2017 3PL and Supply Chain Technology Update
Update on 3PL-Customer Interaction and Technology InvestmentWhat Do 3PL Customers Want from Their Logistics Providers?
It is a complex, changing world that is often very confusing. Throw yesterday’s projections out the window! Now consumers are changing all the rules, causing fluctuations and disruptions in the supply chain. It is challenging for manufacturers and retailers today. Navigating the choppy waters of fluctuating consumer demand can be tricky. New regulations are adding cost and causing new wrinkles in the supply chain. It seems like everything is changing.
For help, companies are turning to their third party logistics providers. 3PLs need to wear a variety of hats these days and be ready for anything. By offering a wide array of services, 3PLs are better able to attract and retain customers.
The question is, what do customers of 3PLs want and need? Here are some of the most popular responses:
- Help with fulfillment and last mile delivery
- Ways to reduce inventory to free up capital
- Ways to decrease inventory carrying costs
- Optimized supply chain networks with quicker reaction time
- Ability to bring new products to market faster
- Help with IT-based services
- More access to technology to give them a competitive advantage
- More real time information and data driven solutions
- Logistics partners who can collaborate and reduce freight costs
According to the 2017 3PL Study by Capgemini Consulting, PennState
Shippers Outsource to 3PLs to Help Conquer Some of the Biggest Challenges Today:
- Shifts in shipping capacity
- New demands within final mile delivery of orders
- Increased shortage of drivers and impact of new driver regulations
- Managing changes in consumer behavior
- Managing more demanding customer expectations & shippers’ desire to respond
- Increased segmentation of supply chains because of growing e-commerce market
How Do the Expectations of 3PLs and Shippers Compare?
While the IT Gap has steadily declined since 2002, there is still opportunity for improvement.
2017: The Year of 3PL Technology Investment
Research studies conducted in 2017 reveal a trend in investment in technology. The legacy systems that are still in use by many third party logistics providers do not have the functionality and sophistication to handle fulfillment operations. Between the sheer volume of transactions and the required ability to be able to pick by “each”, legacy systems are getting left in the dust, limiting the ability of 3PLs to properly service their clients. Because of this, the 3PLs are limited to attracting shippers that need to handle and process inventory on a case or pallet basis.
3PL fulfillment operations are on the rise. The need by customers for direct-to-consumer (D2C) order fulfillment has increased dramatically over the past few years and continues to build.
Today 3PLs are purchasing more flexible warehouse management systems that can more easily and cost effectively be adapted to meet the changing needs of their customers. 3PLs understand that being able to adapt quickly to meet customer demands gives them a tremendous competitive advantage.
3PL Technology Investments
According to the 2017 Annual Warehouse and Distribution Center (DC) Equipment Survey conducted by Modern Materials Handling Magazine, spending on technology is trending upward, most notably for information system solutions.
The study conducted in January 2017 by The Peerless Research Group (PRG) indicated a likely correlation between the continued sustained growth in e-commerce and the pressures exerted on operations for fulfillment, notably D2C order fulfillment.
Factors Fueling the Increased IT Spending by 3PLs and Supply Chain Operations
The trend in omnichannel retail sales and rise of consumer expectations for fast delivery are driving considerable changes in the supply chain. In purchasing technology, 3PLs are investing in order to meet core business objectives related to the following issues:
- Need to keep costs under control
- Need to increase throughput
- Availability of labor
- Cycle times
- Size and volume of orders
- Increased need for trading partner collaboration
- Need for capabilities in handling multi-channel fulfillment
It’s all about the data. 3PLs are leveraging their capabilities and IT systems for competitive advantage and are using them to optimize the operational effectiveness of organizations. The most successful 3PL-customer relationships tend to function as strategic partnerships. Data and processes and shared amongst the two groups that enables optimization of networks and operational transformation. Both customers and 3PLs find the transparency and use of data to be critical for making better decisions, boosting productivity and throughput and for increasing new product speed to market.
Having access to
Conclusion
2017 is a major year for change across the supply chain due to changes from consumer-driven activity. Omnichannel retail and e-commerce fulfillment is fueling the purchase of technology, including IS systems, material handling, robotics and more. Although supply chain operations such as retailers and manufacturers continue to outsource to 3PLs for transactional activities, 2017 has seen a definite increase in the outsourcing of IT, strategic and customer-facing activities. There continues to be an increased need for greater transparency and collaboration across the supply chain as pressure from e-commerce fulfillment continues.
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