How ERP Manages 3PL

Published Feb 5, 2024

How ERP Systems Support Managing Third-Party Logistics

From small businesses to Fortune 500 companies, there is a growing trend to partner with a third-party logistics (3PL) provider to streamline supply chains and overcome operational challenges.

However, ensuring seamless collaboration with 3PL partners can be challenging and this is where Enterprise Resource Planning (ERP) systems step in to play a pivotal role. Efficient logistics management is crucial for businesses to stay competitive and meet customer demands.

Let’s explore how ERP systems support and enhance the management of third-party logistics, offering benefits such as enhanced visibility, streamlined operations, and data-driven decision-making.

What is ERP-3PL Integration?

In an increasingly complex logistics landscape, managing third-party logistics efficiently is crucial for businesses looking to stay competitive.

ERP-3PL integration refers to the process of connecting and synchronising Enterprise Resource Planning systems with the operations of third-party logistics providers.

It involves the exchange of data, information, and processes between a company’s ERP system and the systems used by their external 3PL partners. This integration aims to streamline and optimise supply chain and logistics management through real-time data insights, vastly improved partner communication, and the automation of various aspects of the logistics process.

The Challenge of Third-Party Logistics

Third-party logistics providers offer specialised services, such as transportation, warehousing, and order fulfillment, to businesses looking to outsource these critical functions. While 3PL providers bring expertise and efficiency to logistics processes, managing these external partners can present unique challenges. Some common challenges include:

  • Limited Visibility: Companies often struggle to maintain real-time visibility into their supply chain when relying on 3PL providers. This lack of visibility can lead to inefficiencies, delays, and increased operational costs.
  • Data Integration: Coordinating data between the company’s internal systems and those of 3PL providers can be complex. Mismatches or delays in data sharing can disrupt operations and impact customer satisfaction.
  • Control and Accountability: Maintaining control over critical logistics functions while outsourcing to 3PL providers is essential. Ensuring accountability and compliance with service-level agreements (SLAs) can be challenging.
  • Decision-Making: Data-driven decision-making is the cornerstone of successful logistics management. When data from 3PL partners is not seamlessly integrated into a company’s systems it hinders the ability to make informed choices.

How ERP Systems Address 3PL Partnership Challenges

Now, let’s explore how ERP systems help businesses overcome these challenges and effectively manage their 3PL relationships.

Enhanced Visibility and Real-Time Data

One of the primary advantages of integrating ERP systems with 3PL operations is enhanced visibility and control. ERP software centralises data related to inventory, orders, and shipments. When integrated with 3PL systems, it provides real-time insights into inventory levels, order statuses, and shipment tracking. This visibility allows companies to monitor and manage their 3PL activities more efficiently, reducing the risk of delays, errors, or miscommunications. Enhanced visibility into the supply chain allows for better decision-making, reduced lead times, and improved customer service.

Streamlined Data Integration

ERP systems act as a bridge between a company’s internal operations and its 3PL partners. They facilitate seamless data sharing by automating the exchange of order information. This reduces the need for manual data entry and minimises the chances of errors. As a result, companies can collaborate with 3PL providers more effectively and ensure that the right information reaches the right parties at the right time.

Efficient Inventory Management

Accurate and efficient inventory management is crucial for successful logistics. ERP systems provide comprehensive inventory management capabilities, enabling companies to track inventory levels across multiple warehouses, including those managed by 3PL partners. This real-time visibility helps optimise stock levels, reduce carrying costs, and prevent stockouts or overstocking. Furthermore, companies can synchronise their inventory data with 3PL providers, ensuring that everyone involved is working with accurate information.

Streamlined Order Processing

ERP systems streamline the order-to-cash process by automating order creation, fulfillment, and invoicing. When integrated with 3PL operations, they enable companies to transmit orders seamlessly, track their progress, and reconcile invoices efficiently. This automation not only reduces manual labour but also minimises the risk of errors and delays in order processing, leading to improved customer satisfaction.

Data Analytics for Informed Decision-Making

Modern ERP systems are equipped with robust analytics and reporting capabilities. By integrating data from 3PL providers, companies can gain valuable insights into their supply chain performance. These insights can help identify areas for improvement, optimise routes, reduce transportation costs, and enhance overall logistics efficiency. Informed decision-making based on real data leads to better outcomes and competitive advantages.

5 key benefits of ERP and 3PL provider integration

ERP-3PL Integration in Action

For Steel Blue, Australia’s largest manufacturer of safety footwear, business growth success meant adjusting its supply chain to accommodate new production facilities and distribution channels.

This involved building new relationships with distribution partners, coordinating shipping and logistics across larger distances, and managing inventory across multiple locations.

However, with no access to real-time data and statistics of their stock, inefficiencies and delays in distribution were becoming problematic, productivity was suffering, and they were unable to respond quickly to market changes.

ERP-3PL integration enabled Steel Blue to drive significant business improvements:

  • Shipping times were cut by 50% on average
  • Order preparation was reduced by 10-15%
  • Shipping costs were significantly reduced
  • 100% visibility gained across the entire supply chain

Ultimately ERP-3PL integration meant Steel Blue was able to achieve distribution best practices and deliver easily accessible productivity data for managers within all warehouse locations.

The Future of ERP-3PL Integration

As technology continues to advance, the synergy between ERP systems and 3PL providers is expected to evolve further. Some emerging trends in ERP-3PL integration include:

IoT and Real-Time Tracking: The Internet of Things (IoT) will play a significant role in tracking shipments in real-time. Sensors and connected devices will provide continuous data streams, allowing for proactive decision-making and enhanced supply chain visibility.

Artificial Intelligence and Predictive Analytics: AI-driven predictive analytics will help companies anticipate demand fluctuations and supply chain disruptions. ERP systems will incorporate AI algorithms to optimise logistics operations and reduce costs.

Blockchain for Transparency: Blockchain technology will be used to create transparent and immutable records of transactions and shipments. This will enhance trust and security in 3PL partnerships, reducing the risk of fraud and errors.

Cloud-Based ERP and Scalability: Cloud-based ERP solutions will become more prevalent, offering scalability and flexibility for businesses of all sizes. This will facilitate easier integration with 3PL providers, making it accessible to a wider range of companies.

From inventory optimisation to transportation efficiency and compliance, the tangible benefits of ERP-3PL provider integration are clear.

Embracing ERP-3PL integration can help companies navigate the challenges of modern supply chain management successfully, offering enhanced visibility, streamlined data sharing, efficient inventory management, and automated order processing.

Is your business seeking to thrive in the complex world of logistics? Harness the power of ERP and third-party logistics provider integration today.


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