The Fastest Growing 3PLs Spell Success “C-L-O-U-D”

Third-party logistics (3PL) companies have it tough. Not only do they need air-tight control of their data, 3PLs need to prove to customers that their data is safer than Fort Knox. In today’s world where one person in a black hoodie sitting at a coffee shop can do more damage to a business than a 10-ton bomb, that’s a big ask.

So, how can 3PLs do this? The big debate is on-premise or cloud. Years ago, the biggest knock on cloud-based systems was that it was unproven. Now, the benefits of cloud are well documented: resource light, low maintenance, highly scalable, safe, redundant, low total cost of ownership (TCO), low capital expense and headcount requirements, it’s deployed quickly, and uptime has more “nines” than a deck of cards. But, when it comes to 3PL specifically, securing compliance and performance is more than a checkbox—it’s a market differentiator.

Compliance Whack-a-Mole

How many IT administrators does it take to establish security compliance? From the analysis and gap assessment all the way to certification, it can take months to make headway. Rinse and repeat for each standard, such as SOC, CSA, PCI, ISO, MPAA, FIPS, and myriad others. Then there’s third-party auditors, consultants, and specialists a 3PL should consider bringing in if it doesn’t have an IT Swiss Army Knife to facilitate compliance.

When it comes to security, a cloud provider takes on the brunt of these responsibilities for 3PLs, whereas an on-premise 3PL must chase down the latest requirements and resources to achieve compliance. Administrators for a cloud-based 3PL still need to configure their systems and monitor security updates, but these are provided by a cloud partner. This gives 3PLs in the cloud a free hand for other areas of site security, such as physical on-site inventory or traceability. The result is better security in all areas of the warehouse, faster. 3PLs should get out ahead of compliance regulations as much as possible, because new customers may not wait. And, if you’re chasing down compliance certificates after-the-fact, that doesn’t exude confidence to potential customers.

Keep Calm and Carry On

What are your RPO/RTO parameters? If you’re not on the IT side of things, think of these as how much data your 3PL can stand to lose during downtime (Recovery Point Objective) and how long you can sit with the lights off before the lights go out on the business permanently (Recovery Time Objective). Generally, the smaller the window for RPO/RTO, the tighter the data recovery.

Many 3PLs with an on-premise system perform recovery protocols a few times per day (every four hours, for example). Costs for tighter RPO/RTO parameters can drop jaws, making 3PLs choose between costs and the customer. Going back to gaining customer trust, a 3PL can’t afford anything less than zero tolerance when it comes to data loss and recovery.

The tightest recovery available, mirroring, performs backups at a transactional level. This can be backbreaking when it comes to costs and resources for on-premise systems, but a fraction of the price for cloud. On top of this, cloud builds in redundancy, placing data in multiple DCs to ensure data is recoverable.

The Eye in the Sky

From Black Friday to back-to-school, 3PLs need to accommodate every customer’s busy season. It’s a tough task, and the potential for data spikes never stop. The only reliable trend is that more and more data will hit systems. An on-premise 3PL must be on top of replacing its hardware—at least every five years is generally a good timeframe for servers, if not faster. The onus is on its administrators to catch the spikes, analyze the data, and provision more resources. Cloud partners offer monitoring, alerting and can add more computing power on-demand. Essentially, you’ll never be short-changed when spikes hit. Also, a good partner will provide data analysis to identify scaling trends and cost-saving opportunities.

On the other side of adding computing power for spikes is scalability—the long game. Buying hardware is like buying a new car. Your investment will only last until it breaks or you outgrow it. It’s a lit fuse from the day the purchase order goes through. With cloud, you pay for what you use without any procurement; it’s an operational expense. This means a 3PL’s data infrastructure is always ready to onboard new customers.

Not If, But When…

Can an on-premise database do most of what cloud does? It’s technically possible for those with a grove of money trees out back. Ask any CTO or IT manager how much on-premise costs, how long it takes to implement, and how much time and resource allocation it takes to maintain. On-premise is like building a bridge while trying to drive across it. It’s clear that for most 3PLs, cloud makes the most sense for profitability, operations, and most importantly, customer satisfaction.

Today, the question isn’t, “Is cloud right for my business?” It’s, “How long can my on-premise system hold on until we switch to cloud?”

Tomorrow, the question will be, “Why didn’t we switch to cloud sooner?”