Improvement is a concept that can seem daunting — both in life and across multiple aspects of logistics and supply chain.
How many of us are ever satisfied with status quo? We feel pressure to improve from multiple angles — executive leadership, our managers, our customers and even our families. How is logistics supporting the customer experience? Are you within budget? Where is my order? Is dinner ready yet?
The logistics market is fraught with many challenges. Network, order and shipment complexity continue to proliferate due to unified commerce. Cost reduction and containment are widespread efforts critical to remain competitive and drive growth. Shippers and customers alike want increased visibility, and talent, capabilities and expertise have become difficult to find in a growing economic environment.
Sometimes our plate can seem too full. The good news is this perpetual race to improve the logistics operation does not have to happen in a bubble. We can ask for help — especially for those organizations that use third-party logistics providers (3PLs) for transportation, distribution and fulfillment services. Shipping organizations are seeking more joint value opportunities and better solutions support from their 3PLs in response to market challenges.
As part of the Magic Quadrant for Third-Party Logistics North America, Gartner asked 77 cross-industry shippers the following question: “How would you rate your 3PL’s ability to proactively bring you unsolicited innovation to your business and processes?” The majority — 57% of respondents — rated this capability as just average or below market standard and expectation. See Figure 1.
Wouldn’t it be grand if our 3PLs could solve all of our logistics problems for us before they even happen and without our prompt and input? The reality is, however, that innovation rarely happens in a vacuum. Developing services and solutions to market challenges requires increased collaboration and more active continuous improvement (CI) programs with 3PLs. Gartner has identified five primary categories where 3PLs are often best suited to support CI initiatives. Use these as starting points to identify gaps, highlight priorities and discuss CI opportunities with your 3PL. See Figure 2.
- Technology: Technology is a foundational capability that can greatly impact a 3PL’s service performance. Basic/advanced systems functionality and integration such as warehouse and transportation management systems, task automation, visibility tools, business intelligence (BI) and analytics tools are all areas where improvement can be targeted. Systems support operational efficiency, capture data and provide visibility to operations. You can’t fix what you can’t measure.
- Process: In the warehouse, process includes, but is not limited to warehouse design/facility sizing and layout, flow of materials, space utilization, use of automation and order management. In transportation, process often refers to how routes are planned, shipments assigned, optimized and delivered. Eliminating waste from processes supports cost reduction, productivity and sustainability efforts.
- People: Amid unprecedented talent shortages in the industry, 3PL providers can bring added value in the form of labor supplementation and logistics expertise. People support logistics processes, manage operations and are the source of innovation. Recruiting and pipeline strategies, training and development programs and creating differentiated work experiences are all critical to excel now and in the future. How well a 3PL manages labor and retains talent brings with it a source of competitive advantage.
- Governance: Engagement needs change over time as supply chains evolve. 3PLs should support, enable and catalyze achievement of both short- and long-term goals. To achieve that, communication plans, performance management and accountability on behalf of the 3PL should also change. Build strong governance, communication plans and CI programs into your contract to drive accountability.
- Innovative solutions: Preferred partners will work to develop tailored solutions that also deliver on your unique goals. Solutions innovation is finding ways to challenge how the organization is running not only one area of logistics (like the warehouse), but also up and downstream operations. Supply chain leaders must be willing to explore with a bimodal mindset to capitalize on this CI enabler. Bimodal is the practice of managing two separate, but coherent approaches to improvement, with one focused on predictability and the other on exploration. 3PLs will reserve their most innovative pilots for organizations with the room and culture to take some risks.
Be a change agent.
Courtney Rogerson, Senior Principal Analyst, Supply Chain Logistics, Gartner