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Using a TMS for 3PL Success.
Introduction.
Third-party logistics companies (3PLs) make up a vital and growing part of the logistics market. In the UK, there are more than 200,000 3PLs, which share a market that it is estimated will be worth £36.69 billion by 2028.
To ensure they succeed in this highly competitive industry, 3PL delivery companies need to maximise their profits while simultaneously ensuring customer satisfaction for their multiple clients. This requires that they make as many deliveries as possible in the shortest amount of time. But the journey from the warehouse to the customer’s doorstep is fraught with challenges.
Ensuring timely delivery can be hampered by traffic congestion or having to take convoluted delivery routes. Additionally, 3PLs must manage their drivers and vehicles effectively, so that vehicles are operational and optimally loaded and that drivers are available at all times.
On top of that, 3PLs face other obstacles that can impact their bottom line. Rising fuel and vehicle maintenance costs erode their profits, fluctuating demand creates inefficiencies and having to handle failed deliveries incurs additional expense.
3PLs must navigate these and other issues to ensure they meet their delivery targets while maintaining the high levels of service quality and operational efficiency needed for long-term business success.
Addressing these challenges requires strategic planning and a proactive approach. The cornerstone to this is investing in a transport management system (TMS). Using TMS technology, 3PLs remain agile and responsive to industry issues and can manage a successful and profitable logistics service.
Table of Contents.
Key Challenges Facing 3PL Delivery Companies.
These are the key challenges that 3PLs face in their efforts to deliver efficiently and profitably for their customers.
Volatile Economic Conditions.
The UK was in recession during the second half of 2023, having had two prior quarters of low growth. In economic downturns such as this, there is reduced consumer spending. In turn, this results in a reduced demand for shipping and logistics services, which impacts revenue for 3PL companies. While the economic prospects are beginning to brighten, 3PLs still need to make up for lost business and protect their future income by finding ways to cut costs and maintain profitability.
Inflation is another major concern. Recent inflationary pressures have caused the costs of goods and services to rise, which increases operational expenses. Higher costs for essentials like utilities, insurance, vehicle maintenance and packaging materials strain financial resources, making it more challenging to manage budgets effectively.
Rising fuel costs pose perhaps the most significant risk. Increases in fuel prices can drastically affect transportation costs, directly impacting the overall profitability of 3PL companies. Since fuel is such a major expense in logistics, even small price increases can lead to substantial additional costs.
Changing Consumer Expectations.
Customers expect to receive their purchases quickly. There has been a massive growth in warehouse construction to meet the increasing demand for faster delivery. Same-day and next-day delivery is being surpassed by some providers that promise to deliver within a few hours or less. While this is mainly seen in the food delivery market, this puts pressure on all 3PL companies to speed up their operations.
Some customers will also require tailored logistics solutions. These needs can range from specific packaging requirements to very specific delivery windows. Meeting specific customer needs can increase operational complexity, especially when a 3PL has a range of differing or competing requirements across its client base.
With the rise of omnichannel retailing, 3PLs must efficiently manage their inventory and fulfil orders across multiple sales channels – such as online, in store and telesales. This adds further layers of complexity in juggling delivery schedules and in managing stock, often across several locations.
Capacity Constraints.
Some industries, like retail and ecommerce, experience large spikes in demand during certain seasons – like Black Friday and Christmas, for example. Managing these fluctuations and ensuring adequate capacity can be challenging, especially for 3PLs that specialise in serving industries that are affected by these sorts of demand surges.
Capacity can be further stretched by labour shortages. Many warehouses have struggled to recruit staff since Brexit caused large numbers of EU migrant workers to return home. Equally, a lack of skilled drivers can put strain on delivery capabilities. For example, a 3PL may require ADR drivers to transport hazardous materials or may need drivers qualified in several different driving licence categories if its fleet consists of a range of vehicle types, like articulated lorries, HGVs and vans.
Technology Challenges.
Many 3PLs still operate on legacy systems that are not easily integrated with more modern technologies. This can lead to inefficiencies and an inability for systems to communicate with each other.
Even if they are not using older software, it’s not uncommon for 3PLs to use a different system for each task. So, they might use a route planner, separate software that logs vehicle checks, a proof of delivery app and so on. These rarely natively integrate with each other and are therefore usually left as standalone software. If a 3PL does want to integrate them, this can be complex and costly.
Mitigating Environmental Impacts.
There is growing pressure from governments, international bodies and consumers to adopt more sustainable practices, such as reducing carbon emissions and using eco-friendly packaging.
Companies not only need to explore and use more sustainable and less environmentally harming options, but many also need to report on their practices. The Corporate Sustainability Reporting Directive (CSRD), for example, requires certain businesses to provide detailed sustainability reporting, including calculations of fleet emissions, which creates an additional admin burden for 3PLs.
Competitive Pressures.
The logistics market is a highly competitive one. With numerous players vying for market share, the typical differentiator is price. Price wars compel 3PLs to cut their rates to a minimum, which forces them to find cost savings that do not impact customer service. Inevitably this leads to pressure on drivers and staff as the company seeks to continually optimise routes, improve vehicle utilisation and increase worker productivity.
3PLs need to streamline processes and reduce costs while simultaneously maintaining high service levels that will retain and attract clients. Balancing these factors is a key challenge in sustaining profitability and competitiveness in the market.
Using a TMS to Address 3PL Challenges.
If you’re a 3PL, you can meet these challenges by using a Transportation Management System (TMS) to help manage your deliveries.
Geo2 is a web and mobile based TMS with route planning and optimisation tools designed to streamline your operations, improve efficiency and enhance customer satisfaction.
