features that can be added including “access to real-time data about inventory. [Thus] if an item is running low, you can quickly order more [and if] it means customers aren’t purchasing items that you don’t have in stock and you can quickly and effectively replenish your supplies, making sure you can always meet demand.”

Further, for 3PLs, it is not just a case of tracking, real-time updates, and personalized gifts. For customers, there is much more to brand loyalty and retention. Packaging of goods, delivery-person attitude, demeanor, and politeness, and even type, frequency, and duration of communication. All of these can add up in a customer’s mind and play out across various negative scenarios. It is key to keep up with customer expectations, their requirements, and where they feel improvements can be made. Customer listening is imperative and can shape the way the brand is perceived. Feedback, whether positive or negative, needs to be understood and acted upon. The same concern seen repeatedly will drive a customer away. Customers understand imperfections and business problems but they do not care for insincerity, disregard for their time/money, or inaction. It is key to be in constant touch, especially, during crises as saying nothing can sometimes be worse than saying the wrong thing.

Though 3PLs may not always be as in-your-face as retail brands, with online shopping, eCommerce, and digital payments becoming the norm, customers are now directly facing and experiencing providers within this industry. Thus, the experience must be positive along the entire supply chain similar to what retailers called the omni-channel experience across all touch-points.

Big Data

How Big Data & Analytics are transforming 3PL

With multiple sources of data and information available across the entire supply chain, 3PL businesses and providers are continuously trying to make sense of it. From CXOs to sales managers and finance VPs, the ability to leverage Big Data has become paramount. However, before any sort of analytics can be undertaken, the data (both structured and unstructured) needs to be organised and put into context. For 3PL providers, this has become critical as clear and appropriate analytics can greatly impact their entire business operations.

As Big Data and Analytics continue to play a significant role across industries, the recent 21st Annual Third Party Logistics Study, has already made it clear that “98% of 3PLs [have] said that improved data-driven decision-making is essential to the future success of supply chain activities and processes.” Coupled with this is the fact that “81% of shippers and 86% of 3PLs [surveyed] said that using Big Data effectively will become a core competency of their supply chain organisations.”

For an industry that relies heavily on processes, efficiencies, and timeliness, even the slightest disruption can have significant consequences. This is where Big Data can play a major role in helping to overcome bottlenecks and obstacles.

As has also been said, “Big Data allows those within the supply chain to identify and correct inefficiencies, run “what-if” scenarios, and improve the way they respond to disruptions, and mitigate risk.” These actions and scenarios can help streamline processes and ease internal systems and operations. They can also help to build partnerships, whereby companies seeking to work with 3PLs may do so by assessing their Big Data and Analytics capabilities as one of the deciding factors. Thus, 3PLs that are more engaged with and have greater ability to leverage the tools and technology – to ensure better business outcomes – may be more suitably placed to collaborate with such businesses.

For external, customer-facing outputs, the use of Big Data and Analytics by 3PLs can play a significant role during the last mile of delivery. As this route “tends to be the slowest and least cost effective,” there is scope for more specific, data-driven information to be processed in order to keep clear checks and tracks of possible hurdles. Also, with the emergence of more technological tools such as GPS-enabled devices, scanners, and sensors embedded within products through the Internet of Things (IoT), the entire supply chain route can be directly viewed and monitored. In what is known as the “black box” of delivery data, providers can now keep track of delivery data including the earlier inaccessible “off-vehicle” data.

The ability to understand and analyse large volumes of data and information can lead to the better management of deliveries. It can also help create not just better customer service but also incentive employees through appropriate training, skill development, and help to create real value across the entire supply chain.

Additionally, some of the significant steps being used through Big Data and Analytics surround analyzing weather patterns. Here, the earlier unpredictability of disruptions due to freak climatic conditions could severely hamper large parts of the supply chain. However, with more improvements through data monitoring and tracking devices being used in real-time, such occurrences can be reduced.

Big Data & Analytics

Further, other possible areas of concern such as heavy traffic and a lack of parking availability can be detected early. Though most 3PLs already use highly sophisticated apps, analyzing live updates of roadblocks, jams, and accidents can ease pressure on drivers when trying to ensure on-time delivery.

