Let’s face it: a lean and efficient supply chain is the goal—for everyone. But it's hard to achieve that alone, especially with the complexity of today’s global marketplace. It requires input from all aspects of the process, even the third-party logistics provider (3PL).
Can a 3PL truly up your game when they are not as immersed in your industry as you are? They can, and they do.
According to the “2018 22nd Annual Third-Party Logistics Study” published by Penske Logistics, Infosys Consulting, The Pennsylvania State University, and Korn Ferry, 73 percent of 3PL users, and 92 percent of 3PL providers, agree that 3PLs provide new and innovative ways to improve logistics effectiveness.
In fact, 81 percent of 3PL users or shippers, and 98 percent of 3PL providers, believe that using 3PLs has contributed to improving services to the ultimate customers.
Exactly how do they contribute to the bottom line? The value-add of a 3PL is best seen through six ways they help produce a lean and efficient supply chain in today's competitive environment.
1. Transportation Savvy
The right 3PL has transportation savvy that the shipper likely won’t have.
Transportation within a supply chain is complex as it involves varying rates, different transport modalities, and a range of levels of quality and service. Shippers know and understand the intricacies involved. But do shippers at one end of the supply chain have the corporate knowledge and experience of a 3PL when it comes to transportation savvy?
A logistics provider has many clients with multiple products that travel with different carriers that transport these goods from various points of origin to their destinations. This viewpoint provides them with a unique ability to benchmark cost and service based on many shipments.
Their experience is diverse, comprehensive, and deep when it comes to transportation. A 3PL's experience allows them to provide clients with transportation negotiation and management strengths that a shipper could not easily achieve on their own accord.
This ability includes experience and intuition when it comes to carrier selection, availability, measurement, sophisticated analytics, scale, and technology tools to ensure the transport is cost efficient and most reliable, both hallmarks of excellence in a competitive environment.
2. The Visibility Asset
A 3PL helps supply chain visibility become an asset to the shipper.
Supply chain logistics has many moving parts. Carriers are on the go and navigate through all types of obstacles (be it weather, traffic congestion, hours of service constraints, or dwell time). Warehouses and distribution centers store material that is handled multiple times while in transit.
Parts, inventory, and shipments travel with other material and shipments. At any given time, material must move location, by the day or even by the hour. It's handled by many people and often picked, sorted, packed, and loaded via robotics.
The watchword for a 3PL is to enable visibility. This means real-time transparency into the supply chain movement to know where something is at one moment, when it left there, when it will be at its next destination, and ultimately when it will reach the customer at the end of the supply chain. Is there adequate visibility throughout the process to enable control?
The best 3PLs make this possible.
3. Better Visibility = Better Decision-Making
A 3PL helps turn better supply chain visibility into better decisions.
Making the right decisions quickly is a challenge for supply chain management. It’s more than “where’s my shipment?” If a customer has 500 orders to fulfill, where are the 10 that are in jeopardy, or missing the customer’s expectation? Of those 10, which could cause you to lose a future sale?
Visibility helps drive the focus to the right priority and ultimately leads to the better decision. It also enables the best use of data to find the most efficient way to spend your transportation dollars. With real-time visibility, data is available to improve decision criteria for sales leaders and ultimately the buyer behavior of your final customer.
In addition, visibility of real-time rates for multiple services, modes, and options affords the flexibility to optimize customer requirements and your bottom line.
4. Supply Chain Know-How Is Different than Industry Know-How
A good third-party logistics provider will help to better understand your needs and industry and match those needs to proper supply chain resources.
Such knowledge will allow them to leverage their capacity, tools, and experience across multiple industries to bring outside value to your supply chain.
A 3PL need not have deep knowledge about the inner workings of an industry, though it helps. Rather, their real value to a customer comes with their experience and insight into their particular supply chain and how to maximize it to provide a competitive edge.
5. Mapping Value
A good 3PL can map value to service.
To map value to service, focus on our four-step approach: Discover, Develop Baseline, Design, and Demonstrate Value.
- Discover means learning and understanding the environment of the company and their shipments
- Developing a baseline means having a starting point to measure against: a ground zero of value
- Designing means implementing the best choices in carrier, service, mode, route, price, and other factors
- Demonstrating value means using this design to move the supply chain's needle in the right direction. In the end, all four steps lead to value, measured against the baseline established
While it may sound formal, it's very effective. With such a framework, value can be mapped and recognized. ROI becomes apparent. It’s easy to understand and recognize the value-add of the 3PL and their services.
The return on investment (ROI) results from each step of this approach. For example, a return is realized in cost savings within the transportation spend, or internal operational efficiencies, smart personnel redeployment, specific service enhancements, utilization of better data for decision-making and finally better service to your customer. Of course, if your customers are satisfied, your revenues will grow.
6. The Value of Experience
A valuable 3PL has focused experience where you need it within the supply chain.
We are all the sum of our experiences. Because a 3PL has experience moving different products in many industries to and from all parts of the world, they can provide insight and knowledge that their customers just won't have. Over time, the right 3PL as a trusted advisor had learned and improved from their experiences. They may then cascade this knowledge to all their customers’ supply chain needs.
The best logistics providers add superior value to your supply chain because “supply chain” is what a 3PL does. Their diverse exposure and experience in managing supply chain movements is a big part of what they bring to their customers. The 3PL's experience, tools, scale, and just street-smart know-how contributes to that value.
As you are measuring or evaluating 3PLs, always focus on this value and ensure that you receive every bit of their experience; they should bring continuous improvement throughout the tenure of their relationships with their customers. A solid 3PL relationship should help you leverage your supply chain as a competitive advantage – assisting you in keeping and earning new business.