With more competition arising among the market, it has become extremely challenging for small and midsized businesses to efficiently manage their supply chains.
Discover new innovations that will dramatically change and impact supply chain and logistics in the nearest future!
With all the discussion about capacity and high rates in the transportation industry, the task of finding a new 3PL to move your product is not any easier. 2018, the time of record diesel prices, higher than normal truck rates and a pretty tight capacity. You may have looked into a new provider recently but were faced with the daunting question of WHO? Well, look no further, as well have a thought out list of what to look for when choosing a 3PL that works for you.
Using a 3PL that has access to the latest technology is wise. That means that they are committed to efficiency. The right technology can lower your costs, cut your use time, and increase your productivity. Moder- day 3PLs use a transportation management system (TMS) that can provide many benefits for the 3PL, the carrier, and the shipper. The most up to date systems are beginning to roll out newly advanced tracking to allow further transparency when moving a load. Their technology is yours to use, which can also help you plan shipments at your convenience allowing a system that can provide the user with all the data they need before, during, and after a shipment.
A strong 3PL understands your needs and tailor to your requirements because not every shipment is the same. Those that utilize a one-price-fits-all concept should be avoided at all costs, they won’t be as effective or cost friendly. Your chosen 3PL will have the ability to adjust at a moment’s notice should something arise that interferes with the plan that they tailored to you. It’s also great to have 3PL that can adapt to your expansion and grow as you grow. Having the right resources is important if they plan to adapt to your growth…
Communication is the key to success in any industry, but more so for the transportation industry where everything is constantly in motion. A 3PL should be ready to create a strong relationship with you if they want to succeed. Having a clear understanding of each other’s needs and goals is important. Once there is a mutual understanding, it becomes easier for a 3PL to tailor to your needs. Communication also involves the use of clearly defined metrics that you (as the customer), have the ability to view in a simple and easy to read format. Metrics will help you to understand how your operations are doing, and what you can do (or your 3PL can do) to make improvements. Your 3PL will be able to communicate with you whenever something arises, whether it’s good or bad, in a fast and responsive manner.
You are looking for a 3PL so they can organize a shipment (or shipments) right? That should be what they are good at if they are in this industry. Some may say they are but may lack the experience to back it up. Find one that has a good history of experience, they will make sure your shipment goes to the right location in the right timeframe. The right 3PL will do this at a cost that is effective for your budget and help to maintain those low costs during changes in the industry when we view spikes (such as the industry currently). It’s also wise to understand the carriers they use and if they are reliable. Having a 3PL with access to a multitude of carriers creates more options for you for price, reliability, and geographical coverage. The larger their network is, the better they can assist your growth.
It’s not a secret that we are all currently operating in the conditions of the record-breaking capacity crunch. The crisis has been caused by several factors which we have previously discussed in our post, even more so with the ELD mandate finally going into effect on December 18th. This fact adds up to the reasons to use a 3PL in the tight capacity time.
Predictably, capacity tightened further during the last week of December. Yes, there were fewer trucks out there due to holidays, but same goes for loads.
We witnessed the load-to-truck ratio increase significantly compared to the same time last year, vividly illustrating current market conditions.
According to recent DAT data, dry van load-to-truck ratio hit the highest monthly average ever recorded by DAT of 9 dry van loads per truck (139% higher than in December 2016). The flatbed ratio increased by 77% compared to the same time last year hitting 35.6 loads per truck, while reefer ratio of 14.1 loads per truck was 73% higher than that of December 2016.
Undoubtedly, this affects both, shippers and 3PL’s. However, a 3PL may have better capabilities of navigating in the tight market.
What are the reasons to use a 3PL in the capacity crisis?
A well-established 3PL will have years of thoughtfully developed and nurtured carrier relationships. Strong relationships are crucial for stability and better rates, and you will be able to benefit from them.
Hand-in-hand with the above, a 3PL has volume across various transportation modes, which gives them leverage in negotiating with new carrier contacts and developing mutually beneficial relationships. This helps them constantly expand their network and move your freight easier.
3PL’s work with various customers and come across various, often uncommon, situations. They might be able to offer an alternative, more efficient and cost-effective, solutions for your freight based on their previous experience.
It wouldn’t be called “crisis” if it was pleasant! At the end of the day, a 3PL is there to make your life easier. Their priority is to provide value-driven transportation solutions for their customers and make their supply chain operations a little less stressful.
We are already in 2018, and the forecast remains the same: the crisis is not expected to pass before the end of the year. The best way to survive is to use all the tools at your disposal and maximize your efficiency.
Learn more about our Outsourced Transportation Management services!
