Software Buyer Beware: Process Before Product

Before buying new supply chain software, a company wants to make sure the software will perform as promised. It’s important to know that there is more to product performance than just the product itself. To decide if the software will be successful for your company, look beyond the dashboard, reporting and promised analytics to three key processes: the implementation approach, how the software works with existing systems, and the quality of the data used by the software.

Implementation Approach

The developer’s process to create a new software product (design, coding, testing) is important but the implementation process has a far greater impact than many anticipate. You can have the best software in the world, but incorrect implementation can render it useless. When supply chain managers and other company executives evaluate software, they should focus their efforts on the provider’s implementation approach. How long will it take for full implementation? What level of experience does the provider’s installation team have? Is internal IT staffing support required? In many companies the IT group is already stretched thin and a major software installation can cause a lot of headaches like delays, disruptions and additional costs.

Plays Well with Others

TMS, invoice management, and freight tracking are three widely-used supply chain software solutions, yet companies are having a hard time extracting the value from these software additions. Unfortunately, many companies have purchased a TMS because they’ve been told that this is how they will finally be able to have information at their fingertips about how they’re performing. Then they try to bolt-on the track and trace and invoice management pieces from other providers to get the information they are looking for. I think these companies are missing the mark. Just like the discussion of how important the implementation process is compared to the product, companies need to look at how the software products relate to each other. When you talk about improving logistics, you’re talking about transportation management, invoice management, and tracking as a whole. Yet when you look at what is available on the market, these pieces are all separate solutions being sold by different companies. It’s no wonder that these pieces don’t work that well together or provide value.

In order for the TMS (planning and execution) to work with tracking and the invoice management side (settlement), they have to be integrated together and all three solutions have to be “aware” of each other. You’ll never get this by purchasing three different pieces of software that are produced by three different providers. In the case of invoice management, most of the providers that offer this service don’t have a lot or any software behind it; they are using people to manually solve problems and sort data. There is no way to cost-effectively integrate this manual piece with the TMS and tracking solutions.

Data Fuels Success

It’s a huge red flag when your new software does not produce integrated data. This means you must create a new group within your IT department to integrate all your data together, and possibly staff another whole group to extract the data, cleanse it, and normalize it so it is actionable and accurate. This becomes a very expensive way to get the software to do the thing it was purchased to do.

When you view software as a data/information solution, you can start to see how important the data is. I think a good software product should point out the parts of your process that could cause data quality issues. When it does, you’ll find some processes (either you are doing, or your carriers are doing) that don’t fit into the normal business flow. When routine processes are performed outside the system, they lead to data quality issues. A good example of this is handling exceptions manually instead of through your automated system. The data may or may not get input correctly into the system or even get into the system. These sorts of data quality issues will cause your systems to not perform at optimal levels, which costs you money. It’s no different than putting the wrong gas in your car and wondering why you are having problems. Another way to look at it is, this data is what the software uses for its intelligence—reporting and analytics. If you use those reports and analytics to make decisions, the quality of the data impacts your decisions.

Five Questions to Ask Your Logistics Software Provider

To make sure your new software product performs as promised, here are five questions about data and implementation you should ask the vendor:

1. Who will be responsible for identifying and fixing any data gaps that are found?
2. Will you talk us out of doing something?
3. How much transparency will we have with the data?
4. Will you help us learn how to use the data to make decisions or will it be used to justify the decisions that have already been made?
5. How much internal IT support will we need for implementation?

By using these five questions as a guide and focusing on the importance of integrated systems with clean, actionable data, you’ll be on the path to choosing a logistics software and services provider that’s right for you.

POCs and Pilots: What Do You Need to Know Before Implementing a Software Solution?

Many companies have realized that they need data to understand how they’re performing and to know what to do next.  Lately, the data has been focused on the Track & Trace side of the supply chain. The perceived newness of Track & Trace has increased interest among companies for either a Proof of Concept (POC) or a Pilot implementation before fully committing to a service provider. Either of these approaches can be a great research tool if done properly—but there are a few things you should know first.

