From hoarder to helper
3PLs switch perspective on IT integration and data sharing with shippers.
By Geoff Whiting
As systems expand and information moves across companies at lightning speeds, third party logistics service providers are changing their mindset from data hoarders to profound information sharers to secure customers.
To keep services cheap and easy, 3PLs are being forced to look at existing systems for value-added processes and leaner operations. Investing in new technology and data sharing is
one way 3PLs not only differentiate themselves, but also allows them to construct partnerships with customers around services that benefit both parties.
“Those that will excel in the future will quickly abandon any hold they have on their customers based on the fact they had them captured, and will move toward a consulting service beyond just being a transaction provider,” said Bob Leeds, SAP’s director of industry marketing for transportation and logistics.
Part of this change has already taken place within the industry according to several senior 3PL executives interviewed by American Shipper.
“Contrary to popular belief, we deal with people far more than with computers, and a well-oiled supply chain depends on the daily interactions between all of those people,” Encompass Global Logistics’ Chief Executive Officer Asa Cheng said. “Our aim is to make sure that every individual, from warehouse worker to management executive, can handle the technology we use and garner whatever information he or she requires.”
Mike Stark, president of Pacer Distribution Services, said, “Technology is a critical aspect of our relationships with customers. I like to say he who has the most data management and manages it well wins the game. I say that because the better you can manage customer data, the faster you can help customers to respond to their needs.”
“In the 3PL world, technology is a key focus and has become more predominant over the past few years,” said May Chew, APL Logistics’ vice president of technology services. “Most 3PLs are reactive, but now we’re looking at technology to be more proactive.”
The livelihood of 3PLs depends on effective communications and exchanging information across as many customer systems as possible. For a time, the industry viewed this approach as a one-sided way to lock customers into contracts and make them dependent on 3PL systems, but the advent of SaaS (software-as-a-service) and cloud offerings is making this quickly a thing of the past.
“What’s happening for 3PLs is that it’s becoming harder to secure customers through a dependency on technology,” Leeds said. “With cloud-based solutions, customers can get access to a global logistics network from a global logistics provider and get all of their connectivity from that network.”
These networks mean 3PLs risk becoming just a cog in the machine. Customers pairing outside networks with integration standards that have slowly developed – but are finally beginning to arrive – mean 3PLs must look at improving relationships with their shippers to keep existing or secure future business.
That doesn’t mean deep integration has gone completely out the window as a way to build relationships. It can still have an impact.
“There comes a point where it’s more difficult, but not impossible, (due to deep integration) to make a change,” Stark said. “It makes it less likely that, unless you screw something up, they’re going to come in and take their business away from you. At that point, we both have a vested interest in getting it resolved.”
The previous benchmark for 3PLs was achieving and providing operational efficiency. This, however, meant the 3PL was doing its basic job. With the new systems now available, data has replaced operational efficiency as the 3PL’s most valuable asset, and the key to their future. 3PLs must step up to the task of making recommendations to their partners because they’re in a place not only to capture data, but also analyze it.
Leeds said, “This means they’ll look at technology as an enabler and as a way to provide information and more services. They’ll still use technology as an advantage, but it’ll have to be more from a service perspective rather than securing tethered customers because of the cost of switching providers.”
“It is really the effective use of technology and not just the technology itself,” Cheng said.
Chew echoed the sentiment, by adding, “Customers don’t necessarily care about the technology itself, like cloud computing, what they ask us is ‘how can I operate cheaper than yesterday?’”
Part of the change in approach is moving away from a commoditized industry toward one built on mutually beneficial contracts (for more details, read the September issue article “3PLs make the pitch,” pages 8-15), which requires two interested parties. Previously, visibility from a 3PL wasn’t an issue because they weren’t being paid for it; they were looked to as the lowest-cost provider by most shippers.
According to Leeds, “the 3PL has to be met halfway and the shipper has to accept the fact that, in most cases, they can’t continue to treat the 3PL as a strict vendor-commoditized relationship. If they continue to do that, then the 3PLs will have a tough time.”
This may be an industry mindset change that takes time to germinate. “Price is always important, especially with the economy as it is right now,” Stark said. “We differentiate ourselves with services, but we still have to be price sensitive.”
One area for 3PLs to address in this shift is to analyze how best to present useful data to partners. The easiest way currently is to allow customization of reports generated via platforms. This not only reduces the amount of reports customers will get, but also helps make them more useful and easier to read. Customer-based customization is a simple yet effective way to align 3PL actions with shippers’ interests.
“Making sure we just have a good solution is not enough, we also have to provide quality around the data and integration with all of our customers’ trading partners,” Chew said.
Part of that path is getting services on the Web, not just providing a Web-based portal for customers to login. Going to a Web-based service will allow 3PLs to introduce more real-time data through RFID (radio frequency identification devices) and other equipment. This will allow 3PLs to show shippers where things are in transit and to be more dynamic in logistics management areas like warehousing.
Leeds said the evolving focus of the 3PL, when it comes to investments, needs to address shipper-facing applications. He gave two suggestions for 3PLs as they start to build these new applications: make it feel like a social media site and build first for mobile devices.
Leeds said developing a platform to resemble social media will have an interface with which users are already comfortable. At the same time, software developers can spend more time on the core services and less time on the final touches.
Developing platforms for mobile devices is a key step for two reasons. It addresses an often existing detriment and aims your platform at devices used for rapid-response situations. Older customer-facing portals aren’t built for mobile devices, creating a myriad of issues when using a smartphone or tablet. By building for these mobile devices, companies not only address the current data sharing trend, but they make services that have looser requirements and can be accessed by more PCs.
Another area for 3PL IT development is catering to the younger workforce. “You can’t skip it and just introduce the technology without having the people in place that understand not just how to use it technically, but also how to use it functionally,” Leeds said.
Common practice used to be using different platforms for each type of operation. “This created a lot of bottlenecks as all the platforms jostled with one another to get a job done,” Cheng said. Streamlining operations removes bottlenecks and expands a platform’s reach.
Meanwhile, shippers continue to seek to expand their operations, opening themselves to potentially more 3PL partners. This expanded 3PL pool could include a larger number of small regional players in emerging markets, but also introduce larger 3PLs whose offerings become increasingly competitive as they support more of a shipper’s markets.
As customers expand and competition increases, 3PLs are expected to forge relationships that enhance their customers’ experience and business, no longer just competing on price alone.
More 3PLs are now shoring up their IT and preparing for future shipper demands. “It used to be every year customers want something new, now it’s every three months when customers ask what they can do better, cheaper, or easier,” Chew said.