Turning a profit in a cost-conscious industry like third-party logistics (3PL) is a challenging feat. Businesses are increasingly turning to logistics services providers to run their manufacturing, warehousing and transportation operations more efficiently and cheaply than they can run it themselves. So 3PLs need to run as lean an operation as possible, while at the same time making sure they’re getting paid for each and every service they provide. Tall order! When talking to 3PL customers we find the same issues crop up again and again:
- How can 3PLs attract new business and then on-board new clients* quickly?
- How can 3PLs accurately bill for every service they’re providing to clients?
- How can a 3PL “evolve” to offer more and different services and treat each client’s requirements as if they are the sole focus?
3PLs can help solve many of these industry-specific issues by leveraging key supply chain technology and best practices. Here’s a breakdown of the four most common ones:
1. Adopt better 3PL billing practices
Billing is tricky for 3PLs because their clients are especially concerned with “cost creep.” Understandably, they watch invoices carefully and expect details for questionable charges. If the 3PL is still using a manual billing system, this is a nearly impossible task. Manual systems usually include many people tallying transactions, and the system has all the conventional trappings of working with paper. If a client questions a charge, it is often more costly to jump through the hoops to find the back-up data than it is to simply credit the amount in question.
An automated billing system reduces the chance of leaving money on the table. Charges are generated automatically each time a warehouse worker performs a task. Billing can be done using time-based or activity-based methods, and all clients will have their own separate billing attributes. A robust billing solution gives 3PLs full visibility into costs with comparison to what was invoiced so they can forecast more accurately.
2. Speed the on-boarding of new clients
It’s common that a 3PL will have a prospective client that wants a specific capability that isn’t yet available. Of course, the moment the client signs on the dotted line, they want their services right away and the 3PL still has a lot of work to do to set up their account. A key part of 3PL warehouse management system (WMS) technology is the ability to rapidly on-board clients with a configuration wizard that can make it easy to configure all the required data elements. Workflows can be very different for different industries and clients, but a best-in-class solution can apply preset rules by industry, plus any client-specific rules, so that the client is on-boarded in days, not months.
3. Simplify management of a multitude of clients
A typical 3PL warehouse with multiple clients needs to perform different tasks based on specific industries, products and end customers. To manage this data effectively, 3PLs need technology that enables rules to be granular to the client, their customers and suppliers level. A multi-tenant architecture with a business process configuration tool is one way to help enforce the exact supply chain preferences each of the 3PL’s clients (and end customers) require.
4. Evolve to offer value-added services
Third party logistics used to be basically a commodity business. Now 3PLs are finding that they need to expand their offerings to attract new clients. Our customers tell us that one of the best ways a 3PL can set itself apart from the crowd is to offer extended services. These value-added services can be anything from repackaging to relabeling, kitting and light manufacturing. A warehouse management solution with an adaptable architecture will give the 3PL the ability to quickly create new offerings and workflows inherent with value-added services.
Last, but not least, is to provide clients with real-time views into their own inventory, orders and even billing through a secure Web portal, so clients can make knowledgeable decisions with real-time visibility into demand, order status and potential exceptions.
Chuck Fuerst is the Director of Product Strategy at HighJump Software. He has more than 12 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a Bachelor degree in Marketing Management and Innovation from Concordia University.
* Typically “client” is the term referring to the entity paying the 3PL to provide services. The “customer” is the entity the 3PL is shipping to on the client’s behalf.