Transportation is a large part of many businesses and occupies a significant piece of their supply chains. Managing such an impactful branch as transportation is complicated, and trusting business to handle your supply chain can be very stressful. To resolve logistics challenges, you can outsource your transportation management.
However, trying to keep all processes organized becomes almost impossible. Especially, when you operate a large company with a complex supply chain. Many businesses think they will save money by running an in-house logistics department, but in most cases, it can be much more stressful than outsourcing. Creating and maintenance of the entire department, investing in a transportation management system is certainly a huge expense and can be a huge burden.
While you may doubt whether outsourcing will benefit you, assigning non-core transportation management is a common practice for both large and small businesses.
Why outsource your transportation management?
Reduce costs, save time. Firstly, a 3PL simplifies the processes and makes your supply chain consistent, solid and unified. A good third-party logistics provider obtains a wide network of qualified carriers who they work with for years. This ensures you will get lower rates and faster transit times. The company also thinks about ways to optimize your shipments in the most cost-efficient way.
Streamlined transportation processes. Integrated systems and technology lets 3PL’s provide complete visibility into loads and freight management. You will get regular reporting and analysis to keep track of your transportation management.
No need to buy technology. A reputable 3PL is armed with tech tools such as a robust transportation management system (TMS), tracking tools, etc. While managing all of the transportation processes on your own, you would spend a big part of your budget on a TMS. Using a 3PL you can have management and reporting all in one system with all the needed features.
Ultimately, working with a 3PL can be beneficial both for your budget and operational efficiency. When you outsource your transportation management, it lets you access an enormous network of freight carriers, technology and reports, and all while focusing on your core business.
More and more companies of all sizes are turning to 3PLs for help with their transportation management. Supply chains are becoming more complex, and securing capacity has become a challenge. 3PLs bring their expertise and solid resources to help shippers improve their logistics operations, while also driving cost savings, and generally make shippers’ day-to-day transportation challenges easier. It is important to set up a strong relationship with 3PL.
Here are some tips on how to build a good relationship with 3PL:
Know what you need
Establish what is important for your company and what you are looking to achieve through this partnership. Make sure to outline your key objectives and requirements to your 3PL before you continue growing your relationship. This will help set the tone and your expectations which will solidify the foundation for a successful partnership.
Measure the performance
It doesn’t end with outlining the objectives which set the general direction you want to go. Once you are clear on the general requirements, it’s time to get to details. Establish a set of KPIs and evaluation metrics which are in line with your general objectives and communicate them to your 3PL. This will help you monitor and evaluate your 3PL’s performance and contribute to achieving bigger objectives.
Know your 3PL team
Any partnership and relationship are solely about people. Get to know your 3PL representatives not only professionally, but personally, too. The better you know each other, the easier it will be to work together and be efficient. At the end of the day, you will be working together every day. Having occasional face-to-face meetings to discuss their performance and review objectives is highly recommended as well.
A 3PL is a powerful tool in managing your supply chain effectively both, time- and money wise. There’s nothing quite like a stable long-term partnership with a 3PL who knows what you need before you even say it.
Trust and Respect. The two things needed for a successful business, personal, and… a 3PL relationship.
More often than not, these terms become the exception, not the rule. Many shippers that use third-party logistics providers (3PLs) believe that micromanagement and persistent price pressure will prove the best result. In reality, the opposite is true.
Why a good 3PL relationship matters to your business?
The more is invested in a 3PL relationship with a shipper, as a partner, not a boss, the most successful that relationship will be.
In the research by Dr. John Langley, Ph.D., Supply Chain and Information Systems Group Faculty at Penn State University has done extensive research on the topic. According to him, “Effective client-3PL relationships exhibit a mutual commitment to the creation of value for both parties and to the overall supply chain”.
Dr. Langley continues, “..too much emphasis on the price of 3PL’s makes it challenging to focus on innovation and programs that drive savings and improved performance.”
What can you do, as a shipper to promote mutual trust and respect in your relationship with your 3PL? Below are 5 suggestions to do so:
Setting attainable goals
Set realistic expectations from the start, that way you’re able to work together to achieve your goal or solve your problem.
This relationship is a long-term partnership. Be sure that the relationship feels right, and of course, the numbers look right.
Define the contract terms
Clearly, state the requirements and expectations to be held in your contract. By stating the activities you want to be done, operational performance expectations, and payment terms – your relationship will automatically be much smoother. If these terms aren’t clear, you and your 3PL can be on different pages and no one is happy then.
Communication is key
We love to talk about how your business is doing. It is important to dedicate time to speak with your 3PL, whether it be a weekly call or monthly face-to-face – communication is the heart of our relationship.
Share your strategies
We’re here to help you! Let us know your long-term business strategies. By sharing this information, we can help you grow and flourish in your market. This shared intelligence inspires more insightful thinking and better performance on both ends of the relationship.