Use a POC to Validate the Performance of a Solution

A POC is different than a Pilot with respect to size and scope. As the name suggests, a POC is intended to prove a concept and validate the performance of a solution. The POC should be focused on a very small piece of the overall solution, making it possible to evaluate the results without getting too far into the weeds of implementation. For example, if a company is evaluating a Track & Trace solution, then they might want to do a POC with a handful of carriers to understand how the system will perform. A good POC for Track & Trace should answer the following questions:

• Can the system obtain the Track & Trace data from the carriers?
• Will the data be complete?
• Does the alerting of the system provide real-time information?
• Is the data accurate?

By sticking with a limited scope of carriers, it’s very easy to see and understand any issues that may prevent the company from obtaining the value from the system.

Use a Pilot to Test the System and the Provider

A Pilot, on the other hand, is a dress rehearsal with your supply chain data. The scope is bigger than a POC but, still smaller than a full-scale implementation. A Pilot is used to test not only the system, but also the company providing the system. A Pilot implementation for Track and Trace software should be able to answer these additional questions:

• How long does it take to get the data turned on?
• How much work did the customer have to do compared with the solution provider?
• What do the users think about the system?
• Is it easy to use?
• Can it scale?

What to Expect When Using Either a POC or a Pilot

A POC should require a shorter timeframe and cost less than a Pilot implementation due to its limited scope. Likewise, given the increased depth provided by a Pilot, you should expect to pay roughly the same as a full implementation—you should also expect a Pilot to be more polished for the end user than a POC. If you’re being offered a free Pilot, then you’re not doing a Pilot—I’d say it’s closer to a live demonstration. A company should be thinking about what are they trying to answer—is it a question of the solution working (POC), or the solution provider being able to deliver a working solution (Pilot)? Either way, if you expect to be happy with your eventual service provider, you should expect POC and Pilot implementations to be tailored to meet your company’s needs.

That “Free” Pilot Might End up Costing More. Be Selective.

Free sounds great. But typically, a free Pilot requires you—the end user—to implement the solution yourself. You may invest a lot of time and resources implementing new, unfamiliar software that ultimately isn’t the right fit. After you have spent the time implementing the software and sharing your issues with the provider, they may argue that their software does work but was implemented wrong. If it is indeed the wrong software for your company, a proper installation is only going to cost you additional time and money, without resulting in a usable long-term supply chain solution for your company.

Ask These Four Questions Before Moving Forward with a POC or Pilot

There needs to be objective measurable outcomes to determine if the POC or Pilot was successful. Asking these questions will help you select the proper trial runs for potential solutions for your company.

1. What is the resource requirement from my company’s side?
2. How quickly can the POC or Pilot be up and running?
3. What have previous customers used as their measurable outcomes; and can they be viewed in the system?
4. What is our definition of success?

Knowing the answer to these questions before you dive in will help you streamline the software selection process and help you get the most out of your POC or Pilot implementation.

 

The Great Logistics Software Debate: Build or Buy?

Should You Buy a Logistics and Supply Chain Software Solution or Build Your Own?

Any company that is serious about its supply chain will eventually need to upgrade its logistics data management software. Whether your current software is outdated – or your company has just outgrown it – it’s important to have technology that gives you the real-time information, flexibility, and control you need to optimize your supply chain. When that time comes, you’ll face an important decision: should your IT team build a custom supply chain solution, or should you buy a tailored solution from a logistics software provider? In this blog, I’m going to examine the most important factors that will determine your decision.

Why Companies Need New Supply Chain and Logistics Software

The most common reason companies decide they need new supply chain and logistics software is it has developed a new strategy that will provide a competitive advantage. Typically, the first step is leadership will talk with their IT group about deploying the strategy with their current software suite. IT then does a functional analysis of their current software suite to determine what gaps may exist. Then, IT provides the list of gaps that exist along with how long and how much it would cost for the IT group to solve the problem. The time required to bridge the gaps in the current solution with internal IT resources is usually what causes the company to begin the process of purchasing new software or upgrading their current software to the latest versions with the functionality they need.

The company now assembles a project team that creates a requirements list of the most pressing needs for a new supply chain and logistics solution ranked by importance. Then the project team is also tasked with communicating the need for change and obtaining buy-in from key stakeholders. An RFI or RFP is created and distributed to the leading companies that offer the software. Somewhere during the RFI/RFP process the IT group becomes one of the candidates that can offer a solution as well.

Internal Resources vs. External Solutions

The IT group promises that their internally developed solution will be exactly what the company needs. They’ll no longer have to worry about the software’s version falling out of date – or having to call a support line that can’t provide adequate support.

