Businesses today often need a bit of help moving their bottom line forward. Outsourcing various parts of your company to other businesses that specialize in those areas has long been a solution that can give you excellent results. Here at Cerasis, we understand that it isn’t easy to turn over a major part of your company to the hands of someone else. This is especially true when outsourcing transportation management, as transportation can include a large part of your overall supply chain and business costs.
However, outsourcing non-core competencies have now become a widely accepted practice across many industries. One company may outsource IT hosting capabilities while another outsources customer service and yet another fulfillment needs.
Consider the many shippers who have outsourced transportation management and other logistics functions to third-party logistics (3PL) providers over the past few years.
A distributor or manufacturer’s strength is in making the product—its focus is procurement and streamlining production, but without the capability to fulfill orders, it is doomed. So manufacturers and distributors have increasingly turned to 3PLs to focus on the back-end operations and streamlined process as it relates to transportation management.
According to a recent report from Evan Armstrong of Armstrong & Associates, the 3pl industry is expected to see even more growth in the coming years than it saw from 2010-2013. Here are the details.
- The growth of the U.S. third-party logistics industry was at a healthy 4.5 percent in 2010-2013. Armstrong estimates that this growth will increase to 6.4 percent from 2013-2016.
- Worldwide, four specific industries will account for much of the upcoming 3pl growth. Those industries include industrial, healthcare, technological, and food & groceries.
- The slowest demand for 3pl services will be in outsourcing transportation management, Armstrong stated. The biggest demand will be seen in domestic transportation management, including dedicated contract carriage.
- Currently, domestic transportation management dominates demand, accounting for 23.7 percent of all 3pl demand. Warehouse management demand is also strong, accounting for 19 percent of all demand.
- Due to an increase in wages and manufacturing costs in China, many 3pl companies are “nearshoring” — offering increased services in areas closer to the U.S. Mexico, in particular, is becoming a preferred locale for manufacturing services, due to its close proximity to the United States.
- The increased 3pl growth can mainly be credited to the need for infrastructure to support supply chains involved in global trade, Armstrong said.
4 Core Benefits of Outsourcing Transportation Management
For any shipper, transportation management and the costs associated are a huge part of their business having a direct impact on profitability and competitiveness among numerous affects. And while the way you ship and the prices you pay will have a big influence on it, there are other elements involved as well that all need to be looked at. Outsourcing transportation management to a 3PL has these 4 core benefits.
- Better Productivity – By outsourcing transportation management, which often requires dealing with several if not hundreds of relationships with vendors, customers, suppliers, carriers, and other admin people, shippers free up their team to focus on other aspects of the business, such as better procurement or allowing for more strategic collaborative relationships with suppliers. This means that shippers will complete more work that will generate revenue while the 3PL handles the often fast-moving stressful, difficult tasks of transportation management.
- Better Results – The simple fact is that when you utilize professionals, you get professional results. A 3PL focused on best practices and the use of the most up to date and effective transportation technology, is trained to identify mistakes or issues in the transportation footprint of a shipper and to not only point those mistakes out but also proactively mitigate such issues in areas of transportation accounting, freight claims, and more. When a shipper outsources transportation management, there is also more accountability yielding more professional results.
- Analysis, Reports, and Business Intelligence for Continual Improvement – One of the things we come across at Cerasis, especially as we are talking to prospective shipper customers, is that most shippers don’t have reliable or consistent data not only on the simple activities that occur in transportation but they have no real way to analyze the data or gain insights that provide business intelligence in order to continually improve. When you outsource transportation management to a 3PL focused on transportation management, you should expect the use of a transportation management system to tender loads, choose carriers, and create bills of lading. Because all of the activity happens in this transportation management platform, several reports and custom analysis can be created. With the help of an expert transportation management company, you are then guided to make future decisions that truly impact efficiency and equates to even more bottom-line savings. In short, outsourcing transportation empowers a shipper to get a clear picture of how to improve transportation strategies without having to struggle to get the information yourself.
- Simplifying the Chaos of Transportation with Technology – Thanks to technology many of life’s complications have been made drastically easier for us human beings. From hailing a cab to finding a date, to getting a mortgage, or booking a flight, technology continues to bring down the walls of complexity offering a seamless, always connected, and device-agnostic experience for almost any major function of life and business. This too is true with transportation technology. The driving force of simplification in transportation technology is the use of a transportation management system. As we stated in our state of transportation management systems blog post earlier in the year, unfortunately, not all shippers are taking advantage of a TMS just yet. But, as we have stated in our benefits of a TMS blog post, if you are a laggard in the adoption of technology in supply chain functions, you typically will spend more time and money than you have to and you will hurt your long term competitiveness. And, to boot, as more and more customers, and your competitors, are turning to multiple sales channels and methods of distribution (often referred to as multi- or omni-channel logistics), there continue to be more advancements in transportation technology solutions for e-commerce and reverse logistics.
If you are finding yourself struggling to keep up with effective transportation management, and are seeing year over year increases in transportation costs, it may be time to start looking at outsourcing transportation management. Don’t know where to start? A 3PL can guide you with a transportation management assessment and consultation.