Interested in working with a 3PL? Have questions about PLS’s services? Need a freight quote? Contact us.
What is a non-asset based third-party logistics provider?
A non-asset based third-party logistics provider is a firm that doesn’t own equipment, but partner with carriers to provide transportation services. There are many myths and misconceptions about non-asset based 3PLs. However, none of them are telling the truth. So, we have outlined the most common stereotypes, and crushed them:
Misconception 1: We don’t need to work with a logistics firm since we own our own fleet
Fact: Whether your company leases or owns its own fleet of trucks, complications arise in the quest to maximize shipping efficiency.
Government Rules and Regulations
Carriers and drivers are responsible for safety and compliance. So when government and transportation associations rescind, suspend and update the standards for drivers, it can be difficult to keep up. When demand shifts and current events call for change in capacity or routes, outsourcing lanes could be a better option than relying on your private fleet.
Rising Costs and Capital Investment
Operating your own fleet comes with financial obligations. This means that fuel, equipment, accounting, and insurance costs affect the bottom line. Besides unpredictable costs that can be unprofitable, there are also liability issues. Also, all fleets must carry insurance, usually with exorbitant deductibles. In case of an accident, a private fleet could suffer excessive financial loss. After accidents, lawsuits typically arise, and truckers rarely come out on top. Transfer this burden to a carrier who has a good reputation on the road. When working with non-asset based 3PLs, you can find a carrier who meets your company’s safety requirements and values.
Customer Service and Added Value
For unique or unusual freight, a company will often use a 3PL to find the perfect driver. Public carriers are just as competent as private fleets with regards to routes, customers and products. Through a network of carriers, a 3PL can assign a driver to specific accounts. This way, they can develop a relationship and recognize the routes, products, and requests.
Private fleets haven’t escaped the problems of the driver shortage. What if your top drivers leave you for a competitor? Public carriers have relationships with 3PLs, so they can help find solutions to guarantee capacity through backhauls or less than truckload moves. Also, for a private fleet, the driver shortage limits options.
Does your company have a private fleet? Find out how PLS can find you backhaul opportunitieshere.
Misconception 2: Partnering with a transportation management provider for customized solutions will eliminate my job
Fact: Outsourcing transportation management doesn’t mean turning over your job responsibilities. So, outsourcing specific parts of business operations to an expert is not uncommon. Also, outsourcing is a relationship, a strategic partnership, which adds value to the entire organization. Outsourcing provides more time for you to focus on your core competency and discover cost-saving results.
Outsourcing should be seen as a resource, to produce more efficient processes; it’s a tool that generates data to make better decisions; it’s an identifier of inefficiency and a key to overall growth.
Organizations expect to spend, on average, $65.4 million on transportation, freight services, and equipment in the upcoming year.
Misconception 3: If I work with non-asset based 3PLs on transportation solutions, I’ll lose any or all visibility
Fact: A 3PL’s transportation management solutions provide your company with historical and real-time shipment data. When leveraged and managed properly, big data is used to make smarter operational decisions and optimizes supply chains.
Visibility represents the real-time status of supply chain operations
Consumers, manufacturers, and suppliers want to know where their order is at any point in the supply chain. For companies that want to keep visibility into its supply chain and shipments, they can partner with a 3PL and integrate advanced TMS technology that allows information to be gathered from internal and external sources. The real value in increased visibility includes more effective management, simple monitoring and the ability to optimize business intelligence and practices.
Misconception 4: 3PLs offer a one-size-fits-all strategy
Fact: Transportation management has a suite of services to fit your business needs. A 3PL managing your transportation will work behind the scenes while you manage and monitor the decisions that are best for your business. A 3PL provider will enable you to eliminate tedious day-to-day activities and deliver customized monthly reports comparing current and historical data.
Solutions to consider from a 3PL:
Full Outsourced Transportation
Technology and Management
Whether you have objected to working with a 3PL because your business is too big, too small, has never used brokers or only uses preferred carriers, it’s time to reconsider.
A 3PL is able to provide an evaluation of current processes and find solutions that will cut transportation spend and improve service and processes. Also, it can create shipment visibility and efficiently manage inventory.
The process of outsourcing logistics management involves a lot of trust and a costly investment for both parties. Although 3PLs find new ways to provide value for clients, many shippers are not ready to initiate strategic and long-term relationships that require deeper implementation.
Outsourcing logistics management specific parts of business operations to an expert is not uncommon. Since 3PL can reduce transportation costs and improve customer service, many companies outsource inbound and outbound transportation.
5 major benefits of outsourcing logistics management:
Gain expert analysis and other resources to help in decision making
Free up time to focus on core competency – No more manual processes
Maintain/Improve customer service
Improve supply chain efficiency
Enhance operation productivity
A 3PL has the ability to discover profitable solutions through competitive analysis, inbound vendor management, and ancillary reports. Some companies find more benefits and savings from spot movements, while others need full support to centralize transportation management software.
