Mark Kunar, EVP, Strategy, Transportation and Automotive, Engineering & Manufacturing, Chemical & Energy, DHL Supply Chain, North America
Two opposing forces are making the task of transportation management more difficult than ever. One is the higher-than-expected rate increases birthed from the capacity crunch in 2018 that forced many shippers to re-evaluate their transportation relationships. The other is the increased demands of customers who are moving to smaller order sizes and more frequent shipments with less tolerance for delayed deliveries.
The transportation environment is undoubtedly challenging, but these challenges can also be the impetus for improvements that maximize existing capacity and improve service levels. Third-party logistics providers (3PLs) bring deep transportation expertise, hands-on experience with various transportation technology platforms and the market visibility and scale to cost-effectively meet changing requirements.
Leading 3PLs with fully developed transportation capabilities offer a variety of services that provide shippers with the predictability, capacity and flexibility they need to anticipate and adapt to changes in the market. By tailoring these solutions to their specific needs, shippers can expand their relationships and extend their capabilities while maintaining control over costs.
Here are some of the 3PL services a shipper struggling to manage costs or meet customer expectations should consider.
Lead Logistics Partner
Working with a 3PL in the role of lead logistics partner (LLP) provides access to network design services that reduce overall capacity requirements by optimizing routes, reducing LTL shipments and increasing opportunities for backhaul shipments. This ongoing process can also continually adapt routes to changes in traffic patterns, construction and other events that can create unexpected delays in delivery times or reduce carrier efficiency.
While many organizations have tried to employ technology platforms to perform these functions there is a limit to what they can accomplish because of the inherent complexity of the technology. A single engineer who is asked to occasionally perform network design services simply can’t match the experience and technical fluency that a team of dedicated engineers working on these platforms daily can deliver.
DHL Supply Chain, for example, has a team of design specialists that focus on reducing overall capacity requirements through a variety of sophisticated strategies. Through an LLP relationship, these services are fully integrated into the transportation program and the network is continually re-evaluated and re-engineered.
Working as an LLP, the 3PL should also have access to a full suite of transportation services to meet capacity demands, including managed transport, brokerage services, and dedicated fleet services when required. For this relationship to be effective, the 3PL must take a vendor-neutral approach to carrier selection rather than prioritizing their own assets. It may not make sense for the LLP to become the carrier or broker of record if that limits flexibility or the ability to negotiate rates across carriers.
Managed Transport and Brokerage
While the network design services included with an LLP relationship can typically enhance the value of managed transport services, some shippers prefer to engage with a 3PL only for managed transport services.
In this relationship, the 3PL works as an extension of the shipper’s organization, receiving shipment information directly from the shipper’s ERP system and performing the planning and execution of those shipments to maximize capacity through load consolidation, designing multi-stop routes and optimizing the flows based on the lowest cost.
Brokerage services play an important role in the managed transportation offering by enabling fast, cost-effective capacity to meet peak or unexpected demands without impacting regularly scheduled shipments. In addition to a mature in-house brokerage service, your partner should have the ability to leverage established and emerging digital brokerage platforms.
Of course, visibility into shipments and anticipated delivery times is becoming mandatory across every industry. A platform, such as DHL’s MySupplyChain, consolidates warehouse and transportation data to provide end-to-end near real-time visibility into product movement through a single portal. Working with a partner with this type of platform simplifies the process of providing customers with self-service access to freight information.
One final note on choosing a managed transportation partner: not all 3PLs have the expertise, relationships and processes to efficiently handle international shipments. If you need to ship internationally, even if it’s infrequent, look for a partner with the ability to manage both domestic and international shipments through global control towers that use consistent processes and technology to maximize capacity and manage spend.
Dedicated fleet services can be valuable in meeting capacity requirements on consistent lanes that have high customer service requirements. With this solution, shippers know they always have the capacity to meet the service requirements of their most important customers with cost certainty.
As with the other services, the key is ensuring this dedicated capacity is fully utilized. Proper sizing of the fleet along with continual evaluation and re-engineering is essential to the cost-effective delivery of dedicated fleet services. Strategies like daily dynamic routing, enhancing driver productivity during non-peak periods and route optimization all contribute to higher utilization of a dedicated fleet.
Providing an effective dedicated fleet solution in today’s market also requires a mature and competitive approach to driver recruitment and retention. Ask about the stability of the workforce and the availability of drivers willing to perform special services such as unloading.
As the market continues to evolve, the challenge of managing transportation with both predictability and cost certainty becomes more complex. 3PLs can often deliver the combination of expertise, scale and continuing optimization required to transform this complexity from a liability into an asset. Whether delivering services as an LLP or managed transportation partner, they can customize solutions to the specific needs of a shipper to provide the capacity and flexibility to support high service levels while minimizing the impact of rising rates.
For more information on DHL Transport Solutions and how we think beyond today’s shipment for our customers visit: http://app.supplychain.dhl.com/e/er?s=1897772577&lid=5272.