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Can a Distribution ERP System Bridge Gaps in 3PLs And Distributors?

August 7, 2013BY AMS Editor

A well-designed distribution ERP system can bridge the gaps between wholesale and retail distributors and third-party logistics providers (3PLs), but both need to be on board for it to work.

A recent post on the EBN blog discusses how 3PLs can help manage warehousing in increasingly complex supply chains, although these companies don’t all provide the same services. Although the use of 3PLs may seem like a good deal, distributors should make sure their needs align with what a potential partner can provide. The cost savings evaporate if the 3PL can’t provide real-time shipment information, for instance.

A 3PL may have solid warehouse and transportation management systems, but that’s of little consequence without full integration with a company’s ERP system. “Having advanced [non-integrated] applications that manage individual aspects of an operation can leave data gaps that need to be handled manually,” the article explains. “And without direct and instantaneous updates, information can get old before there’s time to act on it.”

The EBN blog post makes a good point: It’s not uncommon for distributors to contract with 3PLs that either do not have the requisite technology available or simply misrepresent their capability to comply. However, should the 3PL be able to support automation through industry standard EDI documents such as the 940 and 945, it is still incumbent upon the distributor to be able to support communication with the 3PL from within their distribution ERP system.

Although there are a number of EDI providers who can create bridges between a company’s ERP and the company’s partner 3PL, a more optimal system is an ERP with built-in support for communication with third-party logistics providers. This type of functionality ensures that the communications with the 3PLs are an integral part of the standard business process flow. The alternative of doing this via custom development can be daunting, and can severely delay the time to value for a company releasing new products to the supply chain.

Real-time fulfillment processes have become more important than ever. Amazon has revolutionized the industry and raised the bar for everyone else. Customers now expect real-time product availability information and shipping within a few days, not weeks.

This means distributors must have reliable real-time integration between all of their point systems. Otherwise, there will be a reduction in customer service levels, and therefore the customer experience, all potentially resulting in lost customers and sales.

Source: EBN, July 2013

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