service provider relationship

A general logistics service provider or a specialized one- What to choose?

The number of 3PL service providers is growing rapidly. There are many small and big specialized logistics service providers for almost every specific need and then there are providers who will meet all generic requirements. The challenge is which one should you pick for your business? The one who provides every kind (or many kinds) of service or a one who offers a specific type (or just a few kinds) of service. A wrong 3PL will either fall short of the requirement or eat into the capital eroding the margins of the business. Choosing the right sort of 3PL can make or break a business. So, the question comes: How does one select the right type of 3PL provider for his company. We will run through some parameters that can be used to decide the type of 3PL that a company should hire.

 

Services required – Before selecting any 3PL provider, one must understand the services that are needed for one’s business. While it is not complicated, many new companies don’t fully understand the supply chain of their own business. They make mistakes while defining what kind of services they need for their supply chain operations. For example, the grocery startups may typically think that they will be served better with cold delivery chain (for vegetables, milk, meat and other similar products). They often overestimate the amount of cold food that needs to be delivered as part of a grocery order (for delivery- based grocery). In another kind of business, such as apparel business, ease of return of merchandise could be far more critical than other parameters. If a 3PL who specializes in delivery only (and not return pickups) is selected for such business, the logistics alone can eat into all the margins of the company. Some businesses hugely overestimate the volumes they will achieve and end up overpaying for specialized 3PL service providers (think of utilizing only 50% of the contracted capacity of cold storage chain and paying for 100% of it)

Many times, new businesses don’t really understand their customers and end up with under-utilized resources at disposal and thus decrease their capital and cost efficiency. It may be wise for new businesses to start with generalized service providers and gradually move onto specialized ones as they grow their volumes and develop better insights into their requirements.

 

Specialized expertise – Businesses today have to carve their niche to stay relevant in the market. Within groceries business, some specialize in fresh food products, while others specialize in quick delivery. In apparel, some may specialize sending multiple items and then return all except what customer wants to buy, while another may concentrate on quick delivery but with no returns. There may be yet another apparel business which may have carved a niche in ‘made to order’ clothing (this is delivered from factory to customer, directly without any warehousing). All these services need specialized 3PL skills that should be in-line with the business’s chosen specialization. One needs to ensure that the right logistics skills – as required by the business and offered by the 3PL are identified and matched to avoid any disaster.

 

Costs – If a business provides an excellent service but incurs massive costs, it may not be able to sustain. Imagine, providing a rush delivery as standard for a $10 item (which has $5 margin ) and absorbing a $5 delivery charge for it. The customers will love it, the volumes will be huge, but this kind of delivery charges will eat up all the margins. Contrary to the popular wisdom, the high volumes will kill this business. Logistics costs are of great importance to any business and must be kept under control at all times. If they cannot be passed onto the customer, they must form a small a part of expenses, as possible. Here again, there is no saying which type of 3PL will be better suited. Spending $5 on the cold delivery of $10 or $15 grocery (e.g., vegetables) may not be sensible. But if you have a truck-full of deliveries of vegetables, then the specialized cold delivery chain will be more cost efficient, and the value proposition will be higher.

 

Volumes – If a business has larger volumes, it makes sense for it go for specialized 3PL provider. With high volumes, it is possible to cut a deal with the specialized 3PL provider for getting good rates. For smaller quantities, one may want to settle with a general service provider. However, today many specialize players club the delivery from multiple vendors to increase their utilization. A new trend is emerging where multiple businesses join hands and negotiate with 3PL providers to get better value for each one of them.

 

The decision to choose a 3PL provider is never straightforward. Multiple factors need to be borne in mind before making a choice. As a general rule of thumb, it is recommended that one should start with general provider and move to the specialized one as the business grows and there is clarity of requirements.

A key advantages of choosing a general service provider from the start is that as the business grows, the service provider’s volumes also grow and he will make investment specifically for your growing needs. This, in turn, makes him specialized provider for your requirements. In fact, he would develop services for your specific needs making it a strategic fit for your business.

How to Shape up the Future of Trucking?

Although the transportation industry has evolved, trucks continue to play a major role in carrying and delivering freight from one point to another. That said, the emphasis has always been on taking the pressure off the trucks, in order to conserve fuel, maximize overall capacity and even reduce the underlining costs. Even then, the trends have largely been in favor of truckload transportation with these vehicles accounting for almost 81 percent of the entire expenditure module. With truckload transportation and trucking continuing to rule the roost, we actually need to look at what future holds for this industry, regardless of the booming changes. 2018 is already upon us and it’s time we embrace the new changes which are expected to stay with us for the next few years.

Recruiting a more Functional Set of Drivers

Until the trucks start plying by themselves, we would be requiring drivers. However, quite recently the transportation industry has started seeing a dearth of efficient drivers which in turn is raising some important questions. The future of truckload transportation will see the companies’ focus more on exceptional driving skills, especially for the long-hauls. Needless to say, truck drivers will be the limiting factors in the long term and the lack of skills might minimize the overall growth of trucking capacity. Moreover, once the driver conundrum is taken care of, it would be easier for the companies to increase the freight volume at a steady pace.

Growth of Dedicated Trucking Services

In the next few years, industries will witness a massive growth in the adoption of dedicated trucking services. This would involve acceptance towards a host of macro factors including the likes of capacity tightening and dedicated operations. Moreover, this approach will guarantee that customers get the exact product they have signed up for. The companies are eventually realizing the fact that customers are always on the lookout for cost-effective deliveries and that too within a reasonable period of time. Over a period of time, truckload transportation will start concentrating on the same by securing prices and the underlining capacities.

Improved Capacities

Shipping containers which are half-full can lead to higher transportation costs; thereby accentuating worries for the concerned businesses. The future of truckload transportation will make sure that containers are shipped at full capacity by using sophisticated methodologies, higher load efficiencies and cross-docking techniques. Some of the other intuitive strategies include minimizing certain one-way routes and even deploying experienced third-party logistics.

Relying on Technology

Although businesses are already concentrating on technology, it is only a matter of time that supply chains and logistics managers make it their first line of defense. Be it gauging the uncertainties of economy and workforce, technology-driven ideologies and concepts are expected to last way more than the usual ones. Moreover, truckload transportation will see continued adoption of different supply chain technologies, inventory management approaches, consolidated route tracking systems and driver tracking options courtesy the growth of technology. Each one of these techniques can help improve driver safety, performance and even fuel efficiency.

Reliance on 3PL Vendors

Truckload transportation is expected to thrive only if the companies start shifting excess baggage to trusted 3PL services. That said, outsourcing certain tasks can easily increase the overall efficiency as businesses can then concentrate more on productivity and accountability. In addition to that, partnering with certain functional 3PL companies allows businesses to express themselves in a much better way as the former eliminates additional costs and also helps deliver the goods in an efficient manner. Moreover, the 3PL service providers render additional levels of safety to the fleets and concerned commodities.

Inference

The future of truckload transportation will be dictated by how well the organizations make use of the resources in hand. While keeping up with the industrial requirements is a prerequisite, it automatically boils down to how companies express themselves in terms of logistics and fulfillment. At the end, it’s all about delivering the products efficiently to the customers while minimizing overhead costs, associated intricacies and product damages. Needless to say, the quality of drivers and fleet with determine the fate of trucking and truckload transportation and 3PL services will surely play an important role in shaping up the same. Be it outsourcing select services pertaining to transportation or adopting the best technologies for the job, future of trucking will thrive on a proactive approach.