Moore on Pricing: Big Data and 3PLs

As third party logistics providers (3PLs) work to ramp up services for their customers, one area of focus is information management services.

As one can imagine, the 3PL is in a unique position to collect and scrub large volumes of transaction information as they execute orders for shippers. Until recently, large portions of the 3PL data was often not passed on to the shipper nor leveraged for improvement initiatives, being viewed as more of a feeder on basic transaction facts to the customer’s own ERP. Historically the shipper’s ERP systems did the heavy lifting in managing data, but many data elements were discarded to keep the expense and effort involved to a minimum.

With the improvements in systems available to 3PLs, coupled with their drive to add more value to shippers, they’ve been investing in people, processes, and technologies that can help customers manage the cost and service levers of logistics. Today, shippers shopping for a 3PL need to ask about their capabilities in managing and leveraging “Big Data.”

Big Data in logistics includes the very detailed information that spring from the order to cash cycle. In fact, for many companies, their supply chain generates the majority of the data they have to manage. That makes the 3PL a key resource.
The volume of transactions multiplied by the order, inventory, dimension, freight, tracking, delivery and payment data balloons the data to be managed by logistics systems.

Today, we realize the value in mining transactional data and are increasingly relying on the service providers to provide clean complete data sets for transportation, warehousing, and customs compliance. The leading 3PLs have even started to bring additional value by employing an analyst that can use data to show patterns that indicate opportunities for the customer to improve cost and service. 

By way of illustration, when I had a 3PL business one of our services was rail fleet management. While many of our competitors offered aggregation of rail tracking data to customers on a daily basis, we realized that we could offer much more by manipulating the raw data we collected and providing valuable information to clients that would impact their operations. 

For some customers we provided statistical projections regarding transit times, due dates, and car availability that enabled customers to reduce their fleets by ten percent. In turn, we were able to have an impact on the customer’s business well beyond the transportation function as information replaced inventory of very expensive assets.

In one case, a lube oil company began planning their production cycles based upon our reliable information on empty cars, while their customers allowed the shipper to schedule the replenishment of stocks—thus enabling further production schedule optimization.

Our 3PL company benefitted, as we were able to increase fees 20 percent above the average for fleet management services with no additional labor. However, we did train our people to be data analysts, and this investment in our people resulted in a 1,200 percent ROI split between our customers our company. 

For shippers in the 3PL market, there’s a whole new dimension to service that now has to be considered. In order to enable cost and service improvements, shippers will need to utilize the detailed information and analysis of the Big Data generated by the logistics functions. 

Often the company IT function has difficulty understanding and delivering the level of data detail and systems; however, a 3PL partner with the right tools and skills can fill this need. Be ready to ask some questions about how your 3PL will add value by analyzing this valuable information.