Here are the key benefits of Geo2 for your 3PL operation.
Enhanced Route Planning and Optimisation.
Geo2 has a map-based interface for route planning and optimisation that helps ensure that your drivers take the most efficient routes, reducing travel time and fuel consumption.
Using features like priority scheduling, multiple drops and unlimited routes, you can be flexible and adaptable for various delivery scenarios. If your fleet consists of multiple vehicle types, you can also schedule by capacity, so that the right items are carried in the most appropriate vehicles and that you optimise your available vehicle space.
With optimised routes, you can make more deliveries in less time, which keeps your customers happy and minimises your own fuel costs.
Mobile Driver App.
The Geo2 mobile app is available for both Android and iOS devices. It guides your drivers through their delivery schedules, providing route navigation as well as real-time ETAs.
With live traffic information, your drivers are routed around traffic congestion or unexpected hold-ups, so that they avoid delays and take the roads that get them to their next destination as quickly as possible.
The app records verifiable proof of delivery, using barcode scanning, photo capture, signature collection and GPS logging. This ensures that the intended recipient received their delivery in good condition, which prevents fraudulent claims and provides you with verification that can assist in resolving delivery-related disputes.
Photographing the condition of delivered goods is especially helpful in preventing fraudulent returns claims. With concrete evidence that a delivery was undamaged, or that fresh produce was indeed delivered in excellent condition, you will limit refunds made unnecessarily to customers.
Finally, your drivers can perform vehicle checks and report any defects through the app. This enhances vehicle safety and reduces fleet downtime due to maintenance issues.
Real-Time Tracking and Notification Updates.
The real-time tracking feature of the web application enables you to monitor your drivers’ locations. If there are any issues or a sudden requirement to prioritise a certain customer, you can adjust the routes as needed, which helps you to maintain levels of efficiency and customer satisfaction.
You can provide automated live tracking links and delivery updates via email or SMS for your clients’ customers. This allows the recipients to plan their day around a delivery and reduces the need for customers to call you querying the timing or progress of their deliveries.
Web-Based Interface.
As it is cloud-based, Geo2 can be accessed from anywhere with internet access. This eliminates the need for any costly installation and gives you the flexibility to manage your logistics operations remotely if needed.
On the web platform, you can manage orders, users and drivers and there are customisable dashboards for monitoring key metrics and real-time data.
Comprehensive Reporting and Monitoring.
Reporting is essential for 3PL delivery companies as it means you can make critical, data-driven decisions that help you meet your delivery targets and maintain high standards of service quality.
With Geo2’s real-time data and analytics, you gain valuable insights into key performance metrics, such as CO2 emissions, route timings and both driver and delivery performance. Access to this data enables you to make decisions that can bolster your operations, improve efficiency and reduce costs.
The customisable dashboard enhances the value of your reports. You can drag and drop charts to personalise your dashboard, allowing you to focus on the most relevant metrics. Critical data is easily accessible, helping you to quickly identify areas for improvement and take proactive measures to address any issues.
Vehicle Checks and Management.
The safety and reliability of your 3PL delivery fleet is essential. Geo2’s in-app vehicle checks and defect reporting tools allow drivers to quickly and easily report any issues. This ensures that vehicles are in good condition before they hit the road, enhancing overall safety for your drivers and other road users.
Check and defect histories are automatically logged too, providing a comprehensive record of vehicle conditions and maintenance.
Sustainability and Environmental Impact.
By optimising routes and reducing fuel consumption, Geo2 helps you lower your carbon footprint and align with sustainability goals.
You can also track your CO2 emissions and use the data to further optimise your operations. If you need to comply with the CSRD, Geo2 also provides you with the data you need to report your emissions.
Technology Integration and Support.
Geo2 can be run as a standalone application. But we also provide an API, which enables you to integrate it with other systems, such as your ERP and WMS software. This streamlines data imports and reduces manual data – as well as the errors that go along with that. It also means you don’t need to run multiple solutions for different tasks. With Geo2, everything is covered: route planning, vehicle checks and proof of delivery – and it all integrates fully with your other business solutions.
Geo2 is scalable too, to support you as you grow. With per user billing, you can scale it up as you need – when you acquire new clients or take on more staff, for example.
Conclusion: Building Long-Term 3PL Success.
3PLs must overcome some difficult external factors and internal operational challenges in order to maintain profitability and customer satisfaction. A TMS like Geo2 provides the essential tools to effectively address these challenges and to turn complexities into opportunities for growth and efficiency.
In the face of economic fluctuations, high fuel costs and changing consumer expectations, agility and adaptability are always key. Geo2 enables 3PLs to optimise routes in real-time, swiftly respond to supply chain disruptions and maintain seamless communication with both drivers and customers.
Even in the face of tough external pressures, deliveries can be more timely and efficient with Geo2. With accurate, on time and appropriately transported shipments, a TMS helps maintain high service quality that builds and retains customer trust. Enhanced route planning and real-time tracking ensure 3PLs can consistently meet customer expectations, which helps develop good long-term business relationships and strengthens loyalty.
As technology continues to advance, investing in a TMS becomes essential – not only for addressing current challenges, but also in preparation for the demands of the future. A robust TMS equips 3PL companies to scale operations and continually refine processes, ensuring they stay ahead in an evolving and competitive industry.
In a market driven by efficiency and customer service, a TMS like Geo2 offers a strategic advantage. It supports 3PLs in navigating complex logistics scenarios, ensuring they can meet delivery targets, maintain high service standards and achieve sustainable growth – and thus secure a vital competitive edge.
