Companies are always searching for new ways to improve efficiency and cut costs. This has caused an inevitable shift towards outsourcing, particularly in transportation and warehousing, according to a recent study by Georgia Tech University and Capgemini LLC. A reported 50% of businesses that currently do not outsource logistics plan on outsourcing at least some of their operations in the future, and in the last four years of the study, 80% of companies were using third party logistics (3PL) services, an increase of almost 10% from the first six years. While the benefits of outsourcing (lower costs, higher productivity, and better services levels) are clear, the methods for achieving those benefits are often complex and are better left to your 3PL partner, allowing you to focus on your company’s core competencies.
As technologies advance, 3PLs have remained abreast of the ever improving ways to successfully manage all aspects of the supply chain. The use of radio frequency identification (RFID) is one solution that has received increased attention in logistics operations in recent years. RFID is a tracking method similar to barcoding that enables customers and shippers to virtually retrieve data about products throughout the shipping process. Unlike barcodes, however, RFIDs carry tracking devices that uniquely identify each individual item, allowing a client and/or the 3PL to identify the exact location of any product and the time of delivery for every shipment.
Solutions offered by 3PLs, like RFID, have become essential in today’s highly competitive business market. Greg Cudahy, global supply chain leader for Capgemini, acknowledges today’s “increased interest [in] and sustainability of truly collaborative relationships between 3PL providers and their customers," going on to explain that while there are “ways in which all parties can improve these relationships, long-term success in the marketplace requires that more effective logistics and supply chain solutions be developed, including the next generation of RFID pilot programs." As any company knows, to fall behind on technology is to sabotage your firm’s ability to compete within its industry, making a partnership with an IT-savvy 3PL a wise and necessary decision in achieving your long term business goals.
When initially considering technological advancements like RFID, price point is often a deterrent for companies. The substantial amounts of hardware, software and redesign processes involved in a complete RFID overhaul are significantly more costly than traditional methods of item coding. Partnering with a 3PL that has expertise in providing item tracking options that fit your needs — and your budget — can give any company a strategic advantage within its industry. Alternatives that a qualified 3PL may provide include a level of RFID tracking that monitors products by the case and pallet, rather than the individual unit. This method of tagging is suitable for companies that offer products with low profit margins, while manufacturers that produce high-value, low-bulk and frequently stolen items such as consumer electronics would benefit from unit level tracking, in spite of the high initial cost. Through careful analysis of the initial cost in comparison with the long term benefits, a knowledgeable 3PL will know how to advise your company in order to achieve ultimate cost savings.
In addition to cost savings, an effectively constructed and implemented item tracking system can improve productivity and the level of service a company is capable of offering its customers. As noted by Jim Farrell and Ralf Saykiewicz, leaders in technology solutions, “the time required for physical verification of orders has fallen dramatically, particularly for mixed pallets. Whereas verification previously took from 80 seconds to 20 minutes per pallet, with RFID it now takes no more than 20 seconds.” With time reductions such as these, supply chain functions can greatly improve, and getting products into the marketplace and the hands of consumers will occur more efficiently than ever before. Also, because shipping information is in real-time, RFID nearly eliminates human error in the supply chain. If someone operating a forklift mistakenly loads a truck with the wrong product, a red flag will notify a supply chain supervisor that an item is off-track, allowing the 3PL to address mistakes before they become complex and difficult to reverse.
The benefits of a well-implemented and managed item tracking system do not stop with cost savings, improved productivity and increased service levels, however. Supply chain visibility and transparency is among the greatest assets a 3PL can offer its clients. For the 3PL, it means the supply chain can be managed efficiently and without error; for the company, it means they can turn their focus to their core competencies, knowing their supply chain can be viewed and assessed at a moment’s notice. This visibility also helps key decision makers in the company adopt demand-focused systems that reduce overstocks, margin erosion, and markdowns. Furthermore, as a CEO’s ability to forecast demand improves, he or she is able to more effectively schedule production, ultimately reducing costs and capitalizing on economies of scale. A good 3PL can offer the security and piece of mind that your supply chain — and your bottom line — is functioning at the highest capacity for success.
In the fast paced, hi-tech marketplace of the 21st century, companies must do whatever it takes to stay ahead of the competition. RFID, as part of a high-level item tracking system, has become a necessary component in a well-executed supply chain. It is time for companies to realize that approaching their supply chain operations with the “if it ain’t broke, don’t fix it” mentality ultimately puts them at risk for a flat-line in productivity, high operating costs and below average service levels. Assuming that your internal operations are “good enough” without investigating the many areas of improvement a 3PL can offer is counterintuitive to long term business success. Technology and innovation like RFID is the way of the future, and establishing a relationship with a qualified 3PL today can ensure that your company achieves its full potential in the years to come.
Ron Cain, author of “The Future of RFID in the Supply Chain Management: How your supply chain can benefit from a well implemented and managed item tracking system,” is the President /CEO of TMSi Logistics (www.tmsilog.com/) with locations in New Hampshire and Florida. He can be reached at (603) 373-7233 or at ronc@tmsilog.com.
