New technology is key to 3PL growth – but it must add value for their 'shipper partners'

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Growth for 3PLs will be boosted through investment in technology – but it must add value for customers, delegates heard at the recent Future of Logistics conference in London.

“Disintermediation will allow shippers to work with new supply chain players,” said John Manners-Bell, CEO of Transport Intelligence.

“Incumbent 3PLs need to take a long and hard look at what value they are providing to shippers, and ask how they can develop partnerships with them.”

Software services offered by 3PLs are expected to reach $30bn in value by 2022, at a growth rate of 6.5%, according to a Global Market Insights report out this month.

“Rapid adoption of software and latest IT applications to improve distribution coverage and provide quality service to the customers is likely to boost growth,” it notes.

This is backed by a Research & Markets report on global 3PLs, which agrees that market growth would be boosted by technology.

It says: “The use of upgraded technologies in logistics services is likely to increase… IT-enabled services increase the efficiency of logistics services on scheduling transportation and delivery and inventory management. Companies like Wipro, Kale Consultants and Wal-Mart have made it essential for their logistics partners to deploy these services.

“In addition, vendors in the market are now using cloud-based CRM solutions to enhance the vendor-shipper relationship by providing more visibility in the supply chain process, thus reducing SCM complexity.”

Delegates at the conference heard that the relationship between 3PL and customer would be key, and that data should be shared.

“3PLs could look at giving away their technology to shippers operating on their network,” said Sandy Stewart, managing director for Transport & Logistics at Stifel.

“It wouldn’t make the supply chain management software people happy, but it would work for the supply chain. All information should be aggregated in the cloud.”

Nicolas Leroux, managing partner of Lunatech, said: “Who controls the information will control the supply chain. But you need to get away from legacy to open systems.”

Justin Zatouroff, a partner at KPMG, added: “It’s all about big data and analytics. The questions will be on who owns the data and who can analyse it.

“There is a paranoia about sharing data – but the new generation is happier to share.”

E-commerce was also cited as a key sector for IT investment, with Amazon’s predictive demand technology seen as a key factor in its success – and critical to its distribution strategy.

“Amazon understands its US consumers so well it knows what they are going to buy, and it can be at their house next day,” said Mr Stewart. But he added that Amazon had a weakness too: “What Amazon is poor at is the 50lb + items – white glove delivery – it’s a vulnerability.”

Jerome Charlez, founder of Khearos, noted the high costs of poor forecasts in e-commerce.

he told delegates: “$4.2bn was lost last year on poor predictions in e-commerce. Money was lost on the last mile, where there is a huge risk.”

But KPMG’s Mr Zatouroff said the technology was available to make good forecasts.

“There is the challenge of unpredictable spikes for retailers. We have built loads of models to a remarkable degree of accuracy, info which you can roll back through the supply chain, to make inventory match demand precisely.”

He advocated “jumping in”, rather than waiting for new technology, which changes all the time.

And there was warning for 3PLs and carriers that do not invest in IT for e-commerce.

“Transport needs to reinvent itself, or it will be reinvented the hard way,” said Mr Charlez. “Agile transport companies need to scale fast, be flexible and branded.”