3PL Technology Impact

The supply chain technology cycles are increasing in velocity becoming more and more difficult to maintain and stay current.  This change velocity presents a large challenge for many retailers that can be overcome many times through a partnership with third party logistics providers.  Historically the larger retailers would maintain a large staff and warehouse network to support the individual requirements of the retailer.  With the increase in change velocity this strategy of a customized solution supported by the retailer is no longer viable or cost effective and a much more strategic strategy is standardization of software, processes and capabilities to comply with the changing industry standards to support the ability to quickly and efficiently adapt to the changing demands.

A strategy of standardization lends itself to a partnership with third party logistics providers for execution capabilities.  This allows the retailer to take advantage of the capabilities continuously updated by these providers and allows the retailer to focus on reacting to new consumer demands in shopping and purchasing along with the marketing and product procurement demands to remain fresh while leaving the distribution, both inbound and outbound to the provider.  This is a much more cost effective strategy in the long run and places the support with the organizations that are best suited to delivery necessary results.

The industry has been moving in this direction for quite some time when you include the ERP, MRP and supply chain software acceptance in the market starting years ago.  The inclusion of services from a third party logistics provider is the next logical step in a strategy improvements program.  The goal of the strategy is to implement people, processes and systems to first standardize the process and then implement a continuous improvement program.  Third Party Logistics partners provide a standardized method to supporting the inventory management and delivery strategies and they bring to the table a wealth of experience in the industry to delivery a continuous improvement program and support the changing demands of the market.

This is a relatively new strategy that can bring a great deal of benefit to the 3PL partners through both standardized processes along with a wealth of industry experience to help their partners address challenges.  These third party logistics partners, at least the good ones, are continuously driving improvements into their processes and systems to increase efficiencies and reduce costs.  These partners are focused on the extended supply chain and the logistics to manage and support the supply chain.  This is all these 3PL partners do and as a result they are very good at their job.  

These third party logistics partners bring this expertise to their partners so their partners do not have to spend the time and effort in building and maintaining the skills internally.  These 3PL partners can instead focus on the things that differentiate them from the competition.  The extended supply chain can be viewed as something of a commodity and retailers should partner with experts in the supply chain so they can focus on their market key factors.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?