The Benefits of Outsourcing Transportation Management
Big decisions never come easy. Especially when the decision involves moving thousands of dollars’ worth of freight across the country. With the growth of e-commerce and increases in consumer spending, transportation will only become more complex and more in demand. Your business will be faced with the decision to run your own transportation operation or outsource to a transportation management provider. While both choices have pros and cons, there are 3 definite advantages to outsourcing your transportation that may help make your decision easy:
- Efficiency – Working with a single transportation vendor means that processes are streamlined and communication funnels through one point of contact. Top transportation management providers will have well-developed processes in place to ensure the efficient and accurate shipping of your goods. Processes such as carrier onboarding, shipment coordination, and dispatching are all designed to provide quality service while simplifying day-to-day operations. These efficiencies lead to cost savings which are passed along to your business in the form of optimized rates.
- Expertise – Your office doesn’t need to have specific knowledge of the transportation industry, because you’d be working with experts who have this knowledge to keep everything moving behind the scenes. While you’re focusing on growing and operating your business, your transportation provider is using their expertise to service your customers. Your transportation provider will follow your retailer’s delivery scheduling procedures while utilizing preferred carriers for the delivery to minimize retailer chargebacks. While outsourcing your transportation to an outside provider requires giving up some control, Transportation Management Systems (TMS) allow for visibility into shipments and report generation for performance tracking, keeping you in the loop for every shipment.
- Economies of Scale – With a transportation management provider that services multiple geographical regions, you can feel confident that your shipment will reach its destination, no matter the origin. The transportation provider may also have multiple customers that are likely shipping to similar destinations, which opens up the opportunity for less than truckload (LTL) consolidation programs and volume discounts. You won’t have to worry about fleet management or carrier screening, your transportation provider takes on the risks and the workload.
Spotting Inefficiencies That Are Costing You Money
When you outsource your transportation management to an experienced vendor, you’ll get immediate access to expertise that it might take you years to develop in house.
Transportation is what freight forwarders do all day, every day. As a result, they know how to spot opportunities for efficiency and, as a result, cost savings.
For example, a freight forwarder might recommend changes like the following:
Transitioning shipments to more efficient methods of transportation, like moving from 40′ containers to 53′ trailers to reduce the overall number of deliveries and associated costs.
Packing ocean freight shipments more efficiently so freight can move directly to retail outlets, rather than getting re-sorted and re-repacked in a secondary distribution center.
Changing from over-the-road shipments to rail to save on transportation costs.
In other words, when you choose an experienced transportation management partner, they’ll be able to find you the most cost-efficient, yet effective way, to get your freight from point A to point B.
While you could train an employee to develop that expertise—or hire an in-house logistics specialist—working a freight forwarder offers another opportunity for cost savings: Access to their existing relationships. Freight forwarders work with an established roster of partners with whom they do significant volumes of business. As a result, a freight forwarder may be better positioned to negotiate the better for your company.
Outsourcing your transportation management also has one more significant benefit.
Top 3 Reasons Why You Should Outsource Your Logistics Requirements
Whether you are a small business or a major conglomerate, you have your own scope of business activities to do. Businesses that you are an expert in, businesses that you are specialised in and activities that are core to your business.
For most people involved in manufacturing and trading, shipping and freight may not be a core activity, but it is something that has to be done as part of the business.
Shipping, freight and logistics activities can be quite complex and complicated if not handled properly as it involves several stages of monitoring, documentation, dealing with government and regulatory bodies.
There are specialists to handle these particular activities and here are 3 good reasons why you should outsource your logistics requirements to these specialists rather than handle it yourself.
- Peace of mind and efficient logistics management
- Save on time, money and effort
- Network growth and opportunities
Improve Risk Management
There are numerous risks to a supply chain. Regulations, potential for theft (whether physical product or information), damages and huge liabilities if not operating with a legal carrier are just a few of the risk issues. Many of the risks are not even known by many shippers because logistics is not their core competency.
A third-party logistics company has the tools at its fingertips to minimize the risks and in some cases remove the liability altogether by just being the middle person in the transaction. Logistics service providers have the tools to better vet the providers in the carrier approval process and keep track of changes as they occur with the carrier’s insurance certificates, agreements, safety ratings and other legal aspects.
Four benefits of outsourcing transportation
In the Gartner Survey, the main reason given to outsource was to reduce costs. 3PLs with an established customer base have economies of scale and significant buying power. This means that their pricing is very attractive; they utilise their assets very effectively and as a result, can offer volume discounts. 3PL companies have the resources, expertise and hopefully, more efficient operations; supply chain is their core business. Most commentators agree that cost reduction is a major driver of the decision to outsource but there are risks.
Access to technology and communications
I.T. in the logistics field is becoming more sophisticated and more accessible. Established 3PLs are investing heavily in software solutions, both on- and off the vehicle for the benefit of their customers. Track-and-trace, on-board cameras, smartphones and anti-theft systems are now commonplace.
Trustworthy and consistent information on supplier activity is essential for decision making and continuous improvement. Unfortunately, most companies do not have reliable transactional data nor a complete historical spend analysis. An outsource relationship with a 3PL can produce accurate reports and business intelligence in real-time at a level of detail that you may struggle to achieve.
In-sourcing, i.e. managing your own transport in-house comes with challenges in staffing and vehicle utilisation. Dedicated assets, both people and equipment, are expensive and are often under-utilised. Volumes fluctuate, some requirements are unplanned, there are seasonal fluctuations in demand and you may not be able to operate 24/7. Outsourcing can smooth out some of these headaches, especially if your agile service provider can accommodate both your regularly scheduled transportation needs as well as your on-demand needs.