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Jillian Voege

The IT Gap in Most 3PLs

by Jillian Voege
Forklift in a large warehouse

Outsourcing logistics is the new paradigm. For many mid-sized businesses, it only makes sense to outsource logistics and offload that overhead to the experts. Receiving freight and shipping parcels is a tall task for any department to handle, which is why 3PLs have become so popular these days. Businesses can divert resources back to growth initiatives, while 3PLs take the bulk of the costs associated with storing and shipping products.

There's just one drawback to relying on 3PLs - they're slow to update their technology to keep up with rising demand. Take this survey for instance - 98% of 3PLs acknowledge that IT is necessary for them to operate. That's good, it means that 3PLs are prioritizing technology investment to better serve their customers. But here's the rub, only 55% of customers believe 3PLs have adequate IT. This is called the "IT Gap," and it's been observed for over a decade.

Simply put, 3PLs are approaching logistics problems with the same solutions. There's always a need for more capacity, more labor, more scale, when their technological shortcomings are causing real headaches for businesses. Take EDI for instance. EDI technology is 30 years old, which is almost the textbook definition of legacy technology. Most companies don't have the technical resources to build a monolithic integration with a 3PL's EDI endpoint, so they'll usually outsource that to EDI specialists for an exorbitant fee. And yet, 3PLs still rely on EDI solutions to transmit data, when there are easier and more affordable options out there.

Until there is a 3PL that can actively address the "IT Gap" and provide active disruption in the market, there will not be much motivation for 3PLs to change how they operate. Why would they? Businesses don't have an alternative when it comes to logistics. Either they have enough money and manpower to do it themselves, or they don't. But seeing as how most businesses are dissatisfied with how their 3PLs are treating them now, there's a ripe opportunity for the right 3PL provider to exploit the "IT Gap."