Can even the most tech-savvy business master the complex world of digital supply chains? At its essence, this digital realm consists of integrating both data and cutting-edge technologies. Further, it requires businesses to manage collaborations with numerous supply chain partners. This includes ecommerce platforms, TMS / shipping station providers, warehouse operators, carriers, auditors, financial systems, and 3rd party logistics (3PL) providers. To complicate matters further, supply chain data is often vast and disorganized. Moreover, a digital supply chain constantly evolves; it undergoes frequent updates, legacy system phase-outs, and new technology integrations.

So, how can a supply chain go digital and remain competitive? Essentially, there are three options: do it yourself, outsource to a 3PL, or adopt a hybrid approach. This article explores the role of a 3PL provider as an IT integrator to digitizing your supply chain. Moreover, I’ll address the primary challenges of implementing a digital supply chain. This includes comparing the trade-offs between using a 3PL or acting as your own supply chain integrator. Lastly, I’ll provide some tips on how best to outsource to a 3PL IT integrator.

1. The Digital Supply Chain Transition.

All supply chains are currently undergoing a digital transformation, moving away from paper-based transactions and labor-intensive processes. To better understand this shift, I’ll first review the fundamentals of what a supply chain is and how information was managed before the advent of digital technologies. Also, let’s start with a simple definition of supply chain:

“a physical network of entities that source, produce, transport, and deliver a product.”

Unquestionably before information technology existed, information exchange was extremely labor intensive. Further, documents and information flowed in a more linear fashion from point to point across the supply chain. Indeed, there was neither real-time nor end-to-end supply chain visibility. For example, without digital technologies only select persons would actually see the Bill Of Lading (BOL) or shipping documents for a shipment. So, before computers all information about the supply chain was either point-to-point or localized geographically. 

Now, with information technology continuing to advance with the global internet, cloud-based platforms, artificial intelligence (AI) and internet of things (IoT) devices, things have changed. Supply chains now have the ability to gain end-to-end visibility. Further, they can gain visibility real-time anywhere in the world. What’s more, they can process this data almost instantly to achieve timely insights and take action on the information immediately. Some call this information technology phenomenon, the digital supply chain. Others call it Supply Chain 4.0. For the purposes of this article, I like this definition from McKinsey.

Digital Supply Chain Definition

“… the application of the Internet of Things, the use of advanced robotics, and the application of advanced analytics of big data in supply chain management: place sensors in everything, create networks everywhere, automate anything, and analyze everything to significantly improve performance and customer satisfaction”

2. Our Biggest Digital Supply Chain Challenges: Data Interoperability and Application-Centricity.

So, despite available technology and clear benefits, supply chains struggle to go fully digital for one main reason: data chaos. Indeed, most supply chains are adrift in a sea of fragmented data that’s siloed within countless operational, financial, and administrative systems. Worse, we continue to add more complex enterprise software systems that are in constant need of upgrades. Moreover, this messy digital landscape, combined with complex shipping data formats, makes it nearly impossible to achieve even minimum visibility over our supply chains. Further, different parts of the supply chain are unduly strained, not working together effectively nor gaining meaningful insights from their disjointed data silos. Let’s look at the primary reasons we are in this digital mess.

a. Key Data Interoperability Challenges With Supply Chains

Poor Shipping Data – Here Are The 4 Reasons Impeding High Tech Visibility And Actionable Analytics

To list, below are key challenges with supply chain data interoperability:

• Data Is Siloed Within Disjointed Organizations, Restricting Shipment Visibility
• Massive Amounts Of Fragmented Shipping Data, But Few Insights
• Supply Chain Orchestration And Automation Limited Due To Complicated Shipping Data Structures
• Shipping Data Split In Two Parts, Financial And Operational, Impeding FinTech Solutions

For more information on the challenges with supply chain data, particularly shipping data, see my article, Poor Shipping Data Analytics – Here Are The 4 Reasons Impeding High Tech Visibility And Optimization. 

b. Transitioning from Application-Centric to Data-Centric.

Being A Data Centric Business: It’s Going Beyond The Frenzy Of More Big Apps And High Tech

Before discussing how to escape the supply chain data quagmire, it’s essential to comprehend its origin. In the early days of information technology, our approach to digitalization was application-centric. Namely, we treated data merely as a byproduct of various functional silos. At that time, the importance of data structures, quality, and timeliness was not fully recognized. However, as information technology has evolved and its role in supply chain success has become paramount, we are coming to realize that the underlying data is important.

Indeed, throwing more enterprise systems with bloated features at the problem is not the way toward achieving the full potential of a digital supply chain. What we need is a change in mindset. Namely, it is essential for us to move away from being application-centric and adopt a data-centric mindset to overcome our digital challenges. For more details on a data-centric mindset, see my article, A Data Centric Business: The Best Way To Agility, One Truth, Simplicity, Technology Innovation.

