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.

Data and Analytics Can Help 3PLs Save Money While Improving Operations

1. 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.

2. 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.

3. 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.

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. 2nd Watch has vast experience helping companies identify effective, cost-saving data strategies. Feel free to contact 2nd Watch for help determining data analytics solutions that may work best for reducing costs at your company, or get started with a modern data quickstart for 3PLs.