Commentary | IT Matters

3PL Value-Adds Mean Millions

Tags: 3PL, Inventory Management

Greg White, CEO, Blue Ridge, 404-214-0856

You hate to say it, but everyone knows it: Today's third-party logistics (3PL) relationship is transitional. Many 3PLs live and die by the freight rates they offer clients.

Why? Because your shippers see the relationship as transactional, and trucking-focused. Shippers write checks for shipping expenses nearly every day, and freight is in the forefront of their minds. A hundred dollars here or there may be the difference between a long-term relationship and a long kiss goodbye. 3PL providers often get dumped for cheaper trucking—sometimes on just a few routes.

The transitional nature of the shipper/3PL relationship is an issue for nearly every player in the industry. Even the largest providers are not immune, and many are working hard to offer services retailers and manufacturers truly value, to create partnerships that are beneficial and long-lasting for both parties.

While 3PL providers search for opportunities to cement the relationship, shippers are also looking for more value from their supply chain. Retailers face demand fulfillment and inventory alignment challenges every day, because in today's market stockkeeping units (SKU) counts are high, yet specialization is more important than ever. Brands and retailers know their core business, yet many have concerns about their ability to manage their inventory investment properly.

With awareness of the complexities of retail and manufacturing shippers' inventory landscape, some 3PLs are setting themselves apart with offerings that truly add value to their customers. The question is, if shippers aren't using them, are they really of value?

Rising Above the Crowd

Some 3PLs have tuned in to their customers and found ways to add value that shippers find significant, cementing their relationships and setting themselves apart from the crowd. These providers are offering services that wouldn't ordinarily be thought of as 3PL, but align with their position in their customers' supply chain.

Today, so many 3PL providers take on full responsibility as their customers' transportation and distribution arm— managing inventory movement, storage, and fulfillment—it only makes sense that providers can increase ROI to their customers by managing demand and replenishment for brands and retailers. These logistics partners also provide insightful analytics that deliver supply chain visibility, and planning capabilities that improve sales, traffic flow, space utilization, labor planning, and even SKU rationalization initiatives.

Logistics providers can truly take on visionary roles. Initiatives such as vendor managed inventory (VMI), and collaborative planning, forecast, and replenishment (CPFR) managed by logistics partners present a new environment for manufacturing and retail trading partners to work together.

VMI and CPFR initiatives have struggled to gain mass acceptance for a number of reasons, not the least of which is reticence by retailers to hand over control of their inventory purchases to the very party selling them the product. Using their logistics partners, retailers can offload the task of demand planning and product line replenishment to 3PLs with the full comfort that there is clear accountability and common interest in executing the VMI and CPFR strategies based on the retailer's goals.

Benefits Across the Board

Improved demand management not only deliver benefits for shippers, but the efficiencies extend to the 3PL themselves, as well. With intimate knowledge of the forthcoming orders for days or even weeks, 3PLs can put supply chain efficiencies in place to create transportation cost savings.

New delivery methods make technology offerings more accessible and easily deployable by 3PL providers. Software-as-a-Service (SaaS) technologies are not only faster to implement, but also provide the on-demand flexibility to employ capabilities only to the extent that customer needs require. 3PL providers need not make large investments in infrastructure that may not gain adoption. And providers can rest assured that, chosen carefully, today's enterprise-class SaaS providers offer solutions that rival or surpass those of legacy software providers.

Today's visionary logistic providers are delivering real sales, cash, and profit benefits, while cementing their position business partners rather than just vendors. By identifying the value-adds that brand and retail shippers want, logistics providers can position their offerings to bring millions in benefits to their customers and make the relationship stick.