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logistics control tower

Digital Transformation Delivers Value in Logistics Control Tower

Nathan McGuire
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December 13, 2023
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Digital Transformation Delivers Value in Logistics Control Tower
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The global third-party logistics (3PL) market size was valued at $1.3 trillion in 2021, and is projected to reach $2.8 trillion by 2031, growing at a CAGR of 8.8% from 2022 to 2031

Based on 3PL-reported 2022 financial results, Armstrong & Associates estimates the U.S. 3PL market net revenue (gross revenue less purchased transportation) grew 24% to $148.1 billion. The research group reported that the overall gross revenue increased by 18.3%, bringing the total U.S. 3PL market to $405.5 billion in 2022.

From the shipper’s perspective, the pandemic and the global economy have impacted supply chains in various ways. This has driven the need for innovative solutions to improve efficiencies within the supply chain ecosystem. Partnering with experienced logistics professionals – helping you build strong, resilient, scalable, and agile supply chains leveraging the latest technology and deploying best-in-class operational processes – allows shippers to focus on their core business.

Organizations have different needs for supply chain visibility. “Logistics Control Towers” are fundamentally changing how you operate and deliver value to customers. Shippers can realize benefits from true end-to-end supply chain integration, using an optimized transportation service network built and maintained by a trusted, collaborative 3PL partner. Partnering with a 3PL to build the capability of automated workflow and operational triggers, which is enabled by data analytics, technologies, and software, allows small, medium, and large shippers to focus on their core business. An experienced 3PL will be able to monitor and control any service disruptions and identify risks and opportunities to enable proactive operational decisions to mitigate risks.

Transportation in a Box

Key Challenges and Demands Faced by Logistics Operations

Shippers lacking real-time supply chain visibility is a common issue. Most often, this relates to an inability to accurately track goods moving from manufacturer to ocean or air freight, to port, to distribution center, back to carrier, and finally to end customer. 

Also, what you don’t know CAN hurt you! Disruptions are common, from inclement weather to traffic disruptions to customs delays and even geopolitical conflicts. A lack of visibility means this information arrives too late, preventing you from proactively responding and redirecting.

Shippers that lack visibility in their transportation operations often have inefficiencies, disruptions, and excessive costs in their network. There is an increasing demand for real-time (or at least near-real-time) visibility into orders, shipments, and inventory across a network of business partners. Other challenges include a lack of business process standardization driven by industry practices and enabled by technology. Additionally, the problem many shippers encounter managing their logistics needs is the difficulty in creating a comprehensive network of connected trading partners. These challenges are the daily core of skilled and experienced 3PLs.

Shippers Struggle to Manage Day-to-Day Logistics Operations, Driven by Rapid Technology Advances

Many shippers encounter difficulty creating a comprehensive network of connected trading partners to mature their logistics capabilities. In many instances, it’s a one-to-many relationship where the “many” sometimes numbered in the thousands. 

As a result, transportation operations teams focused on what they could do, rather than enterprise-wide, end-to-end supply chain management. Creating the latter scenario involves leveraging technology and a skilled, experienced team to build and deploy a control tower logistics operation. Order and shipment visibility allows you to create a “manage by exception” logistics operation, so your team can focus on more value-added activities while managing and mitigating risks that may affect the larger supply chain or customer experience and satisfaction. Implementing various kinds of technologies, transportation control towers function when they are fed timely, accurate information, and event management triggers or milestones to efficiently and effectively manage the ecosystem.

Managing transportation is getting more complex as everything from fuel surcharges to driver shortages and capacity constraints have made selecting the best and most economical mode, carrier, and lane choices extremely challenging.

Leading 3PLs truly understand the value of technology to automate transportation activities. A very low percentage of shippers use a TMS. Many shippers are not aware of the functionality available today or how to assess and deploy a plan to implement the system or a plan for continuous improvement, focusing on lean methodologies. It is also very common for a shipper to implement a TMS to then only utilize 25% or less of its out-of-the-box functionality.

Other technology advances that are gaining popularity are the use of AI and ML, which aid transportation management to understand better how to drive efficiencies without sacrificing service levels. One of the cooler TMS innovations that has emerged over the last year or so is the use of AI and ML to help “connect” corporate departments that need information that a TMS can provide. Using AI and ML, vendors are blending chatbots and chat capabilities into their platforms and this functionality has been highly adopted by leading 3PLs. These chatbots can provide critical information nearly instantly back to a select group of users to strengthen the decision-making and performance of the extended supply chain.

Difficulty Accessing Reporting and Analytics

As in many other business functions, data analytics is a critical component enabling you to baseline the business, scorecard carriers and customers, financial reporting, and many other areas of the business that need to be measured so that they can be managed. Transportation metrics are the tools for evaluating existing transportation processes that create the opportunity for pinpointing areas that could help improve logistical efficiencies. Companies use these metrics to measure their own values against competition and the industry's current trend.

