In 2014, if you are shipping freight, undoubtedly you have experienced issues finding capacity for your freight. You have read all the articles stating that truck capacity is running close to 100%. Experts in the transportation industry have been saying the increased freight volume that comes with sustained economic growth, plus other factors such as a long bout of poor weather, could create a truly critical situation. That is why it is vital right now to work with a logistics expert with a focused department carrier relations department who can lock in your freight shipping rates that are truly unique to you based on your needs and shipping history.
Today we will go over the advantages of using creative multi-lane and dedicated lane freight shipping rate negotiation services provided by a 3PL.
Like Mortgage Rates, Economic Forces Creating a Freight Shipping Rate Increase Forecast
The Commerce Department’s May 29 revised report that first-quarter GDP contracted at a 1% annual pace, the first contraction since 2011, may be the only factor that’s staving off a worst-case scenario.
This, however, is all good news to truckload carriers, which downsized during the recession and most likely will not add capacity until the supply-and-demand economics restabilize. But for shippers, this means higher rates, fewer trucks available when they need them and the negative effects all this will have on customer service.
The Producer Power Index, according to the IHS, for the LTL sector remains on an upward trend and will rise throughout the year, albeit at a subdued rate. LTL rates will increase 2.4 percent in 2014, after having risen by 3.1 percent last year. IHS expects price growth to reach 3.2 percent in 2015.
What’s a shipper to do? The solution is to embrace expert logistics services from a third party logistics company (3PL), perhaps for the first time, to expertly handle all things related to shipping and freight management, like locking in customized unique freight shipping rates.
Just as home buyers are trying to lock in today’s low mortgage rates, shippers need to take a page from that playbook. The way it looks now, rates are only going to get higher and available trucking capacity more scarce. Shippers should investigate why 3PL usage is growing in popularity and how it can help them control costs and grow businesses.
In a normal environment, where a healthy amount of truck supply is available, shippers have the leverage. Those that implement transportation management systems internally are finding more carriers are turning down freight or may not be able to satisfy windows of delivery as easily as before. Those that stay focused on their core and choose to outsource the function to 3PLs to secure freight shipping rates are finding more success and have many additional freight management advantages.
Advantages of Using an Expert 3PL To Lock In Freight Shipping Rates
All of these issues can be erased in the 3PL outsourcing scenario. The following are the advantages of using a 3PL to not only lock in freight shipping rates, but enjoy many other benefits that help save on both hard and soft costs as it pertains to total freight and transportation costs.
An expert 3PL with tens of thousands of man hours in establishing and negotiating rates with LTL and truckload freight carriers is armed and prepared to deal with any negotiation for your lanes’ freight shipping rates. Most 3PL freight partners have formed direct relationships with a multitude of regional and national carriers. By aggregating the freight volume of many small- to medium-sized businesses, they are able to negotiate better discount rates and terms than some businesses might be able to establish on their own.
The 3PL carrier relations team will take a unique look at the shippers’ overall needs and objectives, and then tailor freight shipping rates programs to fit specific business strategies. The 3PL works diligently with carriers to ensure both the carrier and the customer get their needs met effectively and efficiently.
The 3PL should have such expertise and flexibility that they can negotiate better rates due to their volume, but also after running an historical freight invoice analysis, able to get specific pricing for the shipper by asking many carriers for a request for pricing or “RFP.” These rates are then loaded into the transportation management system, and when the shipper is ready to ship, they simply have to choose the carrier based on transit time, limit of liability, and of course the quote for shipment.
Besides offering deep discounts off the carriers’ base rates, a 3PL freight partner can provide additional value-added services, sometimes at no additional cost. These
services are designed to lower your overall logistics expenses. Some of the operational features can include:
- Routing Management: Once you’ve determined the origin and destination of your shipment(s), many 3PL freight partners will conduct a routing analysis for each shipment. They’ll then advise you as to whom they consider to be the best carrier for that particular route. This is based on the carrier’s cost-effectiveness, customer service and the ability to meet your shipping needs. However, a great 3PL will also empower YOU to make the choice based on your own needs, not dictating who is the best carrier for you, but only when establishing multiple freight shipping rates from many carriers so you do have a choice.
- Inbound Freight Management/Compliance: For retailers, whose primary freight costs involve shipments coming in from suppliers, the 3PL freight partner may offer to contact your vendor with specific inbound freight routing instructions, letting them know which carriers to use and providing all of the pertinent bill-of-lading information. For suppliers, whose primary freight costs are attributed to outbound shipping, a 3PL freight partner can assist with bills-of-lading and freight scheduling.
- Auditing of Freight Bills: With most 3PL freight partners, the freight invoice from the carrier goes directly to the 3PL, who then bills the client company. The 3PL freight partner will typically use its resources and expertise to audit every freight invoice for correct freight class and freight shipping rates amount before putting the amount on the invoice you receive. Industry averages show that 5-10 percent of freight invoices have errors in favor of the carrier. Even if you choose not to work with a 3PL freight partner, it is important to audit every freight invoice you receive from the carrier.
- Consolidated Freight Invoices. Many 3PL freight partners are able to offer consolidated invoices, either on a weekly or monthly basis. These invoices include details typically found on any bill-of-lading. That means paying only one freight bill, weekly or monthly, instead of having to pay an invoice for each shipment. Some 3PL freight partners will also offer extended payment terms over the usual net-15-day terms most carriers require.
- Flexibility and Accessibility: Finally, a great 3PL freight partner is more than just getting you better freight shipping rates, they should also be about responsiveness, flexibility, and accessibility. When you need something and need to get ahold of a person to solve your issue, it should be easy to hear back from the 3PL, not wait for hours or even days. Ultimately, you also want flexibility. Let’s say you see the value in all of the above, but you love your carriers and love your freight shipping rates. That is OK. You should be able to load in your established freight shipping rates into the 3PL’s transportation management system, and still realize all of the above benefits.
Given the real capacity crunch which is driving up rates, and the fact that LTL freight carriers are also starting to add more services, which are driving up rates, and with a recovering economy, look towards increasing rates over the next few years, it may be time to start handing over your in house management of freight shipping rates, and freight management, to an expert third party logistics company.