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How to evaluate 3PL logistics distribution management technology services

For manufacturers evaluating third party logistics (3PL) providers of distribution management services, the first item on the list is whether the 3PL's technology is up to par, said Kate Vitasek, founder of Supply Chain Visions and faculty member at the University of Tennessee. 

"It's harder (for 3PLs) to do distribution [than warehousing] because you're not just storing product in a warehouse," Vitasek said, pointing to important new streamlining methods such as directed put away and cross-docking capabilities that can "leverage and tie together warehouse management systems (WMS) and transportation management systems (TMS) to optimize the warehousing and transportation handoff. "

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Systems integration or collaboration is another component of distribution logistic management outsourcing that warrants a close look, according to Jack Ampuja, president of Supply Chain Optimizers. Ampuja said 3PLs should allow manufacturers to see suppliers' systems to ensure that they (manufacturers) will receive all the information they need. "If you look at the supply chain," he said, "3PLs are managing a manufacturer's inbound supply chain too [as well as] the outbound." Consequently, big companies are opening their systems to share information like production schedules and inventory needs with customers and suppliers.

In general, distribution management technology services can include a broad range of supply chain tasks. "Most [manufacturing] companies don't want to sit on inventory, and larger 3PLs especially are focusing on distribution vs. warehousing," added Vitasek. She said that though warehousing is traditionally part of distribution -- along with transportation -- logistics distribution is broader in nature than warehousing.

"The real thing is the tracking of products and visibility," said Ampuja. Where the technology comes in today is in tracking the product from shipment from the factory to which truck it's on and where that truck is.

"Companies are starting to value anything that gives you better visibility to get better data to manage the business," Vitasek said. "The trend is moving more toward insight and fact-based visibility" in distribution management technology, which gives manufacturers control over as much of the supply chain as possible.

This includes satellite tracking, which now plays a large part in distribution logistics, supplanting old methods that estimated when trucks would leave and arrive. According to Ampuja, trucks can now be equipped with a satellite-connected transporter with precise tracking capabilities that enables a truck to drop its cargo at a store within a 30-minute (or even smaller) window.

About the author: Christine Cignoli is a Boston-based freelance writer who covers IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.

This was first published in January 2010

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