3PL Perspectives
Brian Hodgson | Descartes Systems, LLC
Visibility has long been a priority for supply chain teams. In fact, based on the Descartes 2018 Annual Transportation Benchmark Survey, 67 percent of shippers ranked visibility as a critical capability for effective operations. For logistics service providers (LSP), providing visibility has gone from being a competitive advantage to being expected in order to win new contracts.
The study found that 80 percent of those who delay upgrading their TMS struggle to get their projects approved versus 30 percent of shippers who view transportation as a competitive weapon and experienced no approval obstacles. This creates a huge opportunity for LSPs who leverage visibility not just to provide better customer service, but also to translate the information into a stronger relationship with customers.
Based on experience with thousands of customers, here are five areas where real-time visibility creates value:
- Deliver on heightened customer expectations
- Reduce labor costs
- Improve detention management
- Reduce late deliveries and disputes
- Expand revenue with value-added services
Deliver on Heightened Customer Expectations
In today’s “on-demand” world, customer expectations are driving increased visibility that requires more frequent updates and is expanding to include more stakeholders. As an example, a foodservice customer delivers to medium and large grocery chains, as well as to distributors that sell to small stores and restaurants. Customers are served through a mix of truckload and LTL carriers, comprising approximately 45,000 shipments per year. Before using visibility software, the company had visibility from carriers through EDI, but only for a portion of their freight moves. The updates they received were too infrequent, and they usually only found out about an issue after it was too late. In addition, there was no way to proactively provide the end customer with real-time visibility. It’s possible with some visibility software to receive real-time updates every 15 minutes. Additionally, notifications are automatically sent to key stakeholders for late shipments. By being more proactive and providing quality tracking information, the company’s customers have been able to streamline dock receiving and improve the planning of downstream deliveries.
Reduce Labor Costs
Reducing costs associated with track and trace responsibilities is clearly the place to start. Within the track-and-trace team, it is worth conducting a detailed time and motion study. The operational cost savings fall into several categories: (1) Reduced number of proactive calls to carriers (2) Reduced data analysis if EDI is currently used (2) Fewer “emergency” calls from sales or customer support reacting to late or missed deliveries, and (4) Lower number of customer calls to support and sales. Even for a relatively small LSP with, for example, approximately 200 shipments to monitor, each one might take 2-3 minutes to check on per day. With technology-enabled visibility, the resulting savings could potentially be more than eight hours per day that could be spent on more proactive activities. With larger LSPs, there have been savings exceeding $250,000 depending on the number of shipments.
Improve Detention Management
According to the U.S. Department of Transportation Inspector General, “Accurate, industrywide data on driver detention do not currently exist. Available electronic data … are unavailable for a large segment of the industry.” The challenge when delivering to customers is that, without electronic data, there is no objective record of detention. Carriers may have incentives to charge detention to supplement a low rate lane, and shippers go through a tedious process of getting the detention bill and going back to the consignee to validate or refute. Mix in 3PLs, and it gets even more ambiguous. With no system of record, it too often turns into a finger-pointing exercise and inefficient use of time. With ELD-based location data and configurable geofencing, LSPs have a system of record for arrivals and departures. This information is used to provide value in two ways: (1) When there are legitimate detention issues, with accurate data, LSPs can ensure the issue is resolved and carriers are paid correctly; (2) By looking across multiple customers and their locations, LSPs can highlight bottlenecks and work collaboratively with shippers to drive operational improvements.
Reduce Late Deliveries and Disputes
Real-time freight visibility provides predictive ETAs, enabling LSPs to identify and work with their customers more collaboratively to reduce late deliveries. Use cases include retail deliveries with strict on-time, in-full (OTIF) requirements, just-in-time shipments to manufacturing plants and deliveries to “project sites.” One customer manages deliveries to building sites, which are tightly coordinated with the project schedule and work crews. Without real-time freight visibility, a missed delivery window could result in more than $10,000 in potential penalties. By having visibility to all freight and being able to easily identify deliveries that are at risk, the company can now coordinate with its customers who will have more flexibility to adjust crew schedules, thereby minimizing any issues. Another company studied the impact of a late delivery with a customer. Typically, the chain flowed through sales, was escalated to customer service, and ultimately ended up with a “fire” in transportation. There were 6-8 people involved and a number of conference calls, with each incident costing the company more than $650. With late deliveries occurring 3-4 times per month, the annualized costs amounted to $27,300 per year, on top of the negative impact on customer service.
Expand Revenue with Value-Added Services
As visibility programs expand, the information that is captured can be leveraged beyond the core track and trace team and used to support new applications and more strategic initiatives. One example of fueling a new application is temperature monitoring. With visibility to the temperature in refrigerated loads, LSPs can remotely monitor shipments and ensure compliance. Not only does this eliminate cumbersome paperwork, it also saves the driver time. Visibility can also inform more strategic initiatives, such as improving analysis across a customer supply chain. For example, perhaps some locations are more efficient in loading/unloading, or specific suppliers are always late in preparing shipments. These examples can be factored into quarterly business reviews to drive a more partner-based approach versus strictly a cost-focused review.
Get Started Today
The freight visibility market is moving very quickly, and first movers are taking advantage of the opportunities to create a competitive advantage. To assess how real-time freight visibility can help your operation, start by considering the following:
- Conduct a time-and-motion study on your track-and-trace team. Focus not simply on the activities to get visibility, but understand how they support other areas of the business and your customers. What is the impact in other areas (e.g., customer support, etc.)? What tools are they using today? Spreadsheets, email? How much is reactive versus proactive?
- Determine how often you miss customer deliveries. How does this impact your relationships? Interview some customers on what they expect, and what they are seeing from other providers. What information and recommendations can you provide in quarterly business reviews that can help your customers improve their supply chains?
- Review your detention program. This includes both deliveries and pickups. Do you have detention data that you can share with trading partners and identify the best areas for improvement? LSPs can also take on dock scheduling as a service for customers that are less sophisticated.
With technology changing rapidly, there are always new use cases. Do these fit your operations? Are there alternate ones you are looking at?
Let us know.
Brian Hodgson is Vice President, Transportation Solutions at Descartes Systems, LLC. He can be reached at [email protected]
Photo Credit:
lOvE lOvE/Shutterstock.com