Metrics known as Key Performance Indicators (KPIs) are a basis for performance measurement. 3PLs who manage logistics control towers take data to the next level and implement the use of dashboards. Dashboards are designed to provide real-time data and detailed reports.

Amazingly, in 2023, many shippers still rely on spreadsheets and other basic document tools that work well in many different contexts but are inadequate in logistics operations management.

As we follow along this logical progression to misalignment of freight management functions, a lack of comprehensive analytics can have many negative consequences.

All these issues can seem daunting and overwhelming. Fortunately, solutions are available to address each one. Let’s look at how a tech-enabled supply chain control tower can improve your logistics and transportation game. 

Partnering with an Experienced 3PL for Logistics Process Outsourcing Gains Popularity

More and more companies are forging partnerships with 3PLs for business process outsourcing, creating a competitive advantage for shippers of all sizes. According to a recent study by Sourcing Journal, 62% of shippers outsource their domestic transportation. They’re realizing that logistics, fulfillment, and shipping demands will continue to be common challenges as the landscape evolves. Experienced, skilled professionals are needed to bridge the gap and build more mature processes that leverage state-of-the-art technology and industry best practices.

A 3PL-enabled freight management team can simplify tasks, configurations, and processes to manage freight movement. It involves system integrations and dashboard access for tracking and reporting, enabling you to make better-informed decisions on a daily basis. Industry experts at a tech-forward 3PL can design a logistics control tower, giving you the agility to react to changing conditions and manage scalable, sustainable operations.

This partnership can also allow you to consolidate various functions within a single platform, providing a dashboard view of shipment visibility and reporting. 

Three Functional Areas for Gaining Efficiency Improvement

With these powerful tools in place, a modern logistics control tower opens up several avenues for improving efficiency in your freight operations. Here are three ways a 3PL in a managed services partnership helps you gain operational efficiency.

Single-Source Communication

Instead of using multiple tools to connect and share time-sensitive information with partners and stakeholders, the control tower provides a single channel for all communications. This includes order management, routing requirements, tracking, and exception management or milestone notifications.

For instance, in transporting perishable items such as seasonal fresh produce, careful coordination among driver, carrier, and shipper is paramount. The reefer needs to be calibrated and working properly, and the trailer requirement is food-grade condition. It also has to arrive pre-cooled and on time, and the shipper must be notified when the truck has departed.

All of these critical details can be shared and confirmed within the communication portal of a modern 3PL control tower. 

Real-Time Tracking and Visibility

In a time of market instability, when demand becomes more volatile, quickly flexing up and down, inventory management requires next-level precision. A critical component of this function is real-time tracking and visibility of freight in transit, often down to the SKU level. If you’re a brand supplying a retail or wholesale partner, they often impose penalties for deliveries that fall short of On Time, In Full (OTIF).

A 3PL-enabled supply chain control tower adds this visibility. This will improve the capacity management critical to maintaining all your commitments and timely restocking. As greater visibility and tracking help you keep carriers more accountable, on-time performance is improved, boosting customer satisfaction, loyalty, and ROI.

Data-Driven Decision-Making 

Without leveraging next-generation data analytics to drive intelligent decision-making in support of your transportation operations, you’re basically shooting in the dark. You end up spending more than you budgeted for on transportation, and forecasting based on signals and demand patterns becomes a bit like voodoo science. 

The increased visibility and tracking of a 3PL-based logistics control tower provides a wealth of carrier performance data that is fed into an analytical engine to execute algorithms. The output of reports and actionable insights creates a data-driven process, driving continuous improvement to improve KPIs.

Key Drivers of Transportation Management Outsourcing

There are many reasons shippers are adapting and moving their transportation operations to a 3PL partner to outsource their transportation management function. A key driver is that a 3PL is focused on the core business of freight management and the ecosystem required to manage all functions. 3PLs have various teams with various skills and experience that have industry and technical expertise. Having various tools and skills specific to the transportation industry, they are savvy in cost reduction, lean process management, laws and regulations, improved productivity, partnership collaboration and management, and many more contributors to effectively design and build a logistics control tower.

Expected Benefits of a Logistics Control Tower

  • Competitive advantage through effective transportation management
  • Continuous improvement through fully visible, proven expertise and innovative technologies
  • Create a flexible transportation solution that supports company growth
  • Improve carrier performance and relationships
  • Full visibility into transportation and control true costs to serve
  • Shift organizational focus from tactical to strategic transportation management
  • Identify areas of ongoing, incremental improvements
  • Apply industry best practices, process standardization and achieve leading capabilities

The Verdict: Up Your Transportation Management Game

The complexity across supply chains today all argue conclusively for investment in a 3PL-enabled control tower. Technological advances ensure the systems are “smart,” constantly learning and discovering ways to drive transportation best practices.

Some key services provided include freight management across modes (truckload, less than truckload, intermodal, flatbed, hotshot, etc.), expedited and dedicated transportation, freight brokerage, and supply chain solutions. Speak to a freight expert today to find out how you can start realizing the significant benefits of a state-of-the-art logistics control tower.

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