On the other side, the commercial software provider is telling the market that their solution can do everything. The internal IT group has heard this before and knows that the software provider is over-promising, and they will again live through five years of a “two-year” install. It’s unfortunate that the market has evolved into this all or nothing approach.

However, building in-house software in this industry is a very complex task with its own set of challenges. Not only do you have an incredible amount of variety – truckload invoice data, rating, and track & trace is very different than small parcel invoice data, rating, and track & trace – you have an incredible amount of volume and velocity with thousands of transactions being added every day.

Complex Challenges, Constant Change

Complicating matters further is that many logistics strategies are counter intuitive. Early in my career, I was always taught to strive for high-class in everything you do, but that’s not what you want when you’re shipping LTL freight! In reality, a low-class shipment is less expensive than a high-class shipment, so all those years of learning must be unlearned. This is just one example of the complex problems you must consider when buying or building a supply chain and logistics software solution.

Another factor to consider is that your software must be able to adapt to constant change. Many times, I see that the IT department successfully delivered version 1.0 of the solution, but it was the maintenance that ultimately made the solution obsolete. Over time, I’ve come to realize there are three sure things in life: death, taxes and carrier rate changes.

Data is King

To deal with these challenges, most companies realize that their supply chain and logistics management practices must be powered by clean, actionable data. Now that companies are looking for data to make decisions the same process is happening. Companies have purchased the best analytics software on the market, which is merely a reporting tool that shows them that they either have incomplete data, or incorrect data. So, in steps the IT department to save the day. IT builds a data lake that contains all the relevant data feeds and they integrate it together the exact way the company states they need it. Now the company is reporting on data that should be complete and accurate. What they find is that nothing has changed. Now IT is blamed for not building this right, and IT blames the user for not providing the right requirements and always changing their minds on what they need.

The Big Question: Build or Buy a Supply Chain Logistics Software Solution?

I would tell any supply chain executive that they should think about the long-term effect of building vs buying. When building, you can deliver a solution that is exactly what the company needs; it’s very tailored. However, this is ideal only if the company is in control of all facets of the solution. Once you introduce another company’s rules into the equation – a carrier’s rules for example – then you’ll need many years to build up the deep domain knowledge required to become an expert at maintaining the solution. Can you afford the time required to gain the experience needed to solve these maintenance issues quickly and effectively?

I suggest a third way, a hybrid strategy that breaks the solution into pieces:

1. The functionality that is truly custom to the company (the companies unique business rules, etc.)
2. The functionality that is industry specific (the basic blocking and tackling in the industry)
3. The functionality that requires a high level of expertise (typically a more mature, third-party solution has gone through the required iterations to provide foundational support)

In my opinion this is the ideal combination. Buy the software that provides needs #2 and #3, while building the unique business rules and functionality that provides a company with the rapid deployment they need. Done correctly, this hybrid approach to supply chain and logistics software will deliver long-term value and allow you to implement the strategies that will improve your bottom line.

Don’t be Fooled: Finding True Data Integration

The difference between systems integration and a solution that integrates data is the most misunderstood concept in the market today. Companies sometimes think that systems integration is the same as data integration. However, simply integrating your TMS with another provider’s track & trace system does not provide visibility to the shipments. Also, having your TMS integrated with another provider’s freight invoice doesn’t provide you with financial visibility. While the track & trace integration typically allows the freight invoice integration to trigger a payment to a carrier, in this systems integration scenario the only action that has been performed is matching. The track & trace record and the freight invoice were matched to a shipment.

Data Integration Offers More Value than Systems Integration

Data integration merges all these records together and goes a step further by transforming it into actionable data. The actionable data allows the user to see only what they want to see and makes the data useful by showing only what’s relevant to them. Data integration is also less rigid than systems integration and doesn’t rely on one transaction to successfully occur before moving onto the next transaction. Instead, data integration pulls all the data sets together into one view, standardizing and normalizing the results so the user will see the whole picture.  Therefore, data integration is much more valuable than systems integration.

Data Integration vs. Data Aggregation

Similar to the confusion that exists around Data Integration vs. System Integration, a data integrator and a data aggregator are very different entities. There are many data aggregators in the market today that talk about the hundreds, or even thousands of connections that they have. Data integrators, on the other hand, are focused on the datasets or different types of data that are being integrated together. Every company I’ve ever met already qualifies as a data aggregator because they’ve been getting supply chain data from all their providers for years. Integrated data is a different story.