We understand why it might often be assumed that an asset-based carrier has more advantages than a 3PL. Quite often, shippers don’t feel comfortable working with non-asset based 3PLs and end up limiting, and thus hurting, their supply chain.
There are a few common myths surrounding the never-ending Asset Based VS Non-Asset Based 3PLs battle. It’s time to look at these misconceptions and destroy the myths.
Myth #1: 3PL is a middle-man, thus, their service will be more expensive.
You remove an extra tier and save money. It seems straight-forward, right?
Well, this is actually not true! 3PL’s can offer better rates due to their extensive carrier base and volume. 3PLs take full advantage of discounted backhaul rates and use their volume to negotiate the best rates. In addition, a non-asset based 3PL will always negotiate in the customer’s best interest as they are not putting your freight on their own trucks.
Myth #2: It’s harder for a 3PL to provide stable capacity for your freight
They never have a truck right there in the yard which they can send to pick up your load immediately.
They don’t, but an asset-based carrier might not have a free truck sitting there waiting for the load, either. As already mentioned above, a 3PL has constant access to an extensive carrier base and has much better chances of finding a qualified available carrier to receive your shipment.
3PLs are constantly building strong relationships with carriers to be able to provide stable capacity for their customers even in the times of a capacity crunch.
Myth #3: It’s harder to rectify issues with non-asset based 3PLs
It will take longer, and it will be much harder to resolve issues/claims when you have to go through an extra company between you and a carrier.
You might think so, but the successful resolution and customer satisfaction is a 3PL’s first priority, and they will fight for you on your behalf. Instead of going directly after a carrier (who will tend to be more interested in defending their own interests), you will have a 3PL claims department working in your best interest to get the claim taken care of.
Overall, a 3PL will always be on your side – It’s literally their job to minimize potential issues and make the process as smooth as possible for you.
Have any of the above been holding you back from partnering up with non-asset based 3PLs? Maybe this will help you tackle your fears and open new supply chain opportunities for your business.
Don’t put unnecessary limits on your supply chain. Looking for a 3PL to help you handle your transportation needs? We are here to help!
Analyzation of countries such as Myanmar, Vietnam, and Cambodia, prove that emerging markets are popular again, as suppliers are increasingly flocking to these new manufacturing hubs. Small, independent suppliers within emerging markets offer great benefits to established retailers in developed markets, and the relationship is one that is valuable and extremely worthwhile for both parties.
These countries are noticing exceptional increases in the manufacturing sector, a change that can be attributed to both foreign investment and economic reforms.
Myanmar has experienced a GDP growth rate of 8.05%, and is continuing to rise due, in part, to it’s convenient spot between huge marketplaces, India and China.
Growing industrial output and increased exports are also being witnessed in Vietnam and Cambodia. In the first 10 months of 2016, Vietnam reached $143 billion in exports. In 2015, Cambodia’s garment exports were valued at about $5.7 billion, an increase of 7% from 2014.
As these emerging markets grow, China, who is normally the go-to country for manufacturing, is noticing some of the fastest sector decreases in several years.
So, why are retailers taking their business elsewhere?
First, countries like Myanmar, Vietnam, and Cambodia are able to produce goods at a lower Cost of Goods Sold, meaning that it will be cheaper for retailers to tap into these markets.
Additionally, the product quality of those produced by these emerging markets is often higher, therefore allowing the supplier to cater to the retailer better in both cost and quality aspects.
Clearly, building relationships in emerging markets is a win-win for both parties, but gaining the relationship requires strategy and is often difficult.
For leading retailers, manufacturers, and wholesalers, tapping into these up-and-coming markets poses an issue because of international finance restraints, such as bank limitations and difficult payment terms. Suppliers struggle to provide quality payment terms and have issues securing local funding as financial systems are underdeveloped. Other obstacles that emerging markets must overcome are excessive government intervention, bribery, and corruption.
How can retailers, manufacturers, and wholesalers overcome these concerns and build a relationship?
Suppliers in emerging markets need to be paid immediately upon shipment, or their business could be crippled. They’re unable to offer delayed payment terms, making them a risky investment to buyers.
Oppositely, some suppliers may be unable to produce high-quality goods without upfront payment due to lack of cash flow.
These issues create problems for both players but ultimately affect the supplier more than the retailer.
To combat them, some companies are offering short-term loans to these suppliers. This method is commonplace in developed markets, but rare for emerging markets because of the risk associated with it.
Independent international trade finance providers can supply financing options with no risk or cost, allowing new supplier relationships in emerging markets to become fruitful. These providers can pay the supplier and offer delated payment terms to the buyer, allowing both sides to get the relationship and outcome they want.