Within CBDs, commercial real estate spaces or busy, high-density areas in big cities, parking is always a major concern. Through various devices and a constant stream of visible data and analytics, valuable time and costs can be saved. In some cases, delivery agents may well be advised to park further and walk or even possibly use alternative routes to avoid delay-prone zones. Such data can be paramount when ensuring the smooth delivery of goods. Of course, all of this can only lead to increased on-time deliveries and heighten customer satisfaction, especially given the cut-throat competition within the industry.

For transportation over both air and sea such remedies serve an even greater purpose. Loading and unloading at ports or airports, time and costs per delivery, and assessing the best routes can make a huge difference to freight charges. By analyzing data patterns and using a concise dashboard, 3PLs managers can examine and understand the situation on the field and seamlessly report back to the on-ground team.

One of the hurdles regarding analysis is the vast amount of data that is present. This, unsurprisingly, can be overwhelming and can easily lead to aversions to its use. There is also the obstacle of costs involved as with current, wafer-thin margins, 3PL providers are reluctant to invest in large data centers and data science resources.

Here, though understandable, there must be a clear path created to advise and guide appropriate players when mining and analyzing data. This is usually best undertaken in a phased manner with a clear focus on a particular area of the business. This could be within a warehouse, along a supply route, or within the last mile.

Further, collaborating with the right data partner is imperative. 3PL providers need to research and understand the capabilities and limitations of both the data and associated companies.

With competition being greater than ever and customers being less loyal and more demanding and fickle, 3PL players need to continuously strive to stay ahead of the curve. Here, Big Data and Analytics can play a valuable part in helping providers gain a competitive advantage.

However, though Big Data and Analytics are here to stay and their value cannot be understated, it still remains to be seen how 3PLs cope and use the tools at their disposal. As with many other new ‘disruptive’ technologies and tools each business needs to find its own “sweet spot” from which to ascertain its own unique requirements to produce benefits for the business.

Block Chain

How Blockchain is revolutionizing 3PL

For those who have been following technological disruptions within businesses there are a number of models to look at. Uber, Airbnb, Facebook, etc. have all played a significant role in reshaping the transport, hospitality, and media and advertising industries respectively.

However, another technology, which has been around for several years, has already made inroads into almost all industries. Blockchain, based on decentralised technology, is a “transparent distributed digital ledger (a replica, of a list of transactions in the network, present on a number of computers across the network but not a central server).”

Though this can be most closely related to the banking, finance, and related services, Blockchain technology has impacted many other industries including the third-party logistics (3PL), supply chain, warehousing and distribution sectors.

As Danillo Figueiredo, VP of International Logistics, AB InBev, has stated “Blockchain is one of the most promising technologies in logistics. It has the potential to digitalize many of today’s paper-based processes and overcome the multitude of different interfaces… Blockchain technology will be transformational to our business and the world. It reduces mistakes, digitizes information and improves the supply chain process so we can focus on our core business of brewing the best beers for consumers.”

With this is mind AB InBev has joined together with Accenture, APL, Kuehne + Nagel, and a European customs organisation to successfully test a Blockchain solution that can “eliminate the need for printed shipping documents and save the freight and logistics industry hundreds of millions of dollars annually.” Thus, the group has already tested a solution where documents are “no longer exchanged physically or digitally but instead, the relevant data is shared and distributed using Blockchain technology under single ownership principles determined by the type of information.”

Given Blockchain technology’s advantage as an alleviator of human error, high speed, and a new way of transacting digitally, many industry players as exploring opportunities in this regard. Though still to be examined more closely there are a number of different types of Blockchain networks: public and private. Public networks are open and allow anyone to participate. Private networks are for a closed group and can be extended to new players by invitation. Based on the requirement, one can choose between public, private or public-private networks.

For many players within 3PL, Blockchain technology has the potential to revolutionise certain systems and procedure, reduce costs, and increase efficiency. In many cases, though yet to catch on to the trend, is has been said that Blockchain technology is a prime candidate for inclusion within the supply chain sector. Of course, this only works across the chain if the network of companies including suppliers, warehouses, manufacturers, etc. are all completely involved. However, given the increased interest this is poised to be a breakthrough for the industry.

Regardless, adopting Blockchain technology is no easy feat. It takes time, costs, and changing an already ingrained work culture. In fact, according to findings of the 22nd Annual Third-Party Logistics Study for 2018, though results showed that while “30% of 3PLs and 16% of shippers see Blockchain as a potential application, they have yet to engage with the technology.”