Data is only valuable if it provides three things:
1) Information,
2) Insight, and ultimately
3) Intelligence.

Integrated data delivers on these three elements by combining the datasets and transforming them into actionable data. The transforming process is what normalizes and cleanses the data to ensure the picture you are viewing is complete and accurate. Integrated data also allows you to make better decisions by warning you about the unintended consequences of your actions before you do something.

Data Aggregation Alone Produces Inaccurate Insights

Imagine a scenario where a shipper runs an analysis on their shipment history. The analysis shows the shipper a large savings opportunity. The shipper makes the recommended change only to save nothing. What happened?

After months of hard work and analysis, they realize that the dataset they used was missing a key element such as order type or customer. After they manually integrate the complete information, they see that all the projected savings was coming from a particular order type, or a customer where they couldn’t make the required change. In other words, the lack of true data integration in their analysis model gave them insights that were not accurate.

Selecting a Solution that Offers True Data Integration.

Here are three specific questions you should ask (and answers to look for) when assessing a logistics management solution that promise true data integration.

1. What master data does the system require? A data integrator will have an answer; an aggregator will need little to none.
2. Will you help us fix any data issues? A data integrator will simply say yes; a data aggregator may say no, or assure you that there are no data issues.
3. Ask a carrier, “What it’s like to work with this provider?” A true data integrator will solve long standing problems the shipper and carrier have had, helping the carrier be successful and earning their respect.

Integrated data is all about pulling multiple sources of data together and transforming it into relevant information. For logistics, this means integrating the order, shipment, track & trace, and freight invoice data together and standardizing and cleansing to provide actionable intelligence, so you the shipper can turn your freight into a strategic asset.

The Evolution of the Visibility Revolution

As consumers we demand visibility. As logistics professionals, it is essential. Accurate and timely visibility is now universally expected, thanks to a few key technology advances during the past 20 years.

Technology + ELD Mandate Advances Visibility

In the late 90’s, small parcel began to take off with the advent of online tracking. What started as a confirmation of delivery has evolved into tracking as we know it today. Eventually, tracking became not only possible but expected in every step of a shipment from the time it is picked up until it is delivered. This type of functionality allowed online shopping to gain popularity. Then about 10 years ago, old technology became new again—GPS. GPS has been around since the late 70’s and in commercial use since the early 90’s. In the last decade, affordable GPS and smart phone technology no longer relegated these logistics tools to high end and expensive devices. Since then, GPS is now a crucial part of the visibility toolset and the ELD mandate and compliance deadline of December 2017 has provided the means to have real-time visibility to more than just small parcel shipments.

No Visibility, No Customers

It’s not just technology that has driven the shipper to demand more and more visibility. It is the consumer. Consumers demand their product is delivered to them quickly and require the ability to view the progress of their package at all points in the shipment. This trend has required the shipper to have visibility to their own freight. The shipper’s visibility needs have matched the consumers. The shipper is tracking their inbound loads to ensure that they have the product needed to fulfill the outbound order to their customer. And on the outbound side, the visibility is a requirement from the consumer. Today, a consumer would never order a product from a company if they don’t have a way to view the progress of the shipment on a web site. No visibility may in time lead to no customers.

Without accurate and timely visibility to their shipments, shippers are at a huge competitive disadvantage in the market. Without automatic tracking, the shipper must have a large staff to manually monitor shipment status and deal with inevitable delays. The shipper also must have a call center that is bombarded with numerous calls asking the question “where’s my shipment”, which then requires customer service to make a phone call to find out (which is incredibly expensive). It’s just good business for shippers to seriously evaluate their current visibility tools and what an upgraded solution can provide.

Look for a Wholistic Visibility Solution

When evaluating a new solution, shippers should be looking for one wholistic solution that can solve the visibility needs that they have, as well as the visibility needs that their customer has. Unfortunately, these needs aren’t the same. A shipper wants to be alerted if a shipment isn’t picked up on time or if an exception occurs that will cause the shipment to be delivered late. Both exceptions will require the shipper to act to resolve the issue. For the shipper’s customer, they need an easy-to-use web site where they can view their shipment’s progress and have an accurate delivery date. This requires the order information to be integrated to the shipment information, and the tracking information—resulting in one clean standardized dataset that clearly shows the customer that their order is on its way.

