Whether it’s an economic downturn, increased competition, or pressure from executives, third-party logistics (3PL) companies are continuously tasked with finding ways to reduce costs while ensuring operations run smoothly. Fortunately, 3PL companies have a wealth of data at their fingertips that they can use to find opportunities to reduce costs, increase efficiencies, and more. In this blog, we’ll review three tangible ways data and analytics can help 3PLs save money while improving operations.
Reduce transportation costs with a holistic view of your business processes.
As a 3PL company, moving your customer’s products on time and at the lowest possible cost keeps them satisfied. Especially when they are likely looking to reduce costs on their end as well. By collecting and centralizing data from your various supply chain processes, your logistics team will gain a holistic understanding of the various touch points of your business process. This data can uncover KPIs such as the cheapest routes as well as cost-per-unit, cost-per-truck, and lead times.
Taking it a step further by layering in external information, such as weather and gas prices, provides even more insights for reducing transportation costs. Visualizing transportation data in an intuitive dashboard will tell your team the story of what is actually happening and what could happen through trends, maps, and metrics. This makes it abundantly clear where improvements are needed, and how costs can be cut.
Takeaway: A holistic view of your business processes can help your team make decisions to increase their productivity and shipment efficiency, which will directly translate into more cost-effective shipping rates.
Increase operational efficiency with strategic inventory dashboards.
There are multiple touchpoints a 3PL is required to oversee during the process from when a product is ordered to the moment it reaches its final destination. Your warehouse operations can impact most of these touchpoints in one way or another. Ensuring your warehouse runs smoothly is critical for a 3PL to garner trust and continued business from its customers. One of the best ways to achieve this is through a data-centric inventory management strategy. With centralized and organized inventory data, you can track inventory through each phase of the cycle. KPIs such as order time-to-fill, operation capacity, and storage type utilization can be tracked side by side on dashboards to highlight where there is room for improvement.
Takeaway: Ensuring that supply chain efforts are accurate and efficient will strengthen customer retention and reduce costs associated with under-utilized storage and compensation for inaccurate shipments.
Decrease your cost to serve by breaking down its components in a dashboard.
Focusing on your cost-to-serve metric will help you determine areas of inefficiencies and non-profitable customers. Start by centralizing data from various inputs (e.g., sales, employee expenses, business processes, etc.) in a data warehouse so you can access every component that goes into serving your customers. Then, develop a dashboard that aggregates the cost-to-serve metric and breaks it down into its individual components. Furthermore, you could add filters to analyze specific customers, employees, or even the types of materials your customers ship. This breakdown enables you to analyze what costs are required to make a load successful and which costs can be cut without impacting your customer satisfaction.
You could additionally compare customer revenues to the costs associated with serving them to determine how profitable each customer actually is. From there, you could further the analysis to identify future customers who may yield the most profits using machine learning.
Takeaway: Breaking down and analyzing your cost to serve in a logistics dashboard will help your organization reduce costs and identify more profitable customers, business units, or general operational improvements.
Optimal Route Planning
By analyzing historical transportation data, weather patterns, traffic congestion, and other relevant factors, data and analytics can optimize route planning. This enables 3PLs to identify the most efficient and cost-effective routes, minimizing fuel consumption, reducing transit times, and lowering transportation expenses.
Takeaway: By leveraging data and analytics for route optimization, 3PLs can minimize fuel consumption, reduce transit times, and lower transportation expenses, resulting in significant cost savings.
Accurate demand forecasting based on historical data and market trends allows 3PLs to optimize inventory levels and avoid unnecessary holding costs. By leveraging data and analytics to predict demand fluctuations, they can adjust inventory levels accordingly, ensuring optimal stock levels while minimizing storage expenses.
Takeaway: Accurate demand forecasting helps 3PLs optimize inventory levels, avoid holding costs, and ensure optimal stock levels, leading to cost savings and improved inventory management.
Data and analytics can help optimize resource allocation within warehouses and distribution centers. By analyzing data on order volumes, order frequencies, and storage capacities, 3PLs can identify opportunities to maximize resource utilization, reduce inefficiencies, and eliminate redundant resources. This leads to cost savings through improved labor utilization, reduced equipment maintenance costs, and optimized space utilization.
Takeaway: Optimizing resource allocation through data analysis allows 3PLs to maximize labor utilization, reduce equipment maintenance costs, and optimize space utilization, resulting in improved operational efficiency and cost reduction.
Carrier Performance Analysis
By analyzing data on carrier performance metrics such as on-time delivery rates, transit times, and cost per shipment, 3PLs can identify underperforming carriers or routes. This enables them to negotiate better rates, improve carrier selection, and optimize transportation costs.
Takeaway: Analyzing carrier performance data enables 3PLs to negotiate better rates, select the most efficient carriers, and optimize transportation costs, leading to improved service quality and cost savings.
Analyzing operational data, such as order processing times, picking and packing efficiency, and warehouse layout optimization, allows 3PLs to identify bottlenecks and streamline their processes. By implementing data-driven process improvements, they can enhance operational efficiency, reduce labor costs, and minimize errors and rework.
Takeaway: By analyzing operational data and streamlining processes, 3PLs can enhance efficiency, reduce labor costs, minimize errors, and improve overall operational effectiveness, resulting in significant cost reductions.
Vendor Performance Evaluation
By analyzing data on vendor performance, including order accuracy, delivery times, and quality metrics, 3PLs can identify top-performing vendors and negotiate favorable terms. This leads to better vendor selection, improved service levels, and cost reductions through more competitive pricing or discounts.
Takeaway: Evaluating vendor performance using data and analytics helps 3PLs identify top-performing vendors, negotiate better terms, and achieve cost savings through improved service levels and more favorable pricing.
Supply Chain Risk Management
Data and analytics can help 3PLs identify potential risks and disruptions in the supply chain. By leveraging historical data, market insights, and real-time monitoring, they can proactively manage risks, optimize contingency plans, and minimize the financial impact of supply chain disruptions.
Takeaway: Effective supply chain risk management through data analysis allows 3PLs to identify and mitigate potential risks, optimize contingency plans, and minimize the financial impact of disruptions, ensuring business continuity and cost containment.
Leveraging data and analytics presents significant opportunities for third-party logistics (3PL) companies to achieve cost savings and improve operations. By centralizing data and applying analytics, 3PLs can reduce transportation costs through a holistic view of business processes, increase operational efficiency with strategic inventory dashboards, and decrease the cost to serve by analyzing its components. These tangible benefits can lead to improved customer satisfaction, optimized resource utilization, and enhanced profitability.
If you’re ready to unlock the full potential of data and analytics in your 3PL operations, reach out to Ollion. With our expertise in identifying effective data strategies and implementing modern data solutions, we can help you harness the power of data to drive cost savings and operational excellence. Take the next step towards transforming your 3PL business by contacting Ollion today.
As shown through these examples, the primary starting point is to centralize your data if that has not yet been done. From there, it’s easy to craft strategic dashboards that unlock insights into cost-saving opportunities. Even better, these tips are just the tip of the iceberg. There are many other creative options to reduce costs offered by 3PL data. Ollion has vast experience helping companies identify effective, cost-saving data strategies.
Feel free to contact Ollion for help determining data analytics solutions that may work best for reducing costs at your company.