Part of the hesitation stems from a lack of clearly understanding of the technology as well as embracing its benefits. As Neil Collins, regional managing partner for Korn Ferry’s North American industrial markets unit has said, “The supply chain/logistics leader must now be agile, a strategist, a visionary and a collaborator. The entire supply chain organisation must now compete with technology, and the winners will be those that elevate their people using technology, rather than replacing them with it.” Thus, the leadership must intervene from the top in order to embrace the inclusion of Blockchain.

This, at present, is a big ask and the supply chain industry still needs to place itself within its own context though there are already players working towards this goal. Large companies like IBM, Walmart, and Alibaba have several pilot Blockchain projects in the pipeline. Two of Europe’s largest ports – Rotterdam and Antwerp – have already begun work on Blockchain projects to “streamline interaction with port customers.” However, Blockchain requires the collaboration of all parties to function effectively i.e. to form the link. Here, the technology has to stem from software developers or vendors to be able to successfully “integrate applications used by the largest supply chains companies, in turn creating an incentive for other partners in the ecosystem to come aboard.”

However, once on board, the advantages are clear. Given that the supply chain works in sync with Blockchain technology in a linear or “down-the-line” manner, the transparency of each node and its visibility can benefit the entire chain. As every item can be viewed and traceable within the Blockchain, players merely need to add their own information within each record. This could help reduce fraud, repetitive data duplication, and excess paperwork.

As companies being to see the benefits of Blockchain technology there is a greater likelihood of it entering the 3PL mainstream. However, companies must understand where it can best fit within their own requirements. Finding the appropriate Blockchain partners, calculating costs such as overheads, technological and infrastructure, and ensuring a sound fit within a specific business needs to be carefully examined and addressed. It is a long-term investment and requires a great deal planning, a change in mindset and approach, and a detailed exploration of its ramifications.

Currently, many industries like those mentioned earlier are forming groups and partnerships to ‘test the waters’ with regard to Blockchain usage and adoption. This appears to be a sound point of entry for 3PL players as it provides time to understand and evaluate its merits prior to integration.

Though Blockchain has the potential to be the next big 3PL disruptor its own nature and functioning have ensured that many players are still viewing it with caution and soft hands. Regardless, the undoubted benefits are clearly visible and over the next few years more and more players will look to adopt the technology.

Business of 3pl

Aligning your Business with 3PL

In today’s competitive, tight, and cut-throat business environment, many companies depend on third party logistics (3PL) for their supply chain management in order to reduce costs, improve efficiencies, and ensure smooth operations of their distribution and fulfilment service requirements.

To deliver value and thrive within a difficult market, 3PL providers need to align closely with their parent businesses in terms of mission, vision, and goals.  As the relationship is so significant, most big businesses have well-defined 3PL processes, systems, quality standards, performance, criteria, and best practices already in place and regularly keep a close eye on operations.

In fact, most business are keen to look to partner with vendors who will align and integrate with their own processes and practices. Thus, in a totally aligned relationship, the supply chain “shadows” the processes of the parent company and replicates the parent company’s processes, adheres to their standards, mimics their operating models and becomes an “extension” of the parent company. It is even true to say that they may become fully embedded into the parent company and a “well-coordinated arm” of the parent company.

As this relationship requires careful selection many parent companies have strict and stringent supply chain selection criteria, which they use to screen their supply chain partners. In some cases companies may also train supply chain providers in their best practices and operating procedures to ensure that the vendors understand their business priorities and their own way of operating.

Some companies also craft a strategic plan for the alignment and for the relationship, describing the capabilities that they wish their partner supply chain to develop at different stages of the relationship. These capabilities could be operational, technological, or behavioural.

In order to maintain a sound relationship it can help to carefully define the work flows at the parent-supply chain interface as well as specific goals, outcomes, and expectations. It may also be beneficial to define the responsibilities of the parent company and that of the vendor that may include responsibilities for effort, for job, for the entire system, and for business outcomes.

Wroking in business of 3pl

Sharing performance benchmarks and baselines with the supply chain vendor and of clear unambiguous expectations can also help both parties understand what is expected in terms of performance.