Three Criteria to Select a Solutions Provider

Whether looking to improve visibility, solve a specific challenge or reduce costs, there are three initial criteria to consider when searching for a logistics solution provider. These seem simple enough, but if not rigorously applied, trouble often follows.

3 Criteria to Select a Solutions Provider

1. Puts my interests ahead of theirs.
2. Is a proven problem solver.
3. Listens to my unique problems.

Listening Provides Learning

The third criteria—listening to my unique problems—is a critical but often absent trait. In my experience there are many people who are great listeners, but to their own voice. The stereotypical sales person is great talker and can be very entertaining. All of this talk, however, prevents them from learning about the company they are trying to help. Oftentimes I’ve been told that by being quiet you’re not providing any help. Yet I find that by listening more, you not only learn what the real issue is that the company is trying to solve, you can also learn what solutions they’ve tried in the past and why they’ve failed. By listening, it can help you avoid the same pitfalls and failed solutions that have come before you.

Collaborative Conversations Defines Common Goal

When you meet with your prospective provider, the discussion should be a good back-and-forth conversation. I like to say that it should be a collaborative session between the two parties where the common goal is clearly defined—solve the company’s specific issue. The logistics provider should be able to offer clear and concise answers to what the solution is and how it will be implemented. At this point you should also be informed about the resources the company needs to commit. Perhaps the most important part of the conversation surrounds having a very clear and easy to measure return on investment. Without an expected ROI, it will be difficult if not impossible to gauge the success of the solution. With this information, you can have more confidence that your potential provider has accurately diagnosed the underlying problem and is recommending a solution tailored to address your specific challenges.

When Problem Solving Causes More Problems

Without a clear understanding of the common goals and the solution, unintended consequences can often occur. We see many instances where a company implemented software or hired a third-party to solve a problem only to introduce more issues while not solving the original problem. One of the most common issues that I see is a company trying to obtain clean, standardized data to use for decision making. The company buys a solution because they are told that it will deliver data faster and cleaner because it is using the latest technology to obtain the data. What the company finds is that they still don’t have clean standardized data, and the data they do have is a month behind. The provider tells the company that the solution has worked for their other customers and they must be doing something wrong. All of this trouble could be avoided by making sure the provider could pass the first three criteria.

Logistics Trends and Opportunities in 2018

This past year was very challenging for shippers. The hurricane season exacerbated an already tight truckload capacity market and sent shippers scrambling to find ways to cover their rejected loads. This also caused rates to skyrocket ahead of the 2017 busy holiday shipping season. There are several trends that have been emerging in the industry for the past few years that are now standard expectations, and many more dynamic changes in shipping are coming in 2018.

Logistics Trends in 2018

Coming into 2018 I expect capacity to remain tight which means that rates will remain high. I also see shippers getting more creative around final mile shipping. UPS and FedEx continued with another annual rate increase which is putting more and more pricing pressure on large packages. UPS has another increase scheduled for mid-year that is targeted at the larger packages—think of ordering a big screen TV online. I think we’ll also see shippers and carriers challenged with delivering complete visibility to each shipment. Customers are demanding visibility to where their orders are, which is causing the shipper to need complete visibility to their supply chains. Not only do shippers now have to ensure they can deliver the customer’s order, but they must also provide the customer’s real-time tracking of the order.

Opportunities Around Actionable Data

Looking at these challenges, I see huge opportunities for shippers. I think that 2018 will be the year that shippers move beyond data and focus on actionable data. Shippers in 2017 were focused on collecting data and thought by having all sorts of data with a flashy front-end to view it would instantly improve their supply chain. What shippers found is that data alone won’t offer insight or provide intelligence. Further, the blinking red, yellow, green lights indicating shipment status were only right part of the time.

Moving forward, data alone will no longer be enough. Data must be the right data: cleaned and standardized for the data to be actionable. There’s a reason why UPS is going to do a mid-year rate increase on a focused piece of their rate structure, and I know UPS determined a rate increase was necessary with actionable data.

Speed is the New Reality

In December 2015, we blogged about how the customer experience with expedited shipping had affected business expectations. We saw speed as an emerging trend, but over the last few years we have observed that speed is no longer a trend, it’s the new reality. It’s all about speed. The customer expects products instantly. This has necessitated the shipper and carrier to integrate tighter and exchange much more information than before.

