3PLs and Carriers: Desperately Seeking Tech Solutions

Shippers are a demanding bunch. They want their goods picked up and delivered at the right time and to the right place—every time.

They expect shipments to be transported without damage, while complying with security regulations and customer mandates. They need reporting capabilities, online access to data, and superior customer service.

Oh, and they want to know exactly where their shipments are at every step of the supply chain, so they can track and make changes to goods in transit.

And why not? Satisfying their end users takes rigorous dedication to excellence, so shippers, in turn, expect it of their carriers and third-party logistics providers.

Providers increasingly turn to technology to meet, and with hope exceed, the expectations of these demanding shipper customers.

This creates an interesting dilemma: should providers spend time and resources to develop internal technologies to handle everything from cube optimization to supply chain visibility, or do they partner with niche technology companies to offer such services?

Some providers continue to push the technology envelope-Transplace and D.W. Morgan, for example, tout their technology solutions as much as their supply chain consulting and logistics services; carrier Horizon Lines launched its own technology subsidiary, Horizon Services Group. These companies view their proprietary technology expertise as a competitive advantage.

3PLs Not Going IT Alone

But many logistics and transportation providers are opting to garner IT expertise from third-party technology vendors. These providers outsource technology development for the same reasons their shipper customers outsource supply chain functions—to focus on core capabilities, and cut down on internal resources required to develop, maintain, and upgrade technology capabilities.

Take MOL, for example. The global shipping conglomerate fielded requests from customers-including Limited Brands and Gemini Shippers Group-for a way to navigate their contract data that would alleviate tedious manual communication.

MOL partnered with technology firm GT Nexus, which now provides Contract Viewer, an on-demand solution that gives MOL customers online access to their fully digitized service contracts. These contracts include real-time rates, surcharges, service terms, and amendments.

“This capability has proven to be a key service differentiator,” says Rich Hiller, vice president of transpacific trade management at MOL.

Alameda, Calif.-based GT Nexus reports a rapid expansion of such service provider partnerships. The company was recently selected by global freight forwarder Carmichael International to implement a global data hub that will marry customer shipment information with Carmichael’s transportation and logistics partners worldwide.

It also provides a data quality management program that has improved container visibility for global logistics provider Schenker, and lists Kerry Logistics, APL, Crowley, and other carriers and 3PLs as clients.

The company owes its success with logistics providers to its ability to link their internal systems and expose them to a broad customer constituency, says Greg Johnsen, GT Nexus co-founder.

“Logistics companies need collaborative solutions-for example, systems that can handle multiple organizations in the same environment, model their interactions appropriately, and make sure data is not viewed by the wrong party at the wrong time,” Johnsen explains.

“It is natural for even the most forward-thinking providers to hesitate to build such complex and expensive technology on their own.”

Another technology vendor seeing keen interest from the 3PL market is CAPE Systems. The company, based in South Plainfield, N.J., provides 3PLs and carriers with warehouse management and control systems, automated technology such as pick-to-light and wireless picking systems, supply chain visibility, dashboard technology, and load-planning software.

“The 3PL sector is an up-and-coming market for new technology solutions. Many 3PLs have expressed interest in our systems,” says Dave Sasson, CAPE Systems’ chief operating officer.

Sasson believes customer demand is driving logistics providers to outsource technology.

“A pharmaceutical company using a 3PL to distribute its products, for example, needs inventory accuracy, visibility, and the ability to track lot numbers. If its 3PL doesn’t have the right technology to offer these capabilities, it will not get the business,” he says.

Waiting With Open Arms

In the 3PL marketplace, particularly, intense competition for shipper business has helped nudge providers into the arms-and pockets-of tech vendors. With mega mergers giving some 3PLs huge market clout, and new providers springing up daily, those that offer superior technology services will survive and build their business.

In addition, most 3PLs do not have the in-house IT infrastructure required to develop, maintain, and upgrade the high-octane, capability-specific solutions shippers demand.

“Instead, providers look for technology companies that offer flexible and scalable turnkey solutions providing 3PL customers the features and functionality they need,” says Sasson.

While technology companies such as GT Nexus and CAPE Systems stand to benefit from 3PL partnerships, they are not alone in declaring the trend’s existence.

Ninety-two percent of 3PL users responding to Georgia Institute of Technology’s 2006 3PL Study agree that IT capabilities are a necessary element of overall 3PL provider expertise; but only 35 percent report satisfaction with their 3PL providers’ IT capabilities.

Given those high expectations and 3PLs’ current poor IT performance, it is no wonder 3PLs and carriers are heading for the technology hills.

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