Growing Transportation Budgets Prompt Shippers to Consider Cost of 3PLs

TI Executive Insights V3

Logistics Management Magazine recently conducted a survey of trends and forecasts for the future state of logistics. Polling 345 executives in the logistics, supply chain and transportation fields, the survey showed a major concern for shippers centers on transportation budgets.

Some organizations are increasing their transportation budgets to allow for higher than expected fuel costs. The Logistics Management survey found that 65 percent of shippers expect to pay higher fuel surcharges in the coming months, with 74 percent planning on raising or adjusting freight budgets to cover higher-than-budgeted fuel prices. The price fluctuation of the diesel fuel market and the Growing Budgetrecent changes in the Hours of Service federal regulations continue to be top concerns for cost-conscious shippers. In addition, many organizations are identifying new pain points in their supply chain but are unsure how to address these issues with viable solutions.

In response to these challenges, forward-thinking companies are increasingly turning to supply chain management partners to help ease the strain. A growing trend is for manufacturers and distributors to align their companies with a third party logistics (3PL) provider. A lead logistics provider can evaluate the entire supply chain, identify areas for improvement and co-execute a supply chain management strategy.

What does a company look for when choosing a 3PL? When gathering information with regards to selecting a third party logistics team, companies should first of all interview only the most experienced, reputable providers who complement their business.

What is the cost to partner with a 3PL? The financial requirements will vary with each 3PL and one must consider the value-added services offered to gain a true perspective of total cost associated with a partnership. Many 3PLs in the market tie themselves to a certain cost model, which eliminates flexibility for the shipper. What you should search for is a 3PL that has the ability to provide you with various cost models, particularly one that matches your company’s culture.Growing Budget 2

In addition, can the 3PL assist with LEAN solutions? What are the metrics for success? How accessible is the team who will be managing your account? Are the services offered completed in-house with a logistics team or outsourced to another company?

The alignment with a logistics partnership takes the strain and pain out of economic instability and provides insight for recovery. Upon receiving a proposal from each provider, make sure that you have full transparency and disclosure on how they arrived at the cost (i.e. software or web-based TMS, carrier procurement, freight bill payment and audit, business insight, etc.) and how they plan on delivering returns on your investment (i.e. time savings, hard cost, soft cost etc.)

Investigate each service offered by the 3PL. The provider may have a service you are unaware of that could save you more time and money. Your selection of the most experienced provider who has a
track record of executing with excellence will be key to your success. Have a clear understanding in the beginning to set the stage for a win-win situation.