The speed expectation has also caused the shipper to expect the same thing around data. Shippers are now thinking in minutes and hours, instead of days and weeks with respect to data. Track and trace data can’t be more than an hour old or the shipper deems it to be useless. Analytics that are telling the shipper how they are performing must be running in real-time. The shipper can’t wait to pull a month’s worth of data, then spend another week cleaning the data, and another week analyzing it. The results must be at their fingertips constantly telling them how they are doing and what adjustments they need to make. Real-time, actionable data is the way to deliver on this expectation.

Revolutionizing the RFP Process with Data

There are three letters that most logistics and transportation professionals dread: “RFP.” However, new software solutions that provide clean, accurate freight data are a huge step forward in making the carrier RFP process more efficient and effective.

Surviving the RFP Process

Most companies perform an annual or biannual Request for Proposal process with their carriers. This long and arduous process can take up to six months to complete. The process typically starts with gathering data from their freight payment provider or system. Then the user must clean the data to remove all the non-standard shipments, balance due bills or incorrect data. All this data is placed in a spreadsheet and sent to the carriers with a cover letter outlining the shipper’s timelines and service requirements.

Once the shipper receives the proposals from the carriers, they must manually compare each carrier’s rate to determine what they must do for the second round. After numerous emails, phone calls and face-to-face meetings with the carriers; the new rates are finally agreed upon. But it’s not over yet.

Now the second phase of the long and arduous process begins: loading the new rates into the TMS and publishing the new routing guide for their inbound vendors. After all of this is completed, the rest of the year is spent working on the lanes that were missed during the RFP.

The Risks of Poorly Prepared RFPs

For both shippers and carriers, there are numerous pain points involved in the RFP process. For the shippers, the most notable is the incredible amount of manual work they have to do to gather data, analyze proposals, load the final results and perform the post-bid support. For the carriers, it’s having to guess on what they are bidding due to the lack of transparency from the shipper. The carrier knows that the data is only an incomplete, abridged version of what actually happens during the year. These scenarios present significant financial implications for both parties.

In college, one of my electrical engineering professors used to say, “Two things can happen when a mistake is made: 1) People die; 2) Money is lost.” Luckily, we’re in the business where only money is lost, and that’s exactly what happens when the bid packages are prepared poorly. When RFPs are built on incorrect or incomplete data, there are three scenarios: Either the shipper is losing money, the carrier is losing money, or in some cases, they are both losing money. It’s the definition of a “lose-lose” situation.

The Benefits of Using Big Data to Improve the RFP Process

With the data available today and the software tools that exist in the market, outdated manual RFP processes are no longer needed. I’ve seen some systems that can provide full transparency to the carrier. This means that the bid package contains the exact lanes that they can service, along with a targeted price to win that lane. The benefits of clean, actionable freight data are many – and they can dramatically improve the financial and strategic performance of your logistics. Here are three of the most important benefits.

Transparency. Because both parties (the shipper and carrier) have accurate and real-time shipping and freight data, bids can reflect the actual costs for each party. This results in “win-win” situations where carriers take the freight that’s the most profitable for them while offering the best possible rates.

Meeting higher expectations. Data has changed both the shipper’s and the carrier’s expectations. Both expect that their data and RFPs should be more accurate. Shippers are realizing that leveraging a clean, standardized and normalized dataset in an automated fashion will allow them to be more accurate in their forecasting. Carriers are leveraging the data to be more efficient and optimize their loads, so they can maximize their profits while delivering the services that the shipper needs.

Revealing the hidden costs of freight. Access to more and better data in real time means shippers are now able to see the true cost of freight by accounting for the expense and opportunity costs associated with the integration to their carriers and data quality. While the freight cost may be slightly higher with a given carrier, if this carrier is able to integrate with the shipper and automate the tender process, the track and trace information and the settlement process, the shipper will be wise to choose them over a lower (freight) cost provider. In this example, the true cost is actually lower from the “higher priced” carrier.

