3PL Challenges and Trends: How Technology Can Drive Value

Customer expectations are becoming more demanding across all industries, but that is especially true in the third-party logistics (3PL) industry. Companies are relying on their 3PL partners more than ever to help them succeed in today’s marketplace, which means 3PLs have to keep pace with their customers’ expanding expectations. What are some of the challenges and opportunities 3PLs face? How can technology help 3PLs and their customers achieve business value? Those are the main questions I discussed with Hope Federer, Senior Director of Professional Services at MercuryGate, during a recent episode of Talking Logistics.

3PL challenges and opportunities

We began our discussion by looking at the challenges and opportunities Hope sees in the marketplace. She notes that 3PLs are interested in deepening their relationships with their customers, as well as to get their foot in the door with new customers. One opportunity in this area is in transportation management. A 3PL can assume this function for a customer, freeing them to focus on their core competencies, while also reducing the customer’s transportation spend. Then as customers grow and add new products or markets, the 3PL can leverage the established relationship to expand into other services for the customer.

Another opportunity Hope sees is in the produce industry. A 3PL with a focused practice in this niche market can bring expertise to its customers. “Customers don’t have to do a lot of training on what’s needed every time they bring on a new 3PL,” Hope says. “They can go to their established 3PL partner and know they are in lock-step with what’s needed.”

Hope points out an ongoing challenge is the aging and retirement of truck drivers. “As younger drivers step in, they want a better work-life balance,” she says. “In response, many carriers are regionalizing their businesses. This poses opportunities and challenges for 3PLs. They may have the opportunity to work with the regional organization to deepen their relationship, but they may have to find new carriers to support other regions.”

TMS Requirements

I asked Hope what transportation management system capabilities are most important to 3PLs today and whether these are any different than five or ten years ago. Hope notes that, “3PLs are diversifying their portfolios in terms of the modes of transportation they support and the types of freight they handle as they expand beyond their core markets and the types of customers they support. With that comes a greater need for support from their TMS to meet customer requirements and for KPI reporting, both internal and external. Some 3PLs are now also negotiating rates on behalf of their customers, so being able to track carrier performance and provide visibility back to customers is key.

“Another trend we are seeing is 3PLs are beginning to dip their toes into the brokerage world. Therefore, a TMS must support brokerage operations, as well as enable rapid onboarding of carriers.”

TMS value proposition

What is the value proposition of a TMS for 3PLs? Hope says 3PLs are always looking for ways to streamline internal processes without negatively impacting the specialized standard operation procedures (SOPs) they have in place with customers.

“Automation is a big requirement for 3PLs. Everything from carrier selection to freight tracking and tracing capabilities, doing management by exception, and offering control tower visibility. The system must also allow customers, carriers and suppliers to log into the TMS do self-service functions. Dealing with the complexities of load and fuel rating is another area where the TMS can add value.”

Implementation best practices

Hope explains that all stakeholders should be involved at some level during the implementation. Executive management should set the goals and parameters. Subject matter experts, or business analysts representing them, should be involved to define the requirements and participate in system testing. “Everyone [who will interact with] the system in some way should be involved in the implementation,” she says. “Ask them what the user story is behind their requirements to understand what they really need and then show them how the system can support those requirements, potentially in a more efficient way.”

Hope also recommends using a process management tool and/or methodology to keep everything on schedule and to ensure nothing is overlooked. She says working with all stakeholders on change management is also important.

Questions to ask

Hope provided many more great insights on implementation best practices, but I wrapped up our discussion by asking her what questions companies should ask themselves to evaluate their needs and how technology might help. I encourage you to watch the full video for all of Hope’s insights and advice on those topics and more. Then post a comment and share your own thoughts and experiences.