How To Gain Control Over Your Shipping Budget By 3PL OutsourcingWritten by Paul Forand
So, your company is looking into hiring a 3PL to optimize your shipping processes and cut your freight budget. It's a great idea, especially today, but how do you get the best results?
The Third-Party Logistics field has expanded greatly in the last decade as shipping charges have risen and competition in the field has gotten tighter. The logistics end of shipping has become so complex that a specialist provider is often necessary to get the best rates.
However, this isn't a "magic bullet" solution, and there's some give-and-take involved to get the best results. So, we've got a few tips to ensure your relationship with your 3PL is a good one.
Ensuring The Best Budgetary Returns From A 3PL
1 - Make Plenty Of Phone Calls
You're not likely to get the best possible deal on the first call and different 3PLs often have very different arrangements with carriers. Some act as brokers, simply purchasing space on your behalf from whichever carrier happens to be offering the best rate for the shipment window you need. Others will have direct ties to existing carriers, bringing you contracted rates and (sometimes) even locked-in fuel charges.
Likewise, keep an eye on the commission that they charge. If it's in the 15-20% range, that means they're assuming the risk for lost shipments and other accidents, and passing the insurance charges onto you. 3PLs with direct carrier contracts carry less risk, and therefore charge lower percentages.
2 - Don't Constantly Hop 3PLs
You'll have a better relationship with your 3PL if you're willing to commit to working with them a long period of time. When they know they can rely on a particular client for a fairly steady volume of work, that gives them that much more purchasing leverage when dealing with carriers.
If your company continually changes providers looking for the best deal at the moment, it becomes a "penny wise, dollar foolish" situation, where you never see any long-term benefits from these 3PLs.
3 - Think Software
Another reason that a long-term relationship with a 3PL is more valuable is that many 3PLs now offer software services along with their "typical" carrier services. They can automate your processes into a paperless system, as well as linking your databases to theirs.
So, for example, an employee at a point-of-sale could use the 3PL to look up exact freight charges the moment a purchase is made. That results in better service for the customer, as well as significantly less paperwork on the back end.
In many cases, the cost savings in man hours from a paperless software system will be even higher than the immediate savings in freight. It's a true two-for-one budget cutting measure.
4 - Have A Designated Point Of Contact
Most good 3PLs will assign a dedicated specialist / strategist to work with your company to improve its processes. So while it's not necessary to have a true Transportation Manager on-staff, there should be someone empowered to have direct dealings with the 3PL with minimal oversight.
Ideally, that person should be in a position of having a "Big Picture" overview of your company. VP’s, Controllers, or even IT departments can often work well in this role. Since shipping affects most, or all, departments in your company, you need someone who's has a decent grasp on your overall internal operations.
A 3PL without a single point of contact at a company, or one who has to constantly get approvals through multiple levels, will have a far harder time providing fast service.
A Little Flexibility Brings Big Results
The more you can cooperate with a Third Party Logistics provider and give them what they want - direct access and reliable shipments - the better results they'll be able to provide you in return. The best partnerships with a 3PL happen when the client firm goes in knowing that some changes to their internal processes are part of the deal.
When you allow that to happen, the result is a vastly optimized and cost-efficient method of consolidating your shipping charges.