Reevaluating the Role of the 3PL

Following deregulation of freight in the 1980s, initially the role of the third party logistics provider was to provide knowledge the shipper didn’t have to supplement their internal team. Over the next 40 years this role changed. The 3PL gradually replaced the shipper’s in-house team and the shipper no longer retained in-house logistics knowledge. With today’s increasingly complex supply chains, rapid speed of change, and advances in technology, it’s time to reevaluate the 3PL’s role in the shipper’s logistics management.

Ensuring Continued Value

There is almost always some logistics problem a company is unable to solve themselves that prompts the decision to select the 3PL. Typically, the solution results in the company saving money on their transportation spend and so the 3PL begins to take on a larger role. After the initial solution, however, it’s important for the company to stay involved in what the 3PL is doing to ensure that they are providing continued value that positively impacts the bottom line. To ensure that you are receiving continued value, here’s three questions to ask:

• How much transparency do I have around my freight spend?
• Do I have the proper metrics at my fingertips to measure my supply chain performance in real-time?
• Does the 3PL know more about our business than we do?

Outsourcing Tactical Execution or Knowledge?

When examining the role of the 3PL, the answers to the three questions above will help you understand if you have outsourced the tactical execution, or the knowledge. If it is the latter, you may want to reconsider. Choosing an alternative to a 3PL can seem like a daunting task because everyone thinks that they have to hire a bunch of people. Instead, companies should be looking for an alternative that allows them to bring their knowledge back in house, but not necessarily the tactical execution.

Managed Services Brings Knowledge In House

Today’s best alternatives to a 3PL will leverage technology and collaboration. This creates both value and a competitive advantage. One alternative is to bring the function in house and create a logistics team. When this function is brought in house, the internal team can outperform a 3PL because the group is focused solely on benefiting their organization. They can react and adapt quicker to the wants and needs of the company. Some large corporations will create a Managed Services group which provides in-house help for their individual companies or divisions.

Another alternative is external Managed Services complemented with technology. This option allows a shipper to re-acquire the knowledge that may have lost, while avoiding the expensive burden of a large tactical logistics staff.

We are in the information age and knowledge is power. In order to compete at the speed of business today, companies require a different type of logistics solution than was available 40 years ago. A Managed Services solution that combines market intelligence and consulting, along with technology that provides real-time actionable data and the ability to quickly execute on new strategies is that solution.

Does Your TMS Allow You to Benefit from Automation?

Even in the age of digital automation, there seem to be some tasks that shippers and their teams continue to do over and over again. I often talk to shippers that just spent millions of dollars to upgrade or implement their TMS only to have to put together a large staff of highly trained people to now manage the TMS. It seems that the TMS requires a lot of repetitive and manual actions to make it work—one of the things that a TMS is supposed to eliminate!

How Many People Does It Take to Run a TMS?

The number of people required for a TMS can be surprising. There is the person that has to manually update the fuel surcharge each week to ensure that their rates are correct. Then, there’s the person that has to resolve any exceptions that occurred during the planning phase. Typically, this means assigning the same carrier to the same types of shipments each and every day because the TMS had a glitch of some kind during the planning. Sometimes, a team of people has to send emails and make phone calls because the primary carrier rejected a load.

Once the TMS makes it through the sequential tendering, it gives up and forces the team to have to send an email or make a phone call. To save time, the shipper always calls the same carrier because they always have a truck for the given shipment. Finally, there’s the team of people constantly uploading and updating rates in the TMS because they continually find lanes they don’t have a rate for, which prevents them from tendering the freight to a carrier.

Leverage the Software Provider’s Expertise

If you’ve ever had to tender a shipment, then you know that it doesn’t always go perfectly and there should be easier more automated ways to handle the tactical exceptions. The shipper should be leveraging the expertise of their software provider to prevent these types of situations. We should all know that the carrier’s fuel surcharge changes each week, so should you really have to update the fuel surcharge manually?

If you are shopping for new software, or a new logistics consultant, there are a few questions you should ask to insure your new provider is a true partner that will help you benefit from the automation the TMS provides.

1. First, I would ask what type of internal support is required by the shipper to maintain the system. Does the shipper need to hire a team of 20 people to operate the system and keep it working, or does the system take care of itself?
2. Second, I would ask what the upgrade policy is. Does the system auto-update itself or do the updates have to be applied manually? Updates are a crucial part of logistics software because carrier rates and rules are constantly changing. In the ultra-dynamic world of shipping, your TMS should be taking care of variables for you, not the other way around.