Aligning may also entail integration with a company’s web servers, applications and electronic data interchange standards. This allows for seamless information flow and exchange and utilisation of information between the parent’s business and the supply chain.

Such an integration would allow a 3PL partner to use this information to track and trace shipments and direct this information to the parent company’s website; thus, providing customers with the vital information they need as well as helping to improve customer satisfaction.

Of course, there is the obvious check on physical integration, which ensures that the 3PL has the capabilities to manage the business in questions. Here, some internal questions to be answered could include: “What modes of transportation and what services will you [the business or parent company] need?” “What volumes do you plan to ship and where?” “Do you have specific security or visibility requirements?” and “Are your shipments time-sensitive?” Though these are basic questions given the nature of the business they will be able to filter many potential 3PL providers, which may not be suitable.

Also, the 3PL should be capable of matching the specific needs of the business. Many providers have a variety of strengths and weakness and it is imperative that those most closely aligned to the business’s requirements are at the forefront of its strengths. If the business relies on door-to-door deliveries, intra-warehouse, or last-mile, it is important to understand that the 3PL is on par with this and its strength lie in a particular area.

Additionally, it may be necessary to check on the number of modes the 3PL provider actually has and utilises. The four common modes – rail, road, sea, and air – may be a given on paper by a 3PL but it is wise to ensure that the inter modal services being offered have the right size or fleet as well as hands-on experience to be properly handled.

Further, businesses must undertake thorough research about possible 3PLs prior to confirmation. Reputation, reliability, and responsiveness are key, especially in the logistics and supply chain arena. Also, businesses may opt to review use cases or examples within various scenarios to confirm the handling of specific situations by 3PLs. There must also be a cultural fit and the agreed recognition and understanding of the appropriate protocol, procedures, and hierarchy cannot be understated.

Finally, though clearly a given many businesses fail to check a 3PL’s customer service record. Given the scope for disruptions across the supply chain, the crisis management capabilities or the reputation of the company needs to be maintained and carefully managed. To this end it is paramount that the 3PL knows the plan of action, can ensure regular flow of goods or services, and does not lose control during a crisis.

As businesses rely more heavily on 3PLs getting the right fit to align with both business needs and present-day demands is not an easy feat. Many partnerships have failed, especially when a business has recently moved from one party to another. In this regard and given the high demands on the relationship, both parties need to be on the “same page” prior to any business commitments.

With reduced costs and improved customer service being key in the high-contested logistics marketplace, both businesses and 3PLs require a synergy that can be secure, reliable, and potentially long term. There must be clear and concise dialogue prior to and during all negotiations in order to determine the most apt working relationship once a final agreement has been determined as any hurdles or obstacles cannot be easily overcome “on the field”.

It is evident that today’s customers are fickle, brand agnostic, and ruthless, especially with a mobile in hand and social media apps awaiting comments, tweets or posts. Businesses and 3PLs must work together to create a harmonious working environment for each other as well as for their collective customers.

Risks of a Global Supply Chain

Risks of a Global Supply Chain

The advent of globalisation has brought many issues to the fore. In economic terms, globalisation refers primarily to the ways in which “economic and industrial institutions interact in various locations throughout the world, with primacy given to no specific geographic location.”

For businesses, border restrictions are no longer a hindrance as they can sell products and provide services anywhere in the world. Globalisation also allows for purchases across nations where materials are required from one country to another.

The ease with which this has been able to take place is due to the development of information and communication technologies (ICTs). In what is known as ‘informational’, the process by which “information technologies, such as the Internet, world-wide web (WWW), and other communication technologies have transformed economic and social relations to such an extent that economic (and socio-cultural) barriers are minimised.”

Coupled with the growth of ICTs is the development of more efficient and speedier transportation systems as well as reduced costs of travel and transportation. Thus, it is, in essence these factors as a whole that have led businesses to adopt global supply chains.

However, for local and global supply chains there are both advantages and disadvantages.

Local Supply Chains

Local supply chains benefit from knowing the realities of the country they operate in and so are better able to negotiate the dynamics of the politics, economics, and markets and mitigate risks. By knowing the language and the language of the business they have access to local experts and face fewer communication problems. This is underlined by intercultural communication within businesses as there is already a strong relationship in place due to the sharing of a common language.

