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Outsourcing Report

The Convergence of Order and Execution: The Domain of 3PLs

by Mark Morrison

Technology has created a wave of supply chain networks. Exchanges and cyberhubs that bring together trading partners throughout many industries are springing up faster than you can say “dot com.” Already, the chemical, automotive and aerospace industries have created dynamic exchanges that promise to mine substantial value from transactions among buyers and sellers. For most 3PLs, trying to catch this wave is like riding a Tsunami. Yet, the economics of doing so are compelling. The Delphi Group, Boston, predicts more than $5 trillion will flow through cyberhubs by 2004, “and that number is already starting to prove too low,” says analyst Nathaniel Palmer.

B>Although the point and click crowd dismisses logistics services such as cross docking, inventory management and transportation – the backbone of order fulfillment – as not being sexy enough, 3PLs are in the best position to integrate the myriad of
E-business/B2B markets to carry out the fulfillment.

Those 3PLs who can ride this wave will realize huge rewards. The reason is that the physical or logistical part of the B2B enterprise not only still exists, but also drives it. The reduction in transaction costs within any exchange or cyberhub is insignificant compared to the potential cost reduction in the physical supply chain. Execution has become the critical component of the B2B equation and the fundamentals of supply chain management still apply. Although the point and click crowd dismisses logistics services such as cross docking, inventory management and transportation – the backbone of order fulfillment – as not being sexy enough, 3PLs are in the best position to integrate the myriad of E-business/B2B markets to carry out the fulfillment.

One of the ways 3PLs are accomplishing this is by incorporating their own logistics competence and enabling technologies (such as strong middle ware with proprietary or best-of-breed TMS, WMS, and OMS). Together, they allow for the integration of disparate systems and “real-time, event-driven” transactions among trading partners.

Green2go.com is a premier provider of B2B E-commerce solutions for buyers and suppliers of nursery, lawn and garden centre and landscaping products. It offers the first online solution to the green industry that provides end-to-end supply, transaction management and logistics all wrapped into one. In addition to providing a comprehensive source of timely, accurate and detailed market supply and delivery information, Green2go.com realized that pick-up and delivery execution as well as transportation optimization, were critical to its end-to-end value proposition. It contracted with CTI Logistx to provide the logistics solution.

CTI Logistx’s approach is not very different from how it addresses any B2B marketplace. Through its Vector21 Transportation Management System, CTI Logistx afforded Green2go.com’s customers and suppliers visibility of order status and exception-based performance monitoring. Tied together with its middleware, Bridge Solutions – a real time, event-driven messaging application – Vector21 connects with Green2go.com’s trading partners via the Web to provide E-fulfillment as well as end-to-end collaboration.

For example, if a shipment is delayed, the effected Green2go.com trading partners are alerted through the instant messaging between Vector21 and Green2go.com’s system. In addition, Vector21 supports Network Optimization, Demand planning and Requirement Processing – all the functions necessary not only for transportation execution, but also to the supply chain visibility critical to Green2go.com’s E-fulfillment.

The value of this middleware is that it provides a flexible architecture that enables the 3PL to seamlessly integrate with emerging industry standards such as RosettaNet and XML while maintaining the ability to link and adapt to legacy systems and traditional EDI.

In the Green2go.com model, the customer order is electronically communicated to CTI Logistx’s Vector21 system, where it is consolidated and optimized with other shipments, tendered to the appropriate carrier and tracked from origin and destination. The real-time dialogue between the systems includes the confirmation of the transportation costs to the customer and transportation status updates, both of which are presented in the customer-centric Web application. CTI Logistx audits and pays the carriers, and provides Green2go.com with electronic information regarding freight charges, as well as carrier performance metrics.

Whether the B2B markets or vertical nets partner with a specific 3PL or link customers to a logistics portal that connects them to multiple 3PLs, the fact remains that 3PLs are emerging as the vital link in completing the B2B equation – the convergence of order and execution.