Does Achieving the Best Shipping Solutions Require Hiring a Logistic Expert?

Shipping products without the aid of logistics is like journeying to an unfamiliar destination without the aid of a map; eventually, you get there, but it usually takes more time and money than you anticipated. Just as an uninformed driver makes more stops and takes more roads than necessary to arrive at his destination, an uninformed shipping process results in freight making more stops and taking longer routes than necessary, increasing the cost of the shipping process. Realizing this, shipping companies that don’t have an “in house” logistics department will seek the advice of a logistic expert. But the type of logistic expertise that they retain can also have a significant impact on the cost of the shipping process.

When a company doesn’t have its own logistic expert, it has two options for implementing shipping logistics: hiring a third-party logistics (3PL) provider, or implementing logistics software. Traditionally, shipping companies have opted for 3PL. But today, shippers are increasingly choosing logistics software over 3PL for two reasons: the software offers more shipping options and it costs significantly less than hiring a 3PL provider that offers the same level of service. For companies that are considering hiring a 3PL provider, it’s important to realize that not all 3PL providers are the same. Currently, there are three types of 3PL providers: standard 3PL providers, service developers, customer adapters and customer developers.

Stand 3PL providers offer transportation logistics, but not as one of their core competencies, which ends up making them attractive due to the low cost of their services. Service developers perform transportation logistics as their core competency, but typically emphasize in “value-added” services, such as cross-docking and specific packaging. Customer adapters oversee a company’s logistics process, but don’t specialize in innovative shipping solutions. Customer developers oversee the logistics process and do specialize in innovation solutions. But the price of hiring a customer developer is can be similar to hiring your own logistics experts.

Moreover, 3PL often places small and midsize companies in the position of hiring logistics services that don’t offer comprehensive, innovative solutions or attempting to hire unaffordable logistics services that do; a situation that makes companies realize the value of logistics software, which allows them to realize comprehensive, innovative shipping solutions that increase the timeliness of the shipping process while reducing its price by eliminating the following costs: TMS software costs, 3PL costs, gain shares, freight margins, common rate base licensing costs and annual software maintenance costs.

Logistics software is available on either a software as a service (SaaS) model or as an onsite software solution, with the former offering the advantage of remote system access. But in either case, the software allows its customers to make expert logistics decisions through an easy to use interface. Research shows that companies who implement logistics software can reduce their annual shipping costs by 10 percent after the first year.

TL Logistics Management Software is Essential to Cutting Shipping Costs

When companies grow large enough, they typically purchase their own shipping fleet and have a logistics department that manages their shipping process from a variety of vantage points. But for small to midsize companies that don’t have a shipping fleet or an in-house logistics team, carrying out and managing their shipping process means outsourcing their transportation logistics or trying to choose the right shipping options on their own. In most cases, these companies trust a third party logistics (3PL) provider to provide the best TL shipping solutions for their unique distribution needs. However, to save money and have more control over the shipping process, more and more companies are turning to truckload logistics software-also referred to as TL logistics management software. In addition to allowing small to midsize companies to become their own logistics provider, freight logistics software helps them save money with respect to the following areas of the shipping process: freight management, transportation execution and freight payment and audit.

Freight Management

Freight management amounts to managing each means freight distribution, including but not limited to: small parcel, less than truckload (LTL), full truckload (FTL), rail and sea. While large companies employ logistics professionals or construct internal freight councils, small companies typically either outsource freight management or defer to purchasing personnel or shipping or warehouse managers. By implementing TL logistics management software, companies realize more shipping options than they do from outsourcing to a 3PL provider. Because 3PL providers only use carriers that they can make the most money with, your shipping options with 3PL providers are limited to what makes the best sense for 3PL providers and not necessarily for your company.

Transportation Execution

Traditionally, transportation systems are designed for tendering outbound shipments, meaning that they aren’t designed for managing inbound and third party shipments. In addition, parcel carriers have compliance requirements that cause shippers to use a separate system for parcel processing, leading to higher freight costs. Ultimately, shippers have a difficult time keeping their freight from being tendered outside of their original pricing agreements and end up overpaying for freight transportation. To remedy this situation, TL logistics management software allows companies to enforce internal and external compliance throughout the shipping process with regard to the carrier pricing agreement.

Freight Payment and Audit

TL logistics management software allows you to combine your freight payment and pre-audit data, which gives you limitless reporting options concerning your freight spend. With the combined information uploaded to the software application’s dashboard to give you almost real time visibility of your freight spend, you can to monitor freight KPI’s on a daily basis to further control shipping costs as KPI’s change. The freight payment and auditing capabilities of truckload logistics software also allow you to receive more of your freight bills through EDI, which serves to lower your pre-audit costs.

Freight Logistics Software Vs Third Party Logistics: Which Is Better?

Today, two types of freight solutions appeal to shippers that rely on carriers: logistics software (a.k.a. TMS software) and third party logistics (3PL). Logistics software allows shippers to become their own logistics provider by using a software program, while 3PL providers negotiate arrangements between shippers and carriers. Frequently compared and contrasted, logistics software and 3PL each offer unique benefits. However, the former has the following important advantages:

Less Expensive

Standard 3PL providers and service developers, which offer particular services and not comprehensive solutions, are usually quite affordable. When you hire a provider that offers innovative management of the shipping process – namely, a customer developer – the cost can compare to hiring an in-house logistics department. Logistics software provides logistics through a software as a service (SaaS) platform. It can also be implemented as an in house solution. Instead of relying on a costly customer developer, you can save money and realize more control by using a software solution.

More Control

A top complaint of 3PL customers is they feel distanced from their shipping process and the entity that manages it. Different 3PL providers have different approaches, but few of them integrate the shipper in the shipping process in a formal capacity. For some shippers, having the shipping process fully managed by another entity is appealing. Due to its expense and vendor issues it involves, most shippers wish to be involved in the process. Freight logistics software does more than “involve” shippers in their own shipping process; it puts them in control of it.

Better Options

3PL providers make freight arrangements by listing an available load in an electronic posting system, where it can be matched with an available carrier, or by negotiating with carriers that don’t use a posting system. Because the former method is usually the easiest, many 3PL providers use it to arrange the largest percentage of shipments – a scenario that limits shippers to carriers who use a posting system. Logistics software removes this barrier and exposes you to more carrier options. In some instances, a shipper misses the best carrier option because the carrier who could provide it will not work with the shipper’s 3PL.

Greater Security

No shipping process is as secure as one that the shipper handles on its own. When outsourcing to a 3PL, shippers naturally lose the capacity to scrutinize the carriers with which their loads are placed. Although 3PL providers select carriers with the customer in mind, they also select them with themselves in mind – a dichotomy that can jeopardize the interests of shippers. Freight logistics software alleviates security concerns by putting you in control of the shipping process.

Conclusion

Logistics software is a viable replacement for 3PL, particularly for shippers who wish to control their own shipping process. Next to payroll, shipping is the second largest operating expense for most shippers. This means that rejuvenating a stale shipping process with better carrier options can have a significant impact on a company’s bottom line – an impact that logistics software allows you to achieve.