Economically, local supply chains do not have to face trade barriers as impediments as well as changes within business laws in another country. Also, transfer prices are all in the same local currency and there are no differences in taxes or duties. Given the use of a single currency there is no scope of facing the challenges of fluctuating exchange rates and related transfer prices.

However, the disadvantages are that they may not always be able to provide the cheapest resources or materials and face barriers of distance and geography. Thus, by having access to a global pool makes it easier to source better, affordable, or quality products and services from a larger market.

 

Global Supply Chains

Likewise, global supply chains face specific advantages and disadvantages as well as some critical risks.

First, they can source raw materials and components from wherever is cheapest or most conducive globally, and thus, become more competitive in the worldwide market place. In this regard, it is evident that the manufacturing sector was a first mover in taking advantage of this phenomenon.

However, global supply chains are vulnerable to disruptions and risks. Disruptions can have significant impact on the performance, profitability and fortunes of a business.

For example, in 2000, the large network and telecommunications company, Ericsson, lost more than 400 million euros when a fire broke out at a factory where Philips produced semi-conductors that were also used for Ericsson phones. Similarly, Apple lost many customer orders after an earthquake hit Taiwan in 1999.

In terms of risks there are two types: environmental and organisational.

Environmental Risks

These include natural disasters, hurricanes, earthquakes, tsunamis, etc. For example, the Kobe earthquake in Japan in 1994 impacted, amongst others, a California-based sound-card maker Kelly Micro Systems, causing a shortage of components, which resulted in disruptions in production and loss of revenue.

The Florida hurricane in 2004 caused huge shipping failures in the state impacting companies in Asia and triggered large losses.

In 2016, climate change resulted in the damage of coffee crops that Starbucks was heavily dependent on causing much disruption in both production and sale.

Given these issues, the transport and logistics parts of the supply chain are most vulnerable to natural disasters as ships, planes, and road links can easily be disrupted.

More recently, environmental risk also includes terrorism. Thus, deteriorating political relations between countries or political instability, change of regimes, etc., can also interfere with the free flow of goods and trade between countries and cause supply chain disruptions.

For example, Deutsche Post stopped delivering to Ukraine in 2016 due to political instability in the region. This impacted 620 German companies in the Ukraine.

 

In Turkey, the attempted coup in 2016 exemplified how vulnerable global supply chains can be to political upheaval. Without a stable government, supply chains will always experience problems at borders and check-posts.

Environmental risk also includes market risks. Shortage of skilled manpower in labour markets such as a lack of truck drivers or transport staff striking over wages can heavily impact the supply chain.

As supply chains become more globalised the number of link parties involved not only increases but the geographical distances between the primary company and the links makes it difficult to control and coordinate. Also, it becomes difficult to ensure compliance to norms, standards, and practices across geographical distances as well as across organisational boundaries.

Finally, there is a greater chance of theft, fraud, pilferage and other such risks within global supply chains given the larger number of players involved and the relative opacity of each step by the other.

Organisational Risks

These include risks within the boundaries of the organisation or supply chain such as the uncertainties of labor, of technology dependence, infrastructure dependence, and the integrity of the link parties in the supply chain. For example, the grid blackout on August 14, 2003, in the northeast region of the United States that significantly affected performance, is a prime example of this.

Further, if any link party or vendor becomes bankrupt or closes down, this would adversely affect the entire supply chain. There are also interactions and relationships between the organisation and the supply chain. Dissatisfaction over relations and interactions could result in less than optimal performance, lack of cooperation, or even conflict that could adversely impact supply chain performance.

Between local and global supply chains the risks are fairly similar. However, global supply chains tend to experience a higher degree of risk due to the numerous links between the wide network of parties and firms involved.

3PL Outsourcing

3PL Outsourcing – Strategic Considerations

Third-party logistics or 3PL Outsourcing, is an option exercised by a business, wherein parts of its distribution and fulfilment services are outsourced to a third party. This can occur for a number of reasons including outdated facilities and warehousing systems, as the business does not have the internal capabilities internally and could be experiencing a reduction in efficiency, an increase in time and costs, as well as a decline in customer satisfaction.

Such ramifications could lead to the competitive advantage of the business, its market share, brand reputation, or profitability being diminished. Thus, to stem the tide, businesses have had to look for external solutions.

