Frustrated with the lack of automation, streamlining and “service” that 3PL providers are delivering, mid-market supply chains who are tired of being under-served have been moving to rising SaaS, cloud and other platforms that promise to make their supply chains efficient. There are also mid-market supply chains that know they need a TMS but because of the lower cost of entry, they’re going with these solutions versus the outsourced solution.
However, in-depth evaluations of these different platforms and technologies show that they are falling short in meeting the needs of the mid-market supply chains.
SaaS Solutions Fail to Automate Supply Chains Beyond Order Creation and Tendering to Carriers
Because SaaS solutions have a low cost of entry and they are fast to implement, mid-market supply chains have been leaning toward moving from their current logistics provider to a SaaS solution. But they’re only automating the ordering process – that’s it. The data and analytics these SaaS providers offer so you can optimize your complete chain is zero to none as they are just automating the front end and completing tactical functions.
Those SaaS SCM solutions that provide any form of BI mostly only offer basic and volume cost information. The most advanced that I see they’ll ever get is descriptive analytics (i.e., mean, median, mode, frequency distribution of discrete data points, and percentile rankings), which only provides a vision of what’s currently happening in an organization. It does not provide information on why performance is what it is and how to improve.
Using the SaaS solutions, mid-market supply chains aren’t getting information to help them identify cost-saving opportunities like freight consolidation. There is no way to optimize transportation modes with a SaaS solution and, as a result, companies are paying about 5-20% more on their transportation spend because they are not consolidating LTL shipments.
New Provider Platforms Focus on the Profit Margins of the Logistics Provider & Lose Focus of the Mid-Market Customer
There are logistic providers that are building new TMS platforms and they’re trying to force carriers to pay an annual charge for EDI connections to fund their initiative. The choice of the carrier is to incur the higher cost or decrease efficiency – no good alternative here. This action destroys supply chain value rather than enhancing it. These providers are casually communicating the change to their customers as if it would have little impact. But, ultimately the costs will come back to the shippers whose costs will increase by at least $3500 for each carrier they are using. They are adding cost rather than looking for cost savings and not positioning their customer as “shippers of choice”.
Because of the pushback from the carriers, there is talk that some of the providers have rescinded their efforts in trying to get paid back by the carriers. However, these providers have already demonstrated that their focus is on their own profit margins and not on their customer’s business objective. Losing customer focus to me is a “red flag” and it’s why these emerging platforms fall short in meeting the needs of the mid-market supply chain.
Uber Freight Offers Increased Risk to Mid-Market Supply Chains
Uber entered the supply chain and freight market because they noticed that there is a lack of automation and streamlining. But, again, like the SaaS companies, they are only automating the front end. They also have the supply chain manager focused solely on discounted transportation costs rather than focusing on complete supply chain cost savings and if a risk is being added.
You see Uber Freight has customers thinking about using the cheapest carriers instead of the right carriers for the solution. And, there is very limited visibility to the underlying carrier, which creates a risk to that customer’s brand. One customer using a tariff solution that I spoke to recently told me that she had no idea who was moving her freight. Because of limited carrier visibility, a client of mine using another solution experienced five serious accidents with her carrier and she even had one carrier call her at night asking her what to do with her product that was lying on the side of the highway. With accident and injury litigation reaching $20 million per incident, companies seriously need to think about the risk they’re adding to their supply chain.
There is also a risk to service. With the pending ELD changes coming in Q4 2017, shippers need to understand if their carriers are ELD compliant. Those that aren’t ELD compliant will experience negative productivity impacts of up to 5%.
SCM Cloud Solutions Miss a Vital Piece That Mid-Market Supply Chains Need
To help mid-market companies who cannot pay for their enterprise software, companies like Oracle have been creating more affordable cloud solutions. But these companies are in the business of creating software, not providing expertise to leverage the data their company provides.
While these advanced supply chain technologies enable companies to automate supply chain processes, facilitate planning and execution, support visibility, and enable information to be used more productively— it’s only when they are correctly implemented and applied. According to Ramanan Sambukumar and Anil Vijayan (authors of “The Top Three Reasons Supply Chain Transformations Fail), “Without incorporating critical business requirements and process redesign in the deployment of supply chain technology, your supply chain can become ‘islands of automation’ fraught with chronic inventory shortages, manufacturing delays, and delivery.”
So again, mid-market supply chains continue to be underserved. Read my “Mid-Market Supply Chains Are Underserved” article for more information.