Consumer Demand Helping Drive 3PL Industry Growth

In recent years, shippers have encountered new standards of velocity, market choice and cost for their products. Consumers are demanding better variety and greater availability at the lowest possible cost.

These demands put increasing pressure on retailers, who in turn, pass that burden onto their suppliers – further increasing complexity and intensifying pressure on supply chains. This has created what some in the industry are referring to as “supply chain impatience.”

In order to meet continually-changing consumer demands and expectations in an increasingly competitive market, shippers need a fast, efficient supply chain. As a result, many organizations are turning to third-party logistics providers (3PLs) and enhanced transportation management systems (TMS) to deliver the velocity, visibility, predictability and control they need.

Today’s Next-Gen TMS Meets Today’s Supply Chain Needs

Today’s supply chain requirements demand more advanced tools. Fortunately, as the supply chain has evolved, so too has transportation management technology – now providing organizations with greater visibility and control over their supply chain than ever before.

This next-generation TMS technology provides a comprehensive, graphical view of all shipments and dynamic dashboards of key performance indicators, while also incorporating relevant information from the web, including weather and traffic alerts, to give organizations a 360-degree view of their entire transportation network at all times. Some systems can even help predict the future and alert shippers of potential disruptions – allowing them to proactively take steps to address those disruptions in order to maintain smooth operations and high levels of customer service.

Combining Technology and Industry Expertise

The need for this next-gen technology has contributed to the significant growth of the 3PL market in recent years. But while 10-15 years ago shippers would engage with 3PLs simply as a means to access technology, that technology is much more ubiquitous and more readily accessible today. Yet, even as shippers have increased access to this technology, the 3PL market continues to grow. In fact, according to Armstrong & Associates, the U.S. 3PL market has grown by roughly 7% annually since 2009 and is expected to reach $170 billion by the end of 2016.

What is driving this growth is much-needed industry expertise. In addition to supplying technology solutions, 3PLs provide a deeper understanding of the businesses and the key processes that are necessary for supply chain excellence within the specific verticals in which a shipper resides. And this type of specialized knowledge is as critical as advanced technology, if not more. This experience, as well as the strength and depth of the 3PL’s network, is what enables the ultimate value delivery that shippers are trying to derive from a technology investment.

Understanding and executing upon on-time delivery is a given nowadays. 3PLs are being asked by shippers to create better metrics to provide both added understanding and a deeper perspective as to what’s occurring inside their business both yesterday, in real time and tomorrow. Status updates that are more timely and proactive are becoming essential in the supply chain: the standards keep getting greater, and so should we.

True Partnership to Drive Operational Excellence

While a transportation management system can have a significant impact on your supply chain operations, it’s not automatically going to “fix” your entire network. You need the right strategy and processes behind it. Shippers looking for technology to incorporate into their transportation operations should first take the opportunity to benchmark their entire network. Then, and only then, can they determine what technology solution, or if outsourcing to a 3PL, is best for their business.

For shippers, a 3PL should not just be prescribing a technology for your transportation network, but must truly have the ability to offer the operational expertise and ideas for continual improvement necessary to drive supply chain excellence. Transportation optimization is more than moving freight at the lowest cost or finding a short-term performance boost; it’s about continuous improvement delivered through smart, data-driven planning and efficient execution. If you do choose to outsource your transportation management, your 3PL should be a true partner, and today’s advanced TMS technology allow you to step “behind the curtain” and see exactly what is going on in your supply chain network. Shippers should find a partner that has a demonstrable ability to deliver and execute throughout the entire supply chain, creating both enhanced velocity and a high level of service to customers.

Frank McGuiganMr. McGuigan brings more than 25 years of experience in executive, operations and sales leadership to Transplace. He is currently the President and Chief Operating Officer for Transplace. Prior to this Mr. McGuigan served as the President of Transplace’s Transportation Management and Software as a Service business (SaaS). Mr. McGuigan joined Transplace during the acquisition of SCO Logistics in April 2011, where he was President and CEO. Mr. McGuigan has certifications as a GE Six Sigma Green Belt and in GE Project Management, and in 2012, he was recognized as a “Pro to Know” by Supply and Demand Chain Executive. Mr. McGuigan is a graduate of the United States Merchant Marine Academy at Kings Point and is a retired Lieutenant in the United States Naval Reserve.