Commentary | IT Matters

Leveraging Technology to Accelerate Productivity and Profit

Tags: Logistics I.T.

Chuck Fuerst is Director of Product Strategy, HighJump Software, 800-328-3271

Companies are increasingly turning to logistic services providers to run their manufacturing, warehousing, and transportation operations more efficiently and at less cost than they can run it themselves. Particularly in the past few years, many companies have outsourced logistics to save on operations costs and labor. This puts the crowded third-party logistics (3PL) market at risk of becoming a commoditized business with a reputation of providing only execution-based services, rather than value-added, strategic/operations.

Services that increase a client’s productivity will help a 3PL win new business, satisfy the needs of a more diverse client base, and rise above the perception of being a commoditized business. These additional services may include returns processing, pallet shipping, and kitting. By working even more intimately with a client operations, 3PLs can gain insight into other ways to help maximize/efficiency.

For example, 3PLs can capitalize on clients’ expectation and need for real-time data by providing access to their own inventory, orders, and even billing through a secure Web portal. This helps clients make informed decisions with real-time information and visibility of demand, order status, and potential/exceptions.

By offering these expanded, value-added services, 3PLs can gain and retain a wider range of clients. The challenge for 3PLs then becomes finding the most cost-effective technology infrastructure that can adapt to the expanded range of services it provides, track various types of inventory and item attributes, and – perhaps most importantly – correctly invoice clients for each service to ensure/profitability.

Making value/profitable

Providing value-added services requires infrastructure to support the diversity of products, clients, and needs. An investment in enterprise logistic applications – including visibility; data, order, transportation, and warehouse management; and RFID technology – is common. Warehouse management systems (WMS) with adaptable architecture allow 3PLs to quickly create new offerings and workflows inherent with value-added services. A WMS will also enable rules to be granular to the client, customer, and supplier levels. A multi-tenant architecture with a business process configuration tool is one way to help enforce the exact supply chain preferences that each of the 3PL;s clients (and end customers)/require.

The breadth of service offerings will help drive productivity for the client, but still has to be profitable for the 3PL. Billing can be a thorny issue, as 3PL clients are especially concerned with “cost creep.” Understandably, they watch invoices carefully and expect details for questionable charges. For 3PLs still using manual billing systems, this is a nearly impossible task. Manual systems usually include a tallying of transactions, with all of the conventional trappings of working with paper. If a client questions a charge, it is usually more costly to jump through the hoops to find the back-up data than it is to simply credit the amount in/question.

Automated billing systems reduce the chance of leaving money on the table. They generate charges automatically each time a warehouse worker performs a task. Billing can be done using time-based or activity-based methods, and all clients have their own distinct billing attributes. A robust billing solution gives 3PLs full visibility into costs compared with what was invoiced so they can forecast more/accurately.

The future of 3PL/services

3PL services will continue to evolve to meet clients’ needs and the shifting economics and politics of the marketplace. After a 3PL has built a solid and efficient infrastructure, including a warehouse management system and billing system, the next phase in efficiency will include labor/management.

Labor is the leading cost in most warehouse and distribution operations, so 3PLs that leverage labor management technology can truly provide outstanding service for clients. This system helps track the average time it takes to complete a task, recommends labor standards and timelines to complete tasks, as well as measures workforce responsiveness. It can identify employees whose performance consistently exceeds standards, as well as those who need/assistance.

With the right investments in technology now – and by keeping an eye on future needs – 3PLs can make their business more attractive to current and potential clients by offering additional value-added services, superior inventory control, and overall cost reduction. This proactive response to the marketplace will help any 3PL stand out in a commoditized logistics industry while adding to the bottom/line.