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3PL Communications: Using Technology to Optimize Communications

As anyone who works for or with a 3PL knows, not only are quality communications skills important for any third-party logistics company, but so are the right types of technologies that can enhance and optimize communication efforts.

So, what technologies that are available or on the horizon could help optimize third-party logistics companies’ communications with customers and suppliers?

Two supply chain management solutions are EDI – Electronic Data Interchange – and API – Application Programming Interface. Both can be effective in addressing what customers and motor carriers need from 3PLs, experts say.

"These technologies enable constant communication and seamless connectivity between shippers and carriers, making it easier to capture, centralize and analyze data that impacts logistics operations," said Jordan Kass, president of TMC, a global supply chain management company, a division of C.H. Robinson.

EDI and API both allow users to quickly and securely exchange data between systems, a major part of the supply chain management process. And both are widely used across many different business software solutions. But how effective are they in addressing what customers and motor carriers need from 3PLs?

APIs and EDIs

At the core of a good logistics network is data connectivity and communication between supply chain customers and suppliers. APIs and EDIs both aid in these communications and data transfers, but each has its own benefits and challenges.

EDI has been around for longer and is, therefore, more widespread, while API has an increasing number of users and is becoming a growing choice for data transfer tasks, experts told Intermodal Insights.

An API is a customized way for a logistics application to send, receive and transfer information with other supply chain applications without human involvement – eliminating the possibility of human error, Glenn Jones, global vice president of product strategy and marketing at Blume Global, explained.

"While digital platforms like a TMS were once beneficial but still optional, they are now required for operational success. Without an agile, streamlined supply chain platform that can quickly respond to market disruption, companies are faced with a widening competitive disadvantage."
Glenn Jones
Blume Global

"They are specially coded to allow different applications to communicate logistics data so that both applications can understand and use that information, and data can be transferred at sometimes sub-second speeds," Jones explained. "It is for these reasons that APIs are used extensively in the supply chain to transfer many different types of data among different supply chain software platforms."

However, all supply chain applications involved in the sending, receiving and transfer of data would need to allow for API use, he explained, which requires specific coding, and can be a significant development overhead cost.

APIs are customized ways to send and receive data, but an EDI differs in that it’s an agreed-upon standard to transfer information between supply chain businesses and logistics applications.

"Since EDI technology has also been around for longer and is seen as an industry standard, it is more widely used by businesses. Unfortunately, this also means the technology is older and lacks the real-time speed of API," Jones explained. "Since both parties need to use the same transfer protocols for data transfer to occur, smaller companies often encounter challenges when communicating with larger businesses that use more updated versions of these tools."

Bob Boyle, vice president of NA Managed Logistics Services for Odyssey Logistics, said that generally speaking, API and EDI tools are effective and serve as a solid foundation for providing shippers and carriers what they need.

"Shippers demand visibility, and API and EDI tools do provide that. However, they now expect visibility in a more timely manner," Boyle said. "As a result, they need the more sophisticated tools that provide real-time tracking, e.g., GPS, and enable more flexible integrations with shippers as well as carriers."

Transportation Management Systems

Another factor in quality communications is transportation management systems. What are the ways in which 3PLs’ TMS work for customers and suppliers?

Since a 3PL can provide end-to-end management across many parts of the supply chain, including storage, transport and fulfillment services to customers, a 3PL using a TMS is able to amplify its efficiency by digitally managing all aspects of these services, providing suppliers the visibility and insights needed to streamline their services, and in turn, improve customer satisfaction.

"For example, using a TMS, data including available inventory in transit, accurate location tracking of shipments and empty containers, shipment status and freight capacity can all be collected and monitored and leveraged to optimize transportation of goods," Jones explained. "Together, this information can be used for increasing efficiencies such as optimizing routes and providing customers with real-time ETAs for their goods."

Being able to find capacity, automate with transparency and recognize opportunities and exceptions as they occur are essential to meeting customer delivery expectations while balancing cost, he added.

Boyle added that TMSs "bridge the gap between the shipper and its carriers," with the ultimate goal being to ensure the best decision-making for transportation management.

"Shippers want an assurance that the best possible carrier is being utilized to support routing, and carriers want to ensure that requests coming to them are a good match with their capabilities," he remarked. "A TMS marshals that activity to ensure business rules and logic guide the process versus randomized decision-making."

A TMS also serves, he said, as a full end-to-end service delivery with many components, including scheduling, freight audit and payment and tracking.

Regarding how effective 3PLs’ TMSs are in addressing the needs of customers and motor carriers, Boyle said when combined, a TMS and 3PL enables customers to continuously improve by leveraging the data captured as part of the TMS.

"When a TMS manages transportation activities and processes to ensure optimization is achieved wherever possible and a 3PL provides additional value by creating a layer of support on top of the TMS," he said.

"Shippers and carriers need to understand where opportunities may exist to optimize their processes," Boyle continued. "This can be achieved by implementing a TMS solution and having 3PL support."

He added that a TMS can also support a customer being elevated to shipper of choice status with the carrier community.

"They can stand out from their competition," he remarked, "by creating process governance and continuous improvement strategies to enable better network performance."

Jones added that TMS solutions have been well-positioned to ensure that customers’ and motor carriers’ shifting needs are still met during the course of the coronavirus pandemic, even as international transportation demand has skyrocketed and capacity has been limited.

"The pandemic has rapidly increased the adoption of digitization at all levels of the global logistics industry," he remarked. "While digital platforms like a TMS were once beneficial but still optional, they are now required for operational success. Without an agile, streamlined supply chain platform that can quickly respond to market disruption, companies are faced with a widening competitive disadvantage."

"And now, with logistics workers across modes reluctant to handle paper documents due to the potential spread of disease, implementing a TMS that generates and leverages digital document equivalents is becoming an industry-wide standard," he added.

Kass recommended that when choosing a TMS technology, shippers pick what he calls a "carrier-agnostic, neutral" platform, so that they receive an unbiased carrier selection and focus on their logistics strategy.

"This avoids a conflict of interest by correctly balancing your needs while keeping your information separate and your rates protected," he commented. "A platform that houses all your freight information can quickly select the most cost-effective routes and logistics service provider to meet each order’s requirements."

Emerging Technologies

In terms of emerging technologies that might optimize 3PL communications, Kass remarked that the Internet of Things space is an opportunity for supply chains.

"This presents an exciting opportunity on multiple fronts, and our industry is ripe for these technologies as IoT devices continue to become smaller, cheaper, and longer lasting," he explained. "With this feature, customers can not only see the real-time location of their products, but also monitor and be alerted to potential spoilage, damages, or tampering of their goods, with the goal of engaging and recovering from the issue immediately."

Boyle said that continued focus on machine learning and artificial intelligence will guide the industry’s next steps, as well as technologies that provide faster integration to enable better visibility.

"Business intelligence functionality will also be a critical area of investment going forward," he predicted. "Increasingly, shippers and carriers need business intelligence technology to organize the growing amount of data that’s being created by visibility tools."

Jones added that Blume Global believes that any technology that can provide broad coverage of real-time data needed to enable agility and to avoid supply chain disruptions will be vital as 2021, like 2020, is a year of uncertainty.

"The widespread adoption of technologies that have long been considered as emerging – such as the network strength of 5G combined with the insights of connected devices like IoT – will be crucial in ensuring that 3PLs have real-time communication capabilities," he remarked.

"Using these technologies in tandem," Jones said, "is how 3PLs can provide the up-to-the-second tracking that has come to be expected and relied upon."

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