Josephine Coombe, Managing Director of Nulogy in Europe, discusses how standardisation of technology across value-added services (VAS) operations can increase efficiency and market responsiveness within a consolidating third-party logistics (3PL) sector.
According to the latest report by ResearchandMarkets.com, the current global 3PL market is anticipated to grow annually by 4.7 per cent during 2022-2027.
Mergers and acquisitions are playing a key part in this growth, with accountants BDO reporting that deal activity in the logistics sector was at its highest quarterly volume since its research began in 2016.
Indeed, over the past few decades, consolidation strategies have enabled 3PLs to achieve greater scale, broaden complementary service offerings, expand geographic coverage, obtain assets, increase market share and support earnings growth.
And whilst the reasons and objectives may vary, ultimately consolidation is typically aimed at shoring up competitive advantages in the above areas, delivering economies of scale and scope.
A new challenge – complexity
Mergers and acquisitions, however, generate new organisational complexities to manage. These challenges span the gamut of internal operations, from human resources (the onboarding of people and cultural integration) to sales and marketing (product portfolio and brand repositioning), to technology, which includes IT landscape rationalisation, consolidation, integration, and training.
In the case of technology, organisational change can often be extremely challenging. Many mergers result in disparate technologies co-existing within the new organisation, and the maintenance burden on existing IT infrastructure increases dramatically. While integrating IT landscapes is not something to be addressed in haste, allowing a non-standardised environment to persist ultimately generates more cost, a greater maintenance burden, and higher risk.
It’s important to recognise, however, that technological change also represents a strategic opportunity for organisational growth and efficiency.
A fresh view
With different value-added services operations coming together due to consolidation, there is a good chance that there is no common ground for data visibility or collaboration. From a strategic perspective, it is therefore the perfect opportunity to take a fresh look at the organisation’s overall IT landscape and implement a cohesive, standardised technology vision that leverages the company’s greater scale, while enabling smoother cultural integration and unifying the myriad operations and data sources to support the goals that the merger was designed to achieve.
In logistics environments, the standard technology stack will usually incorporate ERP, WMS, TMS, and other best-of-breed point solutions designed for specific needs. In addition, more companies are looking at collaborative solutions designed to connect their operations to their customers.
For organisations interested in growing the revenue from value-added services such as contract packing, there are software solutions that can centralise and standardise the data flow of a 3PL’s network of value-added services operations, while enabling greater collaborative capabilities with customers through increased data visibility.
A purpose-built platform that can support specialised service offerings – as described above – can pay major dividends across newly merged entities, especially if they are managing geographically dispersed sites. This increased technological sophistication can also manifest as a competitive advantage for 3PLs interested in pursuing additional business from larger brands, whose expectations of digitalised service are ever increasing.
By digitalising their co-packing VAS operations, logistics firms can further differentiate themselves by delivering strategic value to brands looking to rapidly innovate and customise their product offerings in a discerning consumer market. Faster, more responsive service, recall readiness through rapid traceability, and improved quality compliance are just some of the added advantages 3PLs can offer their brand customers through a standardised digital platform for VAS.
With software like Nulogy, companies are better equipped to manage and schedule projects, and can respond to the increasingly dynamic changes in order patterns – making them more flexible partners for their brand customers.
Indeed, by delivering value on the shop floor as well as the strategic business level, digitalisation is not only helping organisations scale but also unlocks the hidden gem of VAS opportunities for those looking to stand out from the competition and deliver the strategic revenue growth that comes from consolidation.