There's a lot of talk out there about 3PLs and their transportation analytics game. It's a huge playground with too many teams to count, but they're not all competing at the same level.
3PLs seem to be sitting in two camps, the "haves" and the "have-nots." The "haves" go all-in, pouring endless resources into data science teams, high-tech infrastructure, and fancy software tools to analyze their transportation data.
But, according to Penske's 2024 3PL Study, not everyone is living that high-tech dream. Many 3PLs face issues, from unclear business cases (56%) to a lack of capital (46%) and talent (43%). It's tough out there for the have-nots who are working with Excel and a prayer.
What type of analytics does your 3PL use most?
The Excel Wizards: Using Descriptive Analytics
Most 3PLs cover the basics well and take a historical look at what’s happened with freight. (This is what data scientists call descriptive analytics.) Some serious Excel wizardry happens here with reports delivered to customers quarterly. But, timely delivery? Well, that’s another story.
Most small-to-mid-size 3PLs are sitting here.
They may, or may not, have leveled their game a bit and gained some historical-report flexibility by investing in a data warehouse or business intelligence tools like Power BI, Tableau, or similar tools.
Analytics Tip: 3PLs in this category give reports to customers at least quarterly. If this is you, work toward giving them the most timely updates possible, at least weekly. Then think about telling customers why their historical data tells the story that it’s telling.
The Detective: Using Diagnostic Analytics
To show your customers the why behind their data, you have to do some detective work. (This is called diagnostic analytics.) It requires an understanding of the transportation landscape and some knowledge of statistics, too. This isn’t easy without having an analyst on staff, but AI can give here relief to even the most math-challenged teams. Diagnostic AI learns what your normal looks like, it combines multiple data sources, and it detects anomalies. Let AI help with the heavy lifting and use it to schedule continuous assessments in ways that your customers will understand.
Very few small-to-mid-size 3PLs can do the detective work.
Analytics Tip: 3PLs at this level have at least a part-time analyst, and that's a good first step. Many still don’t deliver the 'why' to their customers consistently because human analysis is simply a slower process. If this is you, adopt an analytics solution with embedded AI that helps your analyst move faster.
The Fortune Teller: Using Predictive Analytics
Ah, the fortune tellers – those 3PLs giving predictive analytics a shot. They forecast volume trends, carrier spend, and even predicting disruptions. It’s like having a crystal ball for your transportation logistics, always telling you what will happen next.
To make predictions more accurate and insightful, you need data models that are designed for transportation plus the ability to include data from external data sources. For instance, if your want to predict pricing, combine your TMS data with external pricing sources (like Freightwaves or DAT for truckload data, or SMC for LTL data). Prediction methods can range from simple averages on the “easy” end, to time series analysis and decision-tree machine learning algorithms on the more difficult end.
Small-to-mid-size 3PLs recognize this need, but only some put it in action.
Analytics Tip: Tools like Excel have always been able to spit out simple predictions based on averages, but we recommend investing in software that offers more advanced capabilities and AI machine learning to give more accurate predictions.
The Unicorns: Using Prescriptive Analytics
Lastly, meet the unicorn – prescriptive analytics. It's like having a GPS for decision-making that enables you take the next upcoming turn correctly. These analytics guide you with recommendations on a best course of action for a specific opportunity or issue. Under the hood, the best prescriptive analytics engines can bring together a number of different capabilities – things like machine learning, business rules engines, and anomaly detection - to produce the best recommendation possible.
Very few small-to-mid-size 3PLs have reached this level of analytics maturity.
Analytics Tip: Clearly define what you want to get out of prescriptive analytics, choose a single strategic objective to start, and build your custom-tailored approach accordingly. You'll need to identify the right KPIs to measure along the way.
How To Level-Up Your Analytics Game
Delivering all of these types of analytics may seem intimidating, but luckily no one expects you to do all of it from an Excel spreadsheet. There’s never been a better time to invest in analytics solutions with prescriptive powers – such as Third Axiom's flagship product, Axiom-One.
In the ever-evolving landscape of transportation and logistics management, advanced analytics has become a new must-have capability. Analytics is a reliable ally that propels 3PLs and freight brokers towards strategic advantage. Leveraging analytics unlocks a realm of possibilities for your transportation organization to increase revenue, reduce costs, and improve overall customer satisfaction.
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