Finance providers are gaining a huge amount of support in Vietnam, and other emerging markets, and are helping to perpetuate its status as one of the fastest growing economies in the world.
The decision to work with emerging markets may seem risky to retailers, manufacturers, and wholesalers, but it’s possible despite the challenges. Both parties benefit exponentially from the partnership, and it even aids the economy of the emerging market country.
What to Read Next:
When a company outgrows its distribution capacity, it expands by opening a new distribution center (DC). The best approach to choosing your new DC location is to evaluate your entire logistics strategy.
Deciding where the DC is located is crucial for long-term success. Paying close attention while selecting the site could save a company from labor shortage problems, excess transportation fees and vendor issues. The right location could mean better customer service, strong data collection, and an increased bottom line.
Location, Location, Transportation?
Transportation is typically one of the highest expenses for companies. These costs are complex to calculate because the route or mode option can change, making each rate different from another.
Inbound Logistics notes that transportation is one of the most important factors in distribution center logistics. The cost of hauling products from a DC to customers and consumers is based on fuel prices, driver/truck maintenance costs and demand, which fluctuate at random.
Although trucks are the standard method of moving freight, companies often look for a DC with rail access to find cost savings. When shipping large amounts of heavy products, rail’s cost-effective delivery is an obvious trade-off.
Think about it like this: A retailer needs a DC that will best serve its delivery points. By analyzing its network of existing DCs, the retailer can determine the next site to optimize its processes. In retail supply chains, on-time delivery is a top priority, so being close to customers and suppliers on accessible transportation routes would be considered first in the site selection.
Questions to Ask Yourself Before Deciding on DC Location
- Where are your customers?
- What is your present busiest DC?
- What will the new inventory strategy be?
- Will the transportation strategy need to change?
Factors to Consider Before Deciding on DC Location
- Labor costs
- Proximity to customers and suppliers
- Site requirements
Planning and building a new distribution center takes time and money, but choosing the best site and evaluating logistics and transportation plans will help your business succeed in the long run.
Continue Reading: Why Warehouse Technology is the First Step in Fast Shipping
In the past, shippers and their third-party logistics providers stuck to a uniformly transactional relationship. This relationship was one of utility for both parties and lacked any true value or longevity.
According to the 2017 21st Annual Third-Party Logistics Study, the 3PL market is moving towards partnerships that are meaningful and add value for both the shipper and the 3PL provider.
As of this year, 91% of 3PL users and 97% of 3PL providers reported that their business relationships are successful and yield positive results. This level of satisfaction within partnerships is bound to permeate into other areas of the business.
In accordance with this transition, most shippers and providers said that the use of 3PL services has contributed to overall cost reductions and improved customer service. With costs declining and service increasing, there is more room for innovation and improvements to logistics that increase its effectiveness and prove beneficial to the industry as a whole.
If their positivity hasn’t already been conveyed, it’s worth noting that value-added relationships in the 3PL market have also made logistics experts more valuable and useful. As IT-intensive and customer-facing issues occur, professionals are turning less to outsourcing and more to home-bound 3PLs for their services and expertise in these categories.
Is it all good?
The decrease in IT-intensive and customer-facing activity outsourcing doesn’t mean that outsourcing rates are declining overall. The market continues to see an increase in outsourcing, even in these categories.
The 2017 study reveals that 19% of shippers are taking advantage of supply chain consultancy services, compared to 11% last year.
17% of shippers are still utilizing IT services, a 6-point increase from last year’s 11%.
What can 3PLs do to compete?
Judging by these statistics, it’s no secret that 3PLs need to adapt to shippers’ needs.
About this state of the market, Frank D. Monte, of Capgemini Consulting, states, “Shippers continue to push their 3PLs to become more innovative in the areas of logistics technology and advanced analytics, while also developing the appropriate capabilities for geographic expansion. 3PLs are responding by offering advanced and relevant technology to help shippers better serve their customers.”
In the wake of grim-looking market statistics, 3PLs are resilient as they continue to improve their technology in a manner that increases data-driven decision-making, something that shippers find extremely valuable as of late.
Continue Reading: 3PL Technology Helps Enhance Customer Experiences
What is a routing guide?
Routing guides contain routing instructions and an established set of guidelines and requirements for manufacturers, suppliers, wholesalers, and distributors to follow when fulfilling orders and shipping products or materials to a specific location, warehouse or DC. A routing guide is the foundation of transportation management.