In other cases, businesses may have set-up in foreign markets and need to globalise their supply chains to better serve their customers. However, in such instances, being able to completely owning their own supply chain could be prohibitive and an entry barrier into certain global markets. Here, businesses require 3PL support to bridge the gap.

However, businesses do not always have to outsource parts of their elements to third parties. Another method could be that of vertical integration, wherein a business invests in developing and owning some of the sections of the supply chain. This can be exemplified by the Ford Motor Company, which owns forests and steel mills. Another option businesses could use is to franchise the supply chain, which provides relatively tight control and integration over the system rather than outsourcing it entirely.

3PL vendors typically provide services such as contract warehousing, packing and distribution services, transportation management, and freight and inventory management. Here, it is up to the business to analyse the areas where vendors are required and plug the holes as they best see fit.

There is also the relationship between businesses and vendors as many businesses are keen to look to vendors who can align with their goals and objectives, processes, standards and performance, and quality parameters. Such parameters can even be in the form of an economic contract or agreement between the two businesses though it has the risk of allowing vendors to exit the contract as they deem fit.

Thus, depending on the business, its health, performance, market positioning, services, and many other factors, the decision to outsource to third party vendors almost always remains a strategic one. In this regard, there are a number of considerations that businesses must address before entering into such a strategic decision.

Transaction costs are always at the heart of the decision to ‘buy’ or to ‘make’. Here, costs can boost overall, long-term growth or help entry into a new market.

Performance and predictability of performance is another criteria. Businesses are likely to choose those 3PL vendors who offer efficiency in planning, adapting, and monitoring, i.e. where performance is predictable and risk is minimised.

Value addition is another consideration. Businesses are keen to partner with those vendors who add value through embedded knowledge such as competitor behaviour, deep-domain expertise, and market understanding as well as certain unique capabilities. However, such capabilities or value additions are only ‘order getters’ and not ‘qualifiers’. The day-to-day ‘qualifiers’ for 3PL vendors still remain delivery reliability, speed, and price.

However, price may not always be an incentive for businesses. A sudden price drop could arouse doubts and reveal larger problems within a vendor’s functional area or core capabilities.

Further, a 3PL vendor’s IT capability is another significant area that businesses may examine within their own decision-making process. As IT is seen as an enabler to reducing costs, supporting innovation and service quality, it is a core area of scrutiny.

Another area for businesses is the ease of interaction or customer relationship. It is evident that positive and trustworthy customer interaction goes a long way and businesses tend to stay away from vendors who have been known to be ‘difficult to deal with’. Positive dealings could include taking responsibility for notifications about likely delays or identifying parcels that were late, or informing customers in advance along with the reasons for the delay. In today’s highly competitive market, customer satisfaction is paramount and businesses require a vendor who will ensure that delays are minimal, are clearly stated, and can even go the extra mile when systems break-down.

Of course, vendor size is also important. Here the capacity, scale, and reputation come into play. Depending on the nature of the business, companies may opt to choose larger or smaller players within certain markets. This, once again, depends on the business’ own situation within its growth and development cycle.

Finally, there is also the capability for innovation as another option for the selection of vendors by businesses. Innovation is seen as a significant value add and a great customer satisfaction elevator. Here, vendors known to be flexible, unique, or standing out within markets may well be viewed positively, especially where there is less freely open information.

However, despite these factors there are still challenges in the strategic decision-making process for businesses looking to partner with third parties. Some of these include unreasonable and unrealistic expectations from a buyer. For instance, customers may have unrealistic (and unreasonable) expectations that 3PL providers may have the effect of reducing their annual transportation expenditures by 50 percent. Though this is factually incorrect this perception must be addressed before a deal is struck. Not doing so could lead to severe consequences going forward.

In the end business must internally decide whether to opt to use 3PLs. This depends on their own growth strategy, vision, functionality, costs and market forces. Once a decision has been made however, there may space to nurture the partnership given that the right-fit provider has been sourced. To do this there must be clear and transparent communication between both parties, an assessment of ground market realities, and a clear understanding of each other’s capabilities. Of course, the relationship is key and businesses function best with both sides working together and collaborating closely – and in the area of logistics, distribution, and fulfilment, this requires even closer examination.