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Technology providers that survive will be the ones able to meet multiple needs of their customers.

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Drones, robots, online marketplaces, digital forwarding, enterprise technology, the Internet of Things (IoT), big data, and analytics — not since the dawn of the dot-com era has the business-to-business sector been flooded with so many technology models that promise to be transformative for transportation and logistics providers.

How deeply are these concepts affecting the operations of leading global third-party logistics providers (3PLs)? With the dawn of the new year, what further challenges do third-party logistics providers face when it comes to using new technology to reduce costs and satisfy the rising expectations of their customers?  

Evan Armstrong, president of Armstrong & Associates, the Milwaukee-based research firm, said that over the last three years, a great deal of technology has been deployed effectively within 3PL operations, especially on the domestic transportation management side with freight brokerage operations.

Some of the most notable pioneers include:

  • Werner and C.H. Robinson, which offer algorithms that allow freight brokers to quickly and efficiently isolate trucks that are going to have capacity within certain lanes, and will have favorable pricing.

  • HubTran, which makes it easy to retrieve bill of lading information from carrier sites into the transportation management system, and improve data integrity.

  • Start-ups such as Uber Freight, Convoy, and LoadExpress, which are “definitely going to automate technologies, make them more efficient, and lower costs.” Digital freight-matching companies such as Convoy make software that allows freight shipping companies to enter specifications of what they need to move. The technology sets a price to haul the load, and trucking companies can then choose whether to accept the job.

  • VINCI Energies, whose Cobotics (collaborating robots) assist operators by augmenting their capabilities in terms of effort, allowing them to manipulate parts that are hot, heavy, bulky, or too small for precision handling.

  • PINC Solutions, which provides scalable cloud-based software that leverages an extensive IoT sensor network that includes RFID, GPS, and cellular technologies to capture and share real-time information. PINC’s drones read RFID on trailers in trailer yards.

  • Project 44, the first multimodal automation platform based on a single API-based network, optimizes all freight transactions from quote-to-invoice, providing real-time rate quotes out of the carrier.

Satish Jindel, president of SJ Consulting, said that some of the most interesting technological innovations will continue to originate within start-ups, such as Uber Freight and Trucker Path, because big corporations “are traditionally unsuccessful in incubating new ideas because of their corporate structure.” Those start-ups that develop a strong market presence may well wind up being acquired by the bigger firms such as Oracle or C.H. Robinson or Descartes. Among those start-ups that do not get acquired, probably half will eventually go out of business, he predicted.

For his part, Armstrong noted that start-ups such as Convoy, Uber Trucking, and Trucker Path already have achieved considerable scale, and will likely be providing a great deal of new technology for the shipping community. However, huge firms such as C.H. Robinson, which manages billions of dollars of purchased transportation, have developed their own very good technology, and are continuing to innovate.

In the final analysis, he added, those companies that have great technology but no scale are not going to be able to demand rates from carriers. Successful 3PLs such as C.H. Robinson, which have large reserves of cash in the bank, are “probably going to be able to go out there and buy that company and get their tech,” Armstrong said. After that, the cash-rich 3PLs will then pass on the technology to their customers as part of their offerings of services.

Jindel cited the example of MacroPoint, whose successful real-time, third-party freight visibility platform achieved a sound market presence before being acquired by Descartes Systems Group in August 2017. Under its new ownership, MacroPoint is continuing to provide visibility about where the trucks are, and get small truck fleets onto the MacroPoint platform so that their customers can know where their shipments are.

For those companies that do not develop their own solutions, MacroPoint will continue to provide a valuable service, following its acquisition, Jindel explained. As a component of Descartes, MacroPoint can now offer a broader selection of services to its customers in a bundled solution that spreads the MacroPoint user base more rapidly.

Armstrong said that when people talk about margin compression in domestic US transportation costs, the real margin compression is not going to come from disrupters such as Uber Freight — which is primarily just a small brokerage — but from automation that dramatically reduces the costs of 3PLs, and allows some of those savings to be passed onto their customers. Automation, better job specialization, and the use of application programming interfaces (APIs) to integrate different systems more smoothly are jointly intended to provide better data in terms of shipment tracking and carrier invoicing.

Among companies that are providing these new technologies, Jindel said he does not think it is going to be so much a case of industrial consolidation, but a reduction that results when some of those companies go out of business, perhaps because they operate in too narrow a niche. The technology providers that will survive will be the ones that can do multiple things for the customer in terms of their needs for technology.

Some of the surviving companies will be bought out by other companies, Jindel predicted, and some will not be able to sustain themselves because many fairly new start-ups are burning cash. Nowadays, the market does not have a great deal of patience for companies that are burning cash, he said. When new companies are not able to break even after a year or so, people start to wonder “if they have a real model” that is sustainable over the longer haul.

Which kinds of 3PLs have the best chance of surviving in this kind of environment? Matt Yearling, CEO of PINC Solutions, said that, unfortunately, “there are not many 3PLs that are thinking strategically about what is important for their customers.”

He distinguished the commonplace “tactical 3PL”, which views its customers as interchangeable commodities who can be replaced when things go wrong, with the “strategic 3PL,” which is willing to forgo short-term profits in order to build longer-term relationships with its customers. Strategic 3PLs are looking to add more value for their customer, including by bringing in new technology that may not pay off as quickly.

The most progressive 3PLs are positioning themselves to add new kinds of value to their customers, Yearling said, and they are creating in-house innovation centers within their operations with that aim in mind. That means doing pure research about industry trends, such as robotics or drones or other new technology whose payoff is not obvious.

The noise surrounding such decision-making can be deafening. Echoing the hype of the dot-com boom, not a week goes by without some news of a new innovation patented by Amazon, Wal-Mart, or other innovative companies, Yearling said. However, “there is so much hype about so many different things, everyone is trying to do too much.”

Electric trucks, autonomous trucks, and drone deliveries — so many ideas become so fashionable that people do not know what to focus their energies on, he explained. Yearling cautioned 3PLs to prioritize how they can help drive the value of their operations for their end-users. He warned companies that they need to designate someone in their organization as “the center of gravity,” who can make decisions about priorities after consulting with various stakeholders in the organization. Jindel said too many companies are pursuing a reactive approach, rather than one that is pro-active and imaginative. In so doing, these companies are exposing themselves to new start-ups that may be disruptive in ways not predictable.

Dazzled and confused by an overwhelming number of options, so many companies remain old-fashioned that “it is mind-boggling,” Yearling said. There are still some large 3PLs that work with spreadsheets and do not have warehouse management systems.

“Technology is a major enabler of where this is all going,” he stressed. So if your 3PL is a sizable operation and you do not have a well-funded program focused on technology innovation, “you are going to lose.”

Finally, too many 3PLs still manage their operations in separate silos, making decisions in isolation within each silo, which they are then unable to leverage across their entire organization, no matter how excited their silo may be about adopting nifty new technology.

Contact Alan Field at alanfield0@gmail.com.

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