The purpose of a routing guide is to create a streamlined process for inbound shipment delivery – specific packaging, labeling and transporting – regardless of the vendor. The routing guide includes modes and carriers to use in specific lanes, it can contain rates and service requirements.
Think about it like this: You’ve sold your product to a retailer. The retailer has a detailed routing guide, and you ship your product accordingly. Now, you’ve sold your product to many retailers, all who have their own routing guide. It becomes a real challenge for you to fulfill and distribute your product based on each retailer’s specific guidelines.
“The routing guide is not a magic tool that instantly changes a supply chain network. Rather than effecting radical change, a routing guide can foster evolutionary change,” Jeff Johnson says in an Inbound Logistics article. “It aligns discussions that lead to low-level collaboration, which can then blossom to strategic development.”
Efficiencies may begin with greater vendor compliance and control over freight spend, then incrementally build as companies negotiate transportation rates, pare down core carriers, identify areas for shipment consolidation, and mirror these changes in their routing instructions.
Benefits of a routing guide
A routing guide is an essential tool for businesses seeking greater control over transportation decision-making. The routing guide makes vendors responsible for using preferred transportation carriers or shipment instructions and yields value. Compliance with routing guides can reduce costs like processing damaged products and saves time when the operations staff doesn’t have to figure out a shipment with missing documents.
- Defines relevant shipping information: rates, modes, service
- Transforms supply chain from static to dynamic
- Measures compliance, chargebacks
- Develops efficiencies
- Creates thorough onboarding for new vendors, opens communication
What are chargebacks?
If the routing guide isn’t followed exactly – the shipment’s receiver can charge a fee for non-compliance. The chargeback fee offsets the additional expense the receiver incurs as a result of the shipper’s non-compliance. Using the wrong shipping provider, sending damaged materials or products, using the incorrect shipping location, or non-authorized partial delivery is all reasons shippers might be charged the extra fee.
Vendors can reduce their exposure to financial deductions by taking preventative measures against the most common chargebacks:
- Late/Missing/Invalid ASN
- Missing/Inaccurate/Defective Labels
- Missing/Inaccurate/Defective Ticketing
- Order Fill Rate
- Late/Early Shipment
Routing guides often pose a problem to vendors because of the immense detail each organization has in their guidelines – vendors are hit with chargeback fees and the challenge of fulfilling and distributing multiple orders to multiple buyers can cause headaches.
PLS routing guide professionals have broad experience with thousands of routing guides. We provide guidance on best practices and compliance.
- Case Study: Project Cargo Logistics
- Tips to Avoid Failure in Inbound Vendor Management
- 3 Steps to Cut Inbound Transportation Costs
Project logistics refers to specialized freight moves that are oversized, heavy-lift or hazardous. Moving over dimensional, overweight or toxic cargo is a complex job that involves heavy shipping equipment and moving project materials to work sites, facilities and construction stations whether on- or off-highway.
Over dimensional freight is any item that exceeds one or more of the standard legal size criteria for the state. While these measures vary, the general guideline for parameters is 53’ long 8’6” wide, 13’ 6” tall on the trailer. Shipments that exceed these parameters are considered over dimensional and requires a permit before being moved.
To haul project cargo economically and efficiently, there must be attended to every detail, constant communication and collaboration throughout the entire supply chain process.
Common Examples of Project Cargo
- Military supplies and equipment
- Machinery, steel, pumps
- Manufacturing equipment
- Mining equipment
An Inbound Logistics article says that project logistics yields a significant time of planning for billion-dollar projects, and there aren’t any shortcuts. Each project move introduces new challenges and generates inventive designs. Finding a 3PL that can handle such a multifaceted shipping project is critical. Shippers rely on 3PLs to handle the specifics of the cargo, route, and mode, plus understand its needs for budgeting, planning, handling, execution, and delivery.
Planning the transport of oversized, overweight, and hazardous cargo takes knowledge, experience, and confidence. 3PL experts understand the government regulations, handling strategies and the overall situation, which is key to success.
When it comes to shipping project cargo, transportation and logistics demands are distinctive to each situation. At PLS, we are able to determine the best routes, equipment, and timeline for your cargo. Our team is familiar with shipping oversized, specialized shipments. For one client, PLS moved equipment weighing more than 252,000 pounds. The trailer used to move the equipment had 72 tires and two additional tractors that pulled and pushed the equipment.
Shippers with project cargo can overcome transportation hurdles and reduce freight spend with automated transportation management. Partnering with a 3PL and using a TMS helps shippers maintain on-time delivery, improve service and avoid disruptions, gain new carrier partners, consolidate invoice and improve dock controls, among other benefits. Continue reading how this PLS client reduced freight spends through automation.