Using a third-party logistics (3PL) provider for transportation technology needs is nothing new for manufacturing. "Transportation is a logistics and distribution area of the supply chain that many manufacturers have been outsourcing for some time," said Simon Ellis, practice director, supply chain strategies at IDC Manufacturing Insights.
Nor is using a 3PL provider for transportation specific to manufacturers in any particular vertical or size range; few manufacturers, regardless of industry, want to own their own trucks, Ellis said.
Transportation support from 3PL providers include managing all transportation functions, handling lane negotiation and working with trucking companies to find trucks and get products shipped.
What manufacturers should look for in those vendors is not terribly complicated: "At the end of the day it's about cost and it's about service," Ellis said. If the transportation 3PL can meet the manufacturer's service levels with a low level of damages, then it's best to look at which 3PL can deliver the best cost performance.
Beyond cost, it's important that manufacturers recognize the technological capabilities" of a 3PL. While most transportation 3PL providers are fairly sophisticated about EDI technology, Ellis said manufacturers should make sure a 3PL supplier can provide the right technological support for tracking shipments, though most 3PLs are up to speed on that technology.
For manufacturers who conduct a lot of global business, finding the appropriate 3PL is key, though it's not a common issue. "The ability to understand global trade parameters is important," said Ellis, "but most 3PLs don't need to worry extensively about global trade since 3PLs usually exist within the context of a particular market. In the U.S., for example, there are thousands of small regional carriers shipping, according to Ellis.
Up next for 3PL transportation technology is a continued expansion of the trend toward outsourcing. "There are still lots of manufacturers who run their own transportation management systems," Ellis said. "They [manufacturers] do transportation tendering and use physical 3PLs to actually move the freight." But in the past five years, many 3PLs have started taking over all of the transportation technology functions for manufacturers.
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