When selecting a transportation provider many companies are torn between selecting a third party logistics company or (3PL) or working directly with providers.
1. Purchasing power of a larger procurer of freight providers to provide the lowest cost rates and best service for the purchaser of services.
2. High investment in information technology to provide efficient ability to track pick-up and delivery, consolidate multi-company merchandise into efficient truckload mode versus LTL pricing, and integrate with multi-client ERP applications to present a seamless order management system to the user base.
3. Provides the opportunity for a firm to reduce the transportation management overhead associated with managing its pick-up and delivery process.
1. Direct engagement and contact with the transportation provider network. Those companies that actually deliver product and directly maintain physical (tractors & trailers) & human (drivers) assets. This allows for direct rate and service negotiation to assume best price and delivery experience without paying additional 3PL management fees.
2. “Doesn’t put all the eggs in one basket”——a contract with a 3PL provider is typically a multi- year engagement. Although significant time and effort can be spent on contracts, there are always multiple interpretations on the verbiage which presents the opportunity of cost and service expectations not to be met.
3. The technology investment spent to integrate with 3PL systems can be invested in the firm itself to mitigate a “hostage” situation from the 3PL & provide high flexibility to the firm to manage its own transportation network.
Firms should approach and evaluate its current transportation management process in the following way:
1. How should firms direct its human resource base:
a) Investing in its own or 3PL technology
b) Build its own internal management or purchase managed services
2. 3PL versus Direct purchase :
a) If the firm is not satisfied with the 3PL performance , does it have a pragmatic out from the agreement
b) Is the firm aware of the asset based companies to manage the process itself
a) Is transportation a core component of a company’s business plan critical to customer satisfaction and profit margin management