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The Commoditization of the 3PL Back Office

By David Broering, SVP - NFI Integrated Solutions, NFI

David Broering, SVP - NFI Integrated Solutions, NFI

In this day and age, it is not uncommon to hear about the next market that is going to get “Uberized” or even automated–especially the 3PL marketplace. There are many who believe that transportation market is the next market ripe for digital maturity. While many of them are right about the 3PL market being ripe for a shift, most of them seem to be focusing on the incorrect aspect of where this is happening. The coming “disruption” in the transportation marketplace is not happening up front in the sales and operations of the business where the customers and carriers can see it. Rather, it is happening in the back office where efficiencies are being gained each day. These technologies are allowing companies to do the same work with less people, as well as scale their businesses with their customers’ needs without much need for additional support from new hires. There are several places where companies are making big strides in this regard using modern technology, and there are providers in these areas that currently exist that are taking 3PLs to the next level right along with them.

"While most are focused on how to get their Uber marketplace up and running, there are some looking at the progress of technology"

Carrier Tracking–Where is my freight? This has long been the bane of many in the transportation marketplace looking for efficiency. Since the dawn of the 3PL industry, this has been a manual process that was primarily relegated to employing hoards of people to make and receive calls to access the where abouts of drivers moving their freight each day. As technology has evolved, bigger carriers developed EDI to help provide satellite locations of their equipment, and carriers have even started putting their locations on websites. However, the cost of this technology never allowed it to get far enough into the marketplace to trickle down to the real meat of the market, which are the carriers that have 1 to 5 trucks. Enter providers like FourKites, Project44, 10-4 systems, and others that are beginning to crack open the tracking marketplace and make it manageable for providers to expect their entire carrier base to provide “real time” tracking updates on their freight. These companies are working to integrate with carriers via other methods than EDI (API, GPS, App) and making it much easier to integrate with multiple parties by leveraging a platform rather than a one-to-one connection. When adding an additional layer of technology like geo-fencing as well along with the location integration and connecting to the provider’s TMS, the process is boiled down to exceptions management and nothing more thereby cutting a lot of overhead, and being more relevant to the customer in our modern age. By providing the fees at the transaction level and at a very low cost, it is nearly impossible to make the argument it makes more sense to have a person do it when the automated process is that much cheaper, faster, and more reliable.

Freight Bill Processing– Another area of the back office which is beginning to see the automation relates to the paperwork that must be handled in the back office. Every 3PL has to deal with paperwork, it is a fundamental of the business when you do not have assets and need to provide proof that services were provided. The process of receiving, opening, auditing, scanning, and indexing paperwork is one that has always demanded a high degree of touches, and thus employees. Moreover, with paperwork processing is vital to the business–paying carriers efficiently and to term as well as billing customers quickly and accurately– scaling this aspect of the business always means adding bodies as the business grows. As providers like HubTran have come onto the scene it is clear that modern technology can take a cumbersome process and distill it down to heavy automation with human intervention focused on exceptions. By using technologies like Optical Character Recognition (OCR) and machine learning, the software is providing the employee with the power to process and index 3-5x as much information as they were able to do in the past, and to do it more effectively. The secondary benefit of technology like this is that it logically f lows back to a portal that allows the carrier and customer a greater degree of transparency for their part of the process as well. They can see processing time, research individual shipments, and generally see the state of their AR/ AP at the click of a button. This certainly is not a common option for many shippers other than the select few that have centralized their functions via a specific 4PL, and now it is made available to masses.

While these are just two of the many back office processes that exist in most 3PL’s, they are certainly two of the most cumbersome and employee intensive operations businesses grapple with every day. When adding other emerging concepts like digital lockboxes and the use of cloud hosting services for document access / retention, there is a future coming not too far from now where few will be able to do the job of many. While most are focused on how to get their Uber marketplace up and running, there are some looking at the progress of technology and seeing a way to grow and scale without the need to add employees to the back office. This will allow the focus of effort to be on customer service and execution, where our customers and carriers really want us to be focused.