A new wave of digital transformation introduced by third-party logistics services (3PL) where on-demand freight services and load carriers are reshaping the way logistics and supply chains are configured.
New 3PL technologies such as digital freight matching (DFM) make it easier and faster to connect shippers and drivers and share real-time information concerning logistics and transportation.
There are, however, both advantages and disadvantages of using third-party logistics services that organisations must take into account when redefining their supply chain systems.
The disadvantages include:
- New investments needed to integrate 3PL in the current supply chain management system
- Mandatory upgrade or complete overhaul of the supply chain management system
- Additional software licencing purchase or monthly fee payments
- Impersonal service delivered through DFM apps which may be the cause of missing out on individual attention, personalised communication, and other service perks
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For drivers and fleet management providers, third-party logistics provide easy access and low barrier entries in the industry, which can increase competition among transportation providers and lower service rates, cutting into already tight profit margins.
However, there are many benefits of integrating 3PL services into your supply chain management system:
- Quick fulfillment of orders which leads to better customer service
- Transparent and competitive pricing for both shippers and drivers
- Time savings for drivers due to rapid service automation where load transports can be found and booked within seconds
- Advanced integrated features such as instant payments, digital logbooks and map integrations allows drivers out on the road to be easily accessed by both load carriers on the road and shipping companies
As seen above, the increase in competition among the many third-party logistics providers can negatively affect profit margins, which can be recouped thanks to speedy transits and fast automation of delivery.
It also brings a variety of transport service options, competitive pricing and various other features to choose from, which can only benefit organisations to lower overall logistics costs and provide better customer service.
It is no longer optional to not provide the best customer service or to not fully optimise your business processes. Microsoft Dynamics AX can help with this. Microsoft Dynamics AX Supply Chain Management (AX SCM) integrates modules catering for warehouse, transportation, inventory, and cost management in one powerful collaborative platform.