Third-party logistics providers (3PLs) don’t look much like they did 40 years ago. They’ve morphed into high-performing, essential, value-added organizations.
3PLs have become strategic-oriented businesses that offer any shipper competitive advantage.
What does that mean?
Here’s a definition from Investopedia:
Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals.
Competitive advantage also implies a future focus. It implies responsiveness as well as efficiency. Put together these advantages will shape what the future will look like.
3PLs that take this approach to logistics services offer competitive advantage. We’ll explain this in more detail below by examining 3PLs’ core capabilities.
Those core capabilities are: (1) Resilience and velocity; (2); Extended Networks; (3) Customized Solutions; (4) Business Intelligence; and (5) Trusted Leadership.
Achieve Competitive Advantage with Resilience and Velocity
With the increase in scale and impact of natural disasters of late, resilience has become top of mind. That said, resilience and velocity were key tenets of supply chain management pre-Covid-19.
But the pandemic accelerated interest in and importance of resilience and velocity. With fluctuating and uneven demand, shippers and 3PLs had to pivot on demand. This led to many changes.
First, it changed the way we view supply chains. Covid-19 called into question the hyper efficient, just-in-time mentality. Instead, supply chains demand a better balance between efficiency and responsiveness. That means relooking safety stockage to meet unpredictable demands.
It also called for adapting faster and earlier to changing dynamics on the ground. 3PLs that bounced back and responded in real-time gained competitive advantage.
As a result, we’re seeing supply chains transform from rigid business processes to executing “sense-and-respond “logistics support. 3PLs that provide agility will gain a competitive edge for their customers.
Achieve Competitive Advantage with Extended Networks
If we didn’t realize it before, supply chain management is all about people and communication. People must communicate vertically and horizontally – internally and externally. To achieve 360 degree communications, you must network organizations, people, and systems.
In short, tomorrow’s supply chains need extended networks. Networks must connect internal and external communications. For example 3PLs and their customers must communicate openly and transparently. Their communications must extend end-to-end from the top-down to the last-mile.
Also, effective supply chain networks must synchronize communications. Synchronization ensures a single version of the truth. But synchronization is only one criterion. This also entails the configuration of systems to enable secure data flows. With secure networks, reliable data and information result.
Without secure networks, you can’t establish a single point of truth. 3PLs that provide secure, extended networks provide a competitive edge over 3PLs and business that don’t.
Achieve Competitive Advantage with Customized Solutions
Customized solutions were growing as a service differentiator before the spread of Covid-19. By that I mean some in the industry considered it a perk of sorts. Many saw customization as a high-end benefit.
But Covid-19 changed that idea of customization.
During the pandemic, customization became a necessity rather than a perk. Covid-19 forced 3PLs to work closer with shippers to set priorities. In doing that, 3PLs became more attentive to customer expectations. That led to improved service. And that led to customized solutions.
At the same time, 3PLs had to grapple with cost containment. In customizing solutions, 3PLs looked for ways to extract efficiencies to manage costs. That is, 3PLs still had to minimize cost while maximizing service.
Shaped by Covid-19, customer expectations are fixed, even as we return to normal operations. Customers expect more and demand more. And they want service at an affordable cost.
In customizing solutions, 3PLs will deliver exactly what their customers need. 3PLs that offer cost-effective, customized solutions will gain competitive advantage.
Achieve Competitive Advantage with Business Intelligence
The need for actionable information today is greater than ever. Thus, business intelligence has become indispensable. As with the other capabilities discussed, Covid-19 underscored business intelligence’s significance.
In particular, it helped drive competitive advantage in a variety of ways. All provide actionable information via data-based decision-making.
First, it allowed 3PLs to fine-tune daily operations enabling sense-and-respond capabilities. The use of dashboards with relevant metrics facilitates this. Performance dashboards track operational and financial performance against designated standards. They do so in real-time.
Next, moving on to predictive analytics, 3PLs can mitigate or avoid damaging events. That is, with the use of metrics, 3PLs can reduce friction. They can aid shippers by using metrics to anticipate – and avoid risks.
Finally, data mining can make sense of unnoticed or invisible patterns. It helps reveal new and unique opportunities. With keen insights gained from data mining, 3PLs can offer customers innovative solutions. Without data mining, some of these innovations would not crop up.
In brief, business intelligence provides actionable information. It also fosters data-based decision-making. Reliance on opinion won’t work in today’s fast-paced, dynamic marketplace. With business intelligence, 3PLs offer shippers distinct competitive advantage.
Achieve Competitive Advantage with Trusted Leadership
Leadership continues to be a critical core capability that translates into competitive advantage.
Good leaders know how to steer their organizations through expected and unexpected crises. Recognizing the need for agility coming out of the pandemic, good leaders stress the need to be nimble.
When the pandemic hit in March, it caught most businesses off-guard. But a few weren’t surprised. Businesses that had astute leaders fared well, despite the economic shocks.
Those that did well had leaders that embraced new technologies. For example, businesses that invested in automation did better than those that didn’t. Also, leaders who were customer-centric weathered Covid-19 better than those who weren’t.
Customer-centricity promoted closer collaboration. Closer collaboration fostered new and deeper insights. That enabled 3PLs and shippers to thrive during the pandemic, as both gained deep insights.
Knowing customers’ deep needs enabled leaders to shift resources as needed. Shifting employees on demand, for instance, helped place resources when and where needed.
Leaders who know customers’ greatest challenges and deepest needs position them for success. At the end of the day, savvy leaders can help deliver competitive advantage.
Is Your Business Positioned to Succeed Tomorrow?
The world of business has changed. And it will continue to change. Thus, supply chains must adapt.
They must become more responsive to dynamic situations. The future of business will go to the resilient and responsive.
Furthermore, the pandemic made the value of communications crystal clear. Without extended, ongoing, and transparent communications, you can’t streamline operations. And you can’t optimize business processes.
That’s important because otherwise the top line and bottom line will suffer. Both will suffer because customizing solutions and making data-driven decisions need clear communications. Without extended communications, you’ll be hamstrung in avoiding obstacles and realizing opportunities.
Now, more than ever, is the time to seek a trustworthy 3PL partner. We’re a strategic and customer-oriented 3PL. If you want to succeed in tomorrow’s markets, contact American Global Logistics today.
We look forward to learning about your needs and challenges. If you’re interested thriving tomorrow, contact us today. We can help you gain competitive advantage.