The value of innovative 3rd-party tech for logistics firms
Working with outside professionals can help logistics firms prevent industry challenges and save time and money.
For logistics companies, the path to a competitive advantage can be a challenging one. That means it’s increasingly important to understand the industry forces that can help your business gain an edge.
Customers are looking to increase their supply chains’ efficiency while demanding more sophisticated logistics services. And even though that can open doors and create new opportunities for logistics companies, it also creates a conundrum—meeting those needs often requires a hefty investment in new systems.
As technology evolves, demand for transparency in the industry will only grow. In addition to providing data on a shipping container’s location, sensors can send temperature updates, which can be useful when transporting perishables. In the future, says Taylor Howerton, senior vice president of Logistics & Supply Chain Industry Consulting at Truist, customers may expect visibility into individual pallets or even product stock-keeping units (SKUs) inside containers or truck trailers.
“Midsize logistics firms often can’t afford to spend the money it takes to put the technology in, in anticipation of the customers coming,” notes John Sidell, managing principal at SCApath, a consulting firm specializing in omnichannel and supply chain solutions. “So they’ll often have to land the customer and then partner with that customer to fund a technology deployment.”
Even long-term, seemingly solid customer relationships are increasingly vulnerable as demands for new technology grow, says Howerton. “More and more, customers are demanding greater visibility into where freight is at all times. If you can’t provide that, it’s going to become very difficult to compete.”
3 ways technology can sustain logistics providers
“Sometimes, companies try to tackle these things internally with resources that aren’t used to doing it,” Sidell observes. “They try hard, but because they’re blazing a path in an area they’ve never spent time in, they make mistakes. Ultimately, that burns through the budget and kills the project timeline.”
Meanwhile, customers may receive late or incorrect shipments, causing them to look for new suppliers. Sidell adds that working with outside professionals can help prevent these types of problems and, in the end, save logistics firms time and money.
1. Warehouse management
The right technology can help address many challenges faced by logistics companies and can also be the ticket to new markets, Sidell explains. In fact, the popularity of e-commerce has caused retailers to fulfill website orders, as well as pallet- or case-level deliveries to their physical stores. Yet manufacturers that manage logistics internally aren’t usually set up to handle individual direct-to-consumer orders. The right warehouse management system (WMS) at a strategically located facility can enable logistics companies to handle e-commerce orders for multiple clients and dispatch them to home delivery services.
“And that’s where proactive provisioning of technology comes in handy,” Sidell adds. “If I know this is going to be my model, I’ll procure the right systems so that when I go to company X, Y, and Z, I can say, ‘Here are the systems I have in place to handle these e-commerce orders for you.’”
2. Back-office operations
According to Howerton, systems that pair customers with capacity can streamline transportation management companies’ operations—potentially even deepening customer relationships. “For example, the freight billing mechanism could be integrated into the system so that the shipper doesn’t need its own transportation software. Then the logistics provider or transportation management company can handle the billing from the carrier back to the shipper.” Essentially, the logistics company provides its customers a suite of back-office solutions.
3. Accounting functions
Logistics companies often need to pay different vendors in different ways—while some expect automated clearing house (ACH) transfers, others may want checks or prefer cards. Truist can accept one transaction from a transportation firm and disburse the payments according to each vendor’s preferences, saving the firm time.
“Truist also gathers lots of data, so we can see if a company you’re paying with ACH may be getting paid by other companies via card. That might be a preferred way to pay, and we can guide customers with that research,” Howerton tells. “We can say, ‘You might want to reach out and see if they’re willing to take a card.’”
Getting the most of your tech solution
Howerton recommends logistics companies wanting to make these or similar investments try to finance their purchases by leasing them directly or adding technology upgrades onto an overall loan package designed to facilitate company growth. Once a company has decided to invest, the next major decision is between off-the-shelf and proprietary systems.
“Companies that have invested in their proprietary systems for a long period of time really value them,” Howerton explains. “It can give them a competitive advantage because they’re constantly customizing it for their customers. The disadvantage could be a lot of upfront costs to build the infrastructure.”
Before investing in new technology, logistics companies should assess both cost and functionality, especially as it relates to their strategy, Sidell advises. A company looking to facilitate e-commerce orders, for example, will want a WMS that can handle high volumes and multiple owners of inventory under one roof. The list of options is growing as technology evolves, and some cloud-based off-the-shelf systems are updated frequently and can be highly customizable.
Keeping your employees and vendors in mind
When implementing a new technological solution, employees’ perspectives are essential. “Some [employees] are sprinters, and some are marathon runners,” Sidell notes. “Often, you end up with a combination of those types of talents on a project. The sprinters like quicker feedback and short wins, but the marathon folks want to make sure the project is done on time and on budget. You’ve got to serve both of those types of personalities.”
He suggests first bringing new tech solutions into smaller projects that will show a quicker return on investment. This approach could help boost morale and prompt executives to regularly update front-line employees about positive results.
Managers should also remember the importance of planning and resource allocation, Sidell adds. Granular plans are key to efficient implementation, as is having enough people with the right expertise.