Whether logistics is outsourced or not, back-end integration that enables the seamless sharing of information across an organization, from its manufacturing site to a warehouse to a customer, is vital to ensure logistics operations are timely, efficient, and accurate. “Today's leading businesses are trying to orchestrate their entire supply chains as a connected entity,” says Jack Ampuja, president of Supply Chain Optimizers, a management advisory firm focused on supply chain operations. “Whether they own the operations or not is immaterial. From a service and management perspective the whole thing has to work as an integrated system.”

Lots of companies outsource at least some of their supply chain processes. In fact, according to Gartner’s 14th Annual Third-Party Logistics Study, 75% to 95% of companies outsource some supply chain activities. The survey, sponsored by Georgia Tech, Capgemini, Oracle and Panalpina, was released in June.

Not only are the majority of companies outsourcing some of their supply chains, more and more are expanding how they use 3PLs, notes Ampuja. “3PLs are providing a broader range of services such as kitting, assembly and contract packing in the warehouse. For example Kimberly-Clark has announced major cost reductions by moving contract packing into their 3PLs. They used to have separate companies doing packing and warehousing. Integrating the operation into one building has provided big gains in efficiency. But that kind of integration makes the 3PL even more important and raises the stakes on information flow between Kimberly-Clark and its logistics partners,” he says.

“3PLs are an operational extension of their customers, the user organizations -- so the elimination of any siloed information or inventory is critical. There must be a seamless integration between user organization's ERP/accounting system and the 3PL's warehouse management system (WMS) for operational excellence,” explains Steven Katz, VP of sales and marketing with 3PL Central, which offers on-demand supply chain software focused on the needs of 3PLs, public and third-party warehouses. 3PL Central's flagship product is 3PL Warehouse Manager, and on-demand WMS built specifically for public warehouse operations. Because organizations and 3PLs must so closely align their IT systems in order to share information, there is significant pressure on 3PLs to have both operational and technology expertise, Katz says.

Much has changed since the days 3PLs would use documents like bills of lading to update their systems and then mail copies of those documents to their clients, says Ampujua, And it is increasingly no longer acceptable for production or shipment information to be batch-processed at the end of a shift or the next morning, he says. Now, many leverage EDI and Web-based systems to share inventory levels, inbound advance shipment notices (ASNs), notification of receipts, request for shipments, and shipment tracking information in near real- or real-time. “Although EDI is still being used the trend is toward full integration of information via the Internet,” Ampuja says.

Katz agrees. “In addition to EDI X12 integrations with retailers and ERP/accounting packages, we are seeing significantly more shopping cart integration requests,” he says, adding that these integrations must be real-time to maintain accurate inventory levels and provide same day shipping.

Organizations and 3PLs are employing Web-based technologies to build the connections necessary for information sharing. “To achieve this real-time communication between a WMS and a shopping cart, the preferred method is sending orders and returning tracking information via Web Service application programming interfaces (APIs),” Katz says. “This next-generation of integration standards originally developed around web applications. Web Service APIs use Extensible Markup Language (XML) messages that follow the SOAP standard and are sent via the web.”

Companies like 3PL Central can ease integration challenges, too. 3PL Central’s software-as-a-service (SaaS) WMS allows a variety of levels of integration between 3PLs and their customers. For example, the Customer Web Portal is a Web-entry portal that allows user organizations to manually enter orders into their 3PLs’ WMS. The Order Import via Spreadsheet option lets the user organization import order spreadsheets from systems such as QuickBooks, proprietary systems, etc. to the WMS. 3PL Central also offers File Transfer Protocol (FTP) File Integration, which provides system-to-system communication in near real time. Finally, there’s the Web Service API, which provides real-time system-to-system communication between the 3PL’s WMS and the user organization’s systems.

Despite the advancements, there’s still work to be done. Findings in Gartner’s study suggest that companies are still concerned about IT issues, such as insufficient integration across applications offered by 3PL providers, lack of visibility and insufficient performance management capabilities.

Collaboration and integration of systems is critical, especially in these trying economic times where every dollar counts. “One key benefit that cannot be emphasized enough is how a seamless integration will significantly reduce the order-to-cash cycle for the user organization,” Katz says. “The ability for a user organization to be able to invoice a retailer or end customer even a few days quicker will result in receiving payment for the goods quicker.”