When it comes to logistics, there are several options to improve freight movement, and the changing dynamic between frontline personnel and upper management is facilitating more innovation than ever before. Today’s management is more in tune with the needs of the logistics operation and the important role logistics plays in organizational success.
One of the more popular ways to improve efficiencies and reduce costs is through outsourcing some or all of the supply chain operations to a managed transportation provider. Managed transportation services (MTS) providers, fill critical needs for shippers, and while the reasons vary across organizations, they offer great opportunity for the savvy shipper.
An MTS can fill a number of roles – from full management to specific niches – but all bring at least some of these benefits:
- Improved productivity for the shipper by allowing it to focus on core competencies. Without the pressures of managing the particulars of each and every individual shipment, shippers are able to focus on what they do best.
- Lower transportation spend. Outside transportation providers are able to leverage a larger combined transportation spend and expansive networks of carriers to tap into capacity when it is needed. This level of scale typically results in better overall pricing than a shipper can obtain on the open market or through a limited carrier network. In a recent survey, ARC Advisory Group found that 56% of respondents reported freight spend savings of at least 6 percent by outsourcing to an MTS provider. A full 32 percent saw savings greater than 12 percent.
- Access to the latest technology. Investing in new technology is an expensive proposition for businesses. Third-party logistics firms are able to leverage the latest in technology by spreading out the investment cost among many customers. This lowers the overall cost for each customer and ensures each has access to the most advanced technology available.
- Improved visibility with better data insight. As each generation of technology becomes available, new insights and visibility become possible. Managed transportation providers are often able to build larger data teams than shippers to analyze and assess that data, leading to greater supply chain efficiencies.
- Improved customer service. With new insights into operations and lower costs, shippers are armed with more information, and perhaps even cash, that can be re-invested into the operation to improve the overall customer experience.
The process of contracting with a managed transportation provider actually starts internally. It begins with making the business case to upper management. Remember, upper management is interested in more effectively managing operational costs, especially those related to transportation.
The U.S. Department of Transportation’s Bureau of Transportation Statistics shows a continual increase in its Producer Price Index for transportation warehousing services since 2003. In 2003 (the base year), the Index was at 100, by 2015, it had reached 131 for trucking services, and nearly 170 for rail services.
Clearly, anything that can be done to better manage these costs will be considered by upper management. This is the opening needed to make a clear and compelling case for contracting with a managed transportation provider. The best approach to do so is to take it step-by-step:
- Explain your struggles. Management may not be fully aware of the day-to-day struggles logistics operations deal with to ensure the supply chain – and by extension, the entire organization – runs smoothly. When building your use case, be sure to explain why you have pain points, what they are, and why you need help in solving them.
- Analyze the use case. Start to make the case by analyzing why a managed transportation provider can solve your unique problems. Will it provide access to more capacity, improved supply chain visibility, better communication among all parties in the chain, cost savings (versus handling the process internally), technology upgrades at little cost, in-depth reporting and analysis, and auditing services?
- Prioritize your needs. In some cases, the 3PL may only secure capacity, while others may run the entire logistics operation. What is your biggest pain point and what level of service is needed to solve it? What is the cost to do so? Being realistic with your needs bolsters the chance management will sign off on the plan. However, you know your leaders best, if they like to shoot for the moon first, don’t be afraid to pitch a full-service plan if you believe it is the right approach, even if the cost may seem out of reach at first. It’s much easier to scale back.
- Close the sale. Salespeople do this on a daily basis. It’s time to think like a salesperson. You’ve made your case, now close the deal. Reiterate the pain points and be sure to mention the cost they are extracting on the business – from both a time and revenue point of view. Identify how the utilization of a managed transportation provider can help, and finish with the cost savings or operational efficiency gained that can be expected. This should include increased visibility, more data insight, and improved customer service.
Perhaps one of the clinchers in any argument, though, is the ability to scale. As your organization grows, and sales increase, utilizing an MTS offers the opportunity to scale the services with that growth. That is a powerful argument for any executive who sees the upfront expense as an ongoing investment, rather than a cost that must be repeated as needs change.
Managed transportation providers can offer many benefits for shippers and their supply chains, but it starts with making the right investment.
As Ross Spanier, GlobalTranz’s senior vice president for sales & solutions pointed out in a recent blog post, “Now more than ever, supply chain efficiency can make or break a company’s success. By working in tandem with a knowledgeable MTS provider, shippers can tackle changes to the marketplace and continue to compete, grow and thrive.”