3. Third Party Logistics (3PL) Technology And Automation: A High Tech Integrator For Supply Chains.

Many of the reasons that companies use 3rd party logistics (3PL) providers are for their advanced supply chain IT systems. Most businesses either do not have the IT resources nor are they able to continuously invest in the latest supply chain technology capabilities. In particular, most companies do not have the IT expertise to integrate their supply chain’s systems. What’s more, it is getting harder and harder for supply chains to achieve interoperability with the ever increasing multitude of systems and technologies.

Because of this IT integration challenge, many companies are turning to 3PLs for their IT expertise and capabilities. In fact, more and more 3PLs have the full IT capability to help companies digitalize their supply chains. For example, Redwood Logistics offers a supply chain integration platform called RedwoodConnect™. In this case, customers can leverage this 3PL’s integration platform to integrate their entire supply chain.

a. The Complex IT Needs Of Modern Supply Chains.

If supply chains were simple, a company could simply purchase an all-inclusive supply chain software application to handle everything. Specifically, this software would need to encompass features such as supply chain planning, procurement, order fulfillment, warehouse management, transportation, and invoice settlement. However in reality, only the smallest supply chains can rely on a single software or system to fulfill their needs. Furthermore, even if a comprehensive software solution existed, it would likely become outdated within a few years without major upgrades. As a result, businesses today must invest in significant IT resources just to survive.

b. Supply Chains Need An IT Integrator.

Indeed, what most supply chains need is an IT integrator to assure that their systems can interoperate with each other. In fact in this digital world, all companies have an IT integrator whether they know it or not, be it their CIO or another member of their IT staff. Additionally, most companies just don’t exchange data with their internal systems, but also with 3rd party supply chain systems. These outside organizations in many cases include 3PLs of different sizes and capabilities. Also besides 3PLs, external integration can include ecommerce platforms, suppliers’ systems, shipping station solutions, transportation carriers, and freight bill auditors’ systems to name a few.

So, one of the biggest challenges for supply chains is to integrate all these systems, keep up with software changes, phase out old systems, and add new ones. Increasingly, 3PLs are now offering powerful solutions to meet these IT interoperability challenges. In fact, more and more 3PLs are now a viable solution to act as a full-fledged IT integrator for most companies’ supply chains. 

“What most supply chains need is an IT integrator to assure that their systems can interoperate with each other.”

c. High-Tech 3PLs Meet The Need For Integrating Digital Supply Chains.

Indeed, in many cases high-tech 3PLs not only have better logistics technology and IT integration capabilities, but they also can support a wide range of supply chain functions. Below is a sampling of key logistics technologies by supply chain function area that companies can leverage from a 3rd party logistics provider.

Sampling Of Key Logistics Technology Capabilities Offered By A 3PL

What Is A 3PL? Compare Types, Capabilities, Tech, Best Value

• Supplier Sourcing. Utilizes advanced analytics and cloud-based supplier management systems. Thus, streamline supplier sourcing by offering insights into supplier performance, risk factors, and cost efficiency.
• Supply Chain Planning. For example, Machine Learning (ML) algorithms can be used to predict market demand and optimize supply chain planning. This reduces stock shortages and over-supplies.
• Ecommerce / Order Fulfillment. For instance, Robotic Process Automation (RPA) can expedite ecommerce order fulfillment by automating packaging and shipping processes.
• Warehousing. As an example, use Internet of Things (IoT) devices and computer vision AI in warehousing for real-time inventory tracking. This results in accurate stock levels and reduces the risk of inventory loss.
• Integration Platforms. Here, API-driven integration platforms allow different supply chain software systems to communicate seamlessly with each other. This results in better data availability and operational efficiency.
• Fleet Management. For instance, GPS tracking technology and telematics can optimize fleet management by providing real-time data on vehicle location, fuel consumption and driver behavior. This helps reduce costs and improve vehicle utilization.
• Visibility And Tracking. Many 3PLs are already integrated with key carriers and supply chain systems. As a result, businesses can more easily achieve end-to-end visibility and tracking within the supply chain.
• Freight Bill Auditing And Payment. For example, Artificial Intelligence (AI) can automate the freight bill auditing and payment process. As a result, the AI can identify billing errors and help to ensure accurate, timely payments.

For more information and resources about 3PL technology and automation, click here.

