How Digitalization Helps 3PLs Innovate to Differentiate

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Emtec Digital Think Tank

November 23, 2021

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digitization in 3pl

Global retail via e-commerce witnessed a dramatic boom in 2020 with sales exceeding $4.2 Trillion1 globally, indicating a remarkable shift in buying behavior. Several factors, including an elevated demand for essentials and the global shutdown of physical retailers, propelled this dramatic transition to online sales. With this shift, one global need emerged — the need to accelerate supply chain operations.

Leading suppliers turned to third-party logistics (3PL) service providers to help shippers scale quickly. This immense market potential led to the rise of several new competitors; and traditional 3PL firms were now forced to find ways to differentiate and innovate to remain competitive. Legacy logistics technology is so ripe for rapid innovation that the United States has recently increased investments in logistics startups to $15 Billion2 annually. Governments worldwide have re-classified logistics and transportation as ‘critical infrastructure’, positioning 3PLs to innovate while remaining globally viable.

Several key trends have since emerged across the 3PL sector –

  • Crowdsourcing last-mile deliveries: More small and medium businesses are looking to partner with local delivery partners for their delivery operations.
  • Contingency-backed supply chains: The pandemic has revealed weak links in global supply chains, forcing logistics companies to build contingency plans for risk mitigation; and 3PLs are a core pillar within these plans.
  • Infrastructural boost for 3PLs: As capacity and consumer demands increase, infrastructure needs such as additional trucking and shipping fleets along with warehousing and storage facilities will become critical.

Catalysts for digital differentiation in 3PL

Digital transformation offers 3PLs a way to differentiate while serving multiple operators simultaneously. The trends outlined above including building infrastructure capacity and contingency-backed supply chains call for more intelligent freight platforms and better material handling solutions.

Some digital transformation catalysts include:

  1. The rise of Digital Freight Matching platforms

    Digital freight matching platforms are cloud-based platforms that match load-carrying capacities to freight. They use mobile or web-based applications to display available freight carrying mediums to sellers who have freight to ship. Also known as Freight Uberization, digital freight matching can cut down wastage in both capacity and transport, giving 3PLs a competitive digital edge.

  2. Laborious manual processes

    Laborious manual processes in supply chains such as manual ticketing or receipt generation are ripe for digital overhauls. 3PLs who automate manual processes, even incrementally, can differentiate their supply chain services.

  3. Obsolete legacy systems and siloed data

    Most supply chain data lies buried in nested folders across multiple legacy systems. Upgrading siloed systems to an integrated data network with data visualization (dashboards, reporting), and automated retrieval systems gives 3PLs real-time access for more informed decision-making.

  4. Capability challenges

    Capability challenges can arise from shortages of service partners and insufficient data to deploy shipments on time. These provide an exciting opportunity for 3PLs to scale using intelligent technologies and digital partnerships to address these challenges while creating a niche for themselves in the global supply chain.

  5. Technology overload

    Technology overload pertains to the rapid application of technological components without understanding which component is suitable for which function in the supply chain. For 3PLs, technology overload can be avoided by expert input on how to digitally transform without creating multiple sets of data points or overlapping tech interventions.

  6. Shipper network complexities

    An incredible amount of time is spent matching shipping loads with freight carriers, creating wastage across the enterprise. Innovation in shipper networks (advanced digital platforms) can resolve these complexities while oiling a significant cog of the 3PL operation.

How 3PLs can accelerate digital transformation

Successful innovation for 3PLs involves transformation efforts across systems and processes to benefit employees, customers, and operations. Building an innovation program that serves these three vital pillars creates a foundation for long-term growth. Here is how 3PLs can innovate for –

  • Digital Operational Efficiency

    Digital transformation can optimize 3PL operations for more efficiency and higher profits. Operational efficiency in every regard – be it material handling, storage systems, or freight optimization – is enhanced through digital enablement.

    • Robotic Process Automation (RPA) – RPA can effectively reduce manual labor across all departments, especially material handling and storage. By automating scheduling, data gathering and invoicing, and report generation, 3PLs can optimize critical processes throughout the supply chain.
    • Augmented Reality (AR) – Information on material weight, fragility, etc., delivered through wearable devices helps material handlers prevent loss and inappropriate handling of delicate cargo.
    • Modular Automated Storage and Retrieval Systems (ASRS) – Modular ASRS are integral to scaling effectively in a cost-efficient manner. Industry-wide use of modular ASRS ensures optimum space utilization by creating modules that fit into storage spaces according to their sizes.
  • Digital Employee Experience

    Applying Machine Learning algorithms to employee data such as requests for leave or transfers, raises, appraisals, etc., can help track employee trends – garnering insights into better HR management processes. 3PLs can then leverage this data to generate employee programs that keep people motivated, inspired, and productive. Small steps such as giving employees remote working options and digitizing systems to reduce day-to-day manual labor can cut down on costs while elevating employee morale.

  • Digital Customer Experience

    Enhancing supply chain efficiency, anticipating supply chain needs, and eliminating bottlenecks can allow 3PLs to provide an unmatched advantage to their customers. Digital transformation accelerates core logistics operations to create opportunities for scale. Advanced self-service capabilities and continuous support through intelligent chatbots streamlines customer-centric processes. Machine Learning helps 3PLs identify unmet customer needs and package their services accordingly.

Accelerated digital transformation streamlines enterprise operations and delivers rich user experiences – critical success imperatives in the highly competitive 3PL industry. Digitalization is not a short-term activity but a well-planned long-term goal. By collaborating with experienced technology partners, 3PLs can create a strategy to differentiate in a crowded marketplace while ensuring sustained growth. Emtec Digital is a trusted partner to many of the top 10 logistics companies worldwide, providing the necessary technology expertise to accelerate their digital transformation initiatives. We can help you differentiate via digital enablement. Contact us today!

References

1 https://www.statista.com/topics/871/online-shopping/#dossierKeyfigures

2 https://tracxn.com/d/emerging-startups/top-logistics-tech-startups-2020

Author

Emtec Digital Think Tank

We are an enthusiastic group of technologists, market and trend analysts, digital evangelists, and subject matter experts. We discuss and share our thoughts on digital enablement, business strategies, customer / market insights, and advanced technologies that help organizations improve operational efficiency and boost revenue.

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