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Time is ticking for 3PL collaboration



Maarten Baltussen, JDA Software

Maarten Baltussen, VP EMEA at JDA Software investigates whether 3PLs could be the solution to Operations Directors’ omnichannel woes internationally?

In order to meet the demands of today’s omnichannel environment, retail operations directors are racing to transform their businesses’ agility. Closer collaboration with the third-party logistics sector (3PLs) does not immediately come to mind as a solution to help overcome this issue. However, 3PLs could in-fact be in the ideal position to enable operations directors to do just this, through helping retailers modernise their supply chain operations using data.

Historically, partnerships between 3PLs and their customers have been focused on short-term, tactical objectives, such as cost reduction and improved service levels, not on long-term strategic advantages. Today 3PLs are at a crossroads. In order to become a true strategic partner, many will need to undergo a technological change. They must act fast, as this new environment presents an ever-growing threat to their customers’ survival.

In data we trust
A recent study by Capgemini revealed 72% of businesses plan to increase their use of outsourced logistics services in the future. Additionally, it highlighted that 98% of them believe the continued success of their global supply chains depends on managing data and being able to make more informed decisions. Despite this, only 55% thought their 3PL provider had the technological capabilities to meet their aims.

So, why is there is still a perception that 3PLs aren’t investing in newer IT infrastructure? This is firstly because of the short-term nature around customer relationships, which can create business volatility and make long-term investment in new technology risky. Secondly, many 3PLs in the past haven’t had the in-house expertise to understand, evaluate and implement new, advanced systems. Thirdly, some 3PLs have simply had insufficient or outdated technology stacks that cannot support the advanced systems required.

However, thanks to advances in technology, vendor services and cloud platforms many 3PL businesses are overcoming these challenges, allowing them to position themselves as clear strategic partners to operations directors and their businesses.

The pool of strategic data
3PLs already possess a wealth of global and local market data on their customers’ customers. They know who is ordering what products; how product demand varies from month-to-month; how customers like to receive their shipments, and more, but this data is only being applied now at a basic level. With improved approaches towards embracing technology, it could be used to deliver real strategic insights to help retail operations heads effectively manage volatility within their supply chains.
Just imagine the benefits that could be reaped from a 3PL business which could provide consumer insights in real-time, directly to their customers’ demand planning and sales forecasting departments. Or if they were able to inform operations teams on how to create the best product bundles, value-added services or delivery options based on actual consumer needs. Having access to this knowledge would enable more intelligent and profitable order fulfilment on a global scale, as well as a consistently seamless omnichannel shopping experience. Furthermore, the 3PL providing this knowledge would immediately stand out to an operations director as a strategic partner.

This vision might seem futuristic or unrealistic to many operations directors, but a leading few 3PLs are already moving in this direction. They, along with their retail customers, have come to understand that business competition is increasingly being won through supply chain efficiency.

It’s an exciting time for business as a whole, as we are likely to see a greater number of retailers increase their reliance on outsourced logistics. The key to lasting business success is to develop strategic relationships with a 3PL provider that is able to help deal with the volatility of omnichannel on both a domestic and an international scale. Central to this is co-operation between retailers and 3PLs to develop intelligent customer insights.

This feature first appeared in the third print edition of eDelivery Magazine, EDM03

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