4. Alternative Non-3PL Solutions: Act As Your Own IT Integrator To Digitalize Your Supply Chain.

While high tech 3PLs offer businesses many advantages in overcoming digital supply chain challenges, there are advantages of a business acting as their own IT integrators. For instance, a business is able to tailor their digital supply chain to their unique needs as well as have more flexibility. Indeed, flexibility is key. By acting as your own IT integrator, you are not totally reliant on a 3rd party. Thus, you have the ability to quickly respond to market changes, minimize risks, and enhance overall operational efficiency. 

However, becoming your own IT integrator demands substantial investment in time, resources, and expertise in digital technologies. The crucial question to consider is whether your company possesses the competence to be competitive as its own supply chain IT integrator. The decision to pursue this route should be grounded in a comprehensive cost-benefit analysis, a clear understanding of your organization’s long-term strategic objectives, and your organization’s ability to execute effectively.

“Does your company possess the competence to be … your own supply chain IT integrator?”

As every company is unique, there are many approaches that you can take to build out a digital supply chain. A key consideration is should you build or buy software services and other IT capabilities. In many cases, it is better to buy IT services. For example, cloud-based software offers many advantages to a small business than hosting the software themselves. Below is a list of several key ideas and solutions you should consider when integrating your digital supply chain.

Ideas And Solutions To Improve Supply Chain Data Interoperability

Let’s Breakthrough The Data Interoperability Nightmare: It Is The Best Way To Unlock Supply Chain Innovation

a. Use Standardized Data Formats for Increased Compatibility.  

Standardizing where you can helps prevent your data sources from being locked into proprietary software apps that will eventually become obsolete.

b. Leverage Collaborative Data Sharing Platforms Independent Of Software.

This enables supply chain stakeholders to securely share and verify data in real-time, regardless of the software applications they use.

c. Use System Integration Interfaces Like Application Programming Interfaces (APIs).

Indeed, this is a key skill for your IT staff. Without this skill set, your supply chain  systems cannot seamlessly exchange and synchronize data with other systems, both internal and external.

d. Use Automation Such As Robotic Process Automation (RPA) And AI to Streamline Processes.

Without a doubt, the ability to automate logistics administrative functions as well as technical tasks is another key skill set for your IT.  Both traditional automation as well as emerging technologies like AI are needed to streamline data sourcing, data processing, and data optimization.

e. Consider Using Strategic Partner Collaboration Platforms.

For example, use Supplier Relationship Management (SRM) systems to collaborate closely with suppliers. This includes sharing critical data such as demand forecasts and production plans in real-time, leading to better supply chain coordination and data interoperability.

f. Leverage Cloud-Based Solutions for Improved Accessibility.

For instance, a cloud-based inventory management system enables suppliers, manufacturers, and retailers to view real-time inventory levels, improving coordination and data interoperability across the supply chain network. 

Data Interoperability For Supply Chains: The Best Ways To Unlock Your Digital Assets And Empower Innovation

For a more detailed discussion on achieving supply chain data interoperability, see my article, Data Interoperability For Supply Chains: The Best Ways To Unlock Your Digital Assets And Empower Innovation.

5. How To Achieve A Digital Supply Chain Using a High Tech 3PL Partner.

Outsourcing Logistics Right: Use These 7 Practical Steps To Secure The Best 3PL

Achieving a digital supply chain with a high-tech 3PL partner involves developing a clear strategy, selecting the right partner, and fostering a strong collaborative relationship. A clear strategy should outline the company’s digital supply chain goals, identify key technologies, and define the role of the 3PL partner. The selection process should consider the 3PL’s technological capabilities, industry experience, and alignment with the company’s strategic goals. 

Once a partner is chosen, ongoing communication and collaboration are key to ensuring the successful implementation and management of the digital supply chain. With the right approach and partner, companies can leverage a high-tech 3PL to overcome the digital supply chain challenge and achieve their supply chain objectives.

More References.

First, for more information on the ins and outs of creating a digital transformation strategy as well as review key emerging technologies available to supply chains. See my article, Examples Of Digital Transformation Within Supply Chains – The Best Way To Achieve A High Tech Redesign. Also, for tips on the best ways that you can outsource to a 3rd party logistics provider, see my article, Outsourcing Logistics Right: Use These 7 Practical Steps To Secure The Best 3PL. This step-by-step process holds true not only for outsourcing logistics services, but also technical services.

Examples Of Digital Transformation Within Supply Chains – The Best Way To Achieve A High Tech Redesign

Need help with an innovative solution to make your supply chain systems work together? I’m Randy McClure, and I’ve spent many years solving data interoperability and visibility problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. I specialize in ?proof-of-concept and operational pilot projects for emerging technologies. If you’re ready to modernize your data infrastructure or if you are a solution provider, let’s talk. To reach me, click here to access my contact form or you can find me on LinkedIn.

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