Executive Briefings

Innovation in 3PLs Should Not Be an Oxymoron!

Analyst Insight: Customers of 3PLs face fundamental market transformation impacting their supply chain operations and initiatives. Connected commerce drives basic changes to fulfillment operations. Change is occurring at internet speed. 3PLs haven't traditionally been known for "anticipating" customer requirements changes. They have, however, been exceptional in responding to customers' requirements when the changes become apparent. In today's fast-paced markets, responding to change may not be enough. Vested relationships based on innovation are the new 3PL imperative. – Rich Sherman, author and founder at Gold & Domas Research

Innovation in 3PLs Should Not Be an Oxymoron!

Innovation is one of those commonly used words that are rarely understood or acted on. Everyone wants to innovate; but, more frequently innovation is created by someone else and adopted when they are forced to.  Companies perceive that innovation has to be "creative" and "out of the box." The belief is that innovation has to be groundbreaking or game-changing. People think innovation is something no one has ever done before. The reality is that the definition of "innovate" is simply to change existing processes and improve them.

3PLs that document their processes to meet customers' requirements are consistently improving their processes to create value to attract and retain customers. They are constantly scanning the market for emerging best practices, trends and technologies. They then innovate by changing and continuously improving the way they operate. Continuous improvement is innovation. They establish "vested" relationships and develop common metrics and objectives with their customers based on innovation. Those that don’t innovate are relegated to transactional relationships and increasingly lower margins based on price competition.

Emerging trends driven by mobility, the Internet of Things, regulatory compliance, analytics, to name a few, are resulting in an ubiquitous digital or connected commerce global market. The game is changing rapidly and represents opportunity for 3PLs. It's also a major threat to those that do not embrace the change. So-called Connected Commerce levels the playing field and expands it to global proportions. Companies' existing supply networks are increasingly challenged to adapt. 3PLs have the opportunity to provide seamless fulfillment and delivery services to satisfy the global demand from customers and suppliers of all sizes and industries leveraging the Internet for supply management.

While global competition and effective supply chain management have never been more challenging, there are also more resources, technology and know-how available to meet the challenges. Best practices and leadership in supply network management form the foundation for growth. By focusing on process improvement versus functional management, 3PLs can change the game. 3PLs are uniquely positioned to innovate and create value by leveraging Connected Commerce to serve as information and material management hubs as the flow of goods changes with demand variability.

Conversely, leveraging the competencies and capabilities of strategic 3PLs, companies can transform their supply networks rapidly to achieve unprecedented levels of agility and responsiveness while reducing cost and liberating capital. In the global Connected Commerce market, companies that leverage their strategic partners will extend the boundaries of their supply chains, transform to smart supply networks, and lead in the 21st Century. 

                                                      The Outlook

In 2015, leading 3PLs/4PLs will extend and expand their market reach and assets, invest in and leverage emerging technology, and establish "vested" strategic relationships with their customers. M&A activity will increase to serve this expansion. Regional 3PLs will have to be more innovative and adaptive to compete and avoid relegation to commodity transactional service providers. Competition will intensify, the market will change, and the innovators will survive.

Innovation is one of those commonly used words that are rarely understood or acted on. Everyone wants to innovate; but, more frequently innovation is created by someone else and adopted when they are forced to.  Companies perceive that innovation has to be "creative" and "out of the box." The belief is that innovation has to be groundbreaking or game-changing. People think innovation is something no one has ever done before. The reality is that the definition of "innovate" is simply to change existing processes and improve them.

3PLs that document their processes to meet customers' requirements are consistently improving their processes to create value to attract and retain customers. They are constantly scanning the market for emerging best practices, trends and technologies. They then innovate by changing and continuously improving the way they operate. Continuous improvement is innovation. They establish "vested" relationships and develop common metrics and objectives with their customers based on innovation. Those that don’t innovate are relegated to transactional relationships and increasingly lower margins based on price competition.

Emerging trends driven by mobility, the Internet of Things, regulatory compliance, analytics, to name a few, are resulting in an ubiquitous digital or connected commerce global market. The game is changing rapidly and represents opportunity for 3PLs. It's also a major threat to those that do not embrace the change. So-called Connected Commerce levels the playing field and expands it to global proportions. Companies' existing supply networks are increasingly challenged to adapt. 3PLs have the opportunity to provide seamless fulfillment and delivery services to satisfy the global demand from customers and suppliers of all sizes and industries leveraging the Internet for supply management.

While global competition and effective supply chain management have never been more challenging, there are also more resources, technology and know-how available to meet the challenges. Best practices and leadership in supply network management form the foundation for growth. By focusing on process improvement versus functional management, 3PLs can change the game. 3PLs are uniquely positioned to innovate and create value by leveraging Connected Commerce to serve as information and material management hubs as the flow of goods changes with demand variability.

Conversely, leveraging the competencies and capabilities of strategic 3PLs, companies can transform their supply networks rapidly to achieve unprecedented levels of agility and responsiveness while reducing cost and liberating capital. In the global Connected Commerce market, companies that leverage their strategic partners will extend the boundaries of their supply chains, transform to smart supply networks, and lead in the 21st Century. 

                                                      The Outlook

In 2015, leading 3PLs/4PLs will extend and expand their market reach and assets, invest in and leverage emerging technology, and establish "vested" strategic relationships with their customers. M&A activity will increase to serve this expansion. Regional 3PLs will have to be more innovative and adaptive to compete and avoid relegation to commodity transactional service providers. Competition will intensify, the market will change, and the innovators will survive.

Innovation in 3PLs Should Not Be an Oxymoron!