Why use outsourcing logistics management?
When a 3PL provider and shipper enter an embedded, long-term partnership, the 3PL functions as a seamless part of the customer’s supply chain. Also, the embedded level refers to 3PLs and shippers working in close, long-term partnerships.
This form of relationship requires 3PL providers to invest in technology and facilities, so they ensure complete transparency. The main goal of an embedded level partnership is to share risks and gains between parties so that both can achieve a competitive advantage and provide customer satisfaction. Here, a 3PL becomes a part of the strategic team that will plan the supply chain strategy according to the shipper’s needs.
For effective transportation management, PLS’ mission is to become an extension of the customers’ supply chain network. Fully understanding a customers’ supply chain allows PLS’ team of experts to compare rates and lanes, analyze reports and volume, and then suggest the best solutions based on customer needs.
There are several benefits to your business when outsourcing the supply chain. As it will reduce costs, improve service and allow the shipper to focus on core competency. Third-party logistics firms give you a chance to provide value through solutions, service, and expansion. There are two categories of 3PLs: asset-based and non-asset based 3PL.
The main difference between the two is that asset-based firms own part of the supply chain, like trucks, distribution centers and/or warehouses. On the other side, a non-asset based 3PL, predictably, does not own supply chain assets.
Owns many or all assets in the supply chain
Can take care of the entire supply chain
Align your solution within their strategy
Knowledge and expertise to identify and evaluate challenges and solutions
Negotiate for cost savings
Flexible, work with the large carrier network
Uncover hidden freight costs
There are many misconceptions about non-asset based third party logistics companies in the transportation industry. This is understandable because before 2013, just about anybody with access to the internet and phone could claim themselves as a non-asset based 3PL. That is until DOT changed the freight broker surety bond to $75,000. Today, a good 3PL will be a transparent, collaborative logistics partner that saves money and drives value for a shipper.
There are pros and cons to both types of 3PLs. Likely, the goal of both is to reduce errors, cut costs and improve general initiatives. However, asset-based firms could encounter a conflict of interest, because they’re managing your logistics using their assets. But a non-asset 3PL doesn’t have any hidden agenda. Since non-asset based firms act as the third party in every aspect, they can’t use their own assets as an advantage.
Some key benefits to outsourcing transportation to a non-asset based 3PL include:
Competitive carrier rates and secured capacity
Knowledge on base rates, surcharges and other fees
Continuous optimization for business improvements
Collaboration and partnership to build long-term results
PLS Logistics is a non-asset based 3PL. PLS lets you focus on your job’s responsibilities while your single point of contact runs your supply chain. Also, PLS doesn’t have an inventory of assets to keep profitable; our team connects to a large carrier network to eliminate inefficiency and provide value at a low cost. Also, we are experts at negotiating and can provide documentation of proven successes. We’re proud to offer transparent, trustworthy services to shippers.
Outsourcing logistics processes to third-party logistics companiesis more common than some shippers might think.
Third-party logistics companies offer a suite of services, including supply chain management. Efficient transportation is a competitive advantage in today’s marketplace, so many companies now focus on optimizing logistics functions.
6 reasons to outsource transportation to third-party logistics companies:
Save Time and Money
Third-party logistics companies have expertise, transportation management software, carrier network, and reporting capabilities, so they assure time and cost savings for the shipper.
3PLs leverage industry relationships and shipment volumes to get lower prices. They can negotiate lower fuel surcharges, too. Also, third-party logistics companies have thousands of carriers in their fleet network, so carriers bid on freight which lowers the price significantly.
A 3PL will continuously search for ways to cut costs and add value to your logistics operations. Also, there’s a dedicated team of experts monitoring, analyzing and optimizing processes every day. A 3PL will make sure that transportation operations never fall victim to the constantly changing supply chain environment.
Outsourcing the risks of transportation operations to the logistics provider is protecting your organization from penalties and fines. Also, if a shipment is lost, stolen or damaged, it’s the 3PLs responsibility. Anyway, a 3PL lowers these incidents.
A 3PL with a TMS is instrumental for insight into the supply chain. TMS technology provides the custom data you desire. TMS software is very expensive, so when a 3PL integrates the technology, you save money and get more accessibility to capacity. Shippers benefit from increased load consolidation, more frequent backhauls, and optimized routing and distribution.
Through a 3PL partnership, your operational control will increase. However, outsourcing is a two-way street. Presumably, reputable 3PL will collaborate and report to you regularly which creates visibility and real-time metrics into your transportation processes than ever before.
At the end of the day, outsourcing transportation management saves businesses time and money. Third-party logistics companies provide expertise to add value to your supply chain processes, so they give you time to focus on what matters most – your products, business, and customers.