The day and age of Freight Shipping has seen a drastic change over the last 15 years. There was once a time wherein a Traditional Freight Carrier would dominate the Heavyweight shipping market with it’s large fleet of vehicles, brand name recognition, and it’s so-called ability to service their customers total shipping needs.
Much like the deregulation of the Telecommunication Industry in 1996, when smaller companies were finally allowed to take part in the booming market of telecommunications, the freight industry witnessed a resurgence, wherein smaller Regional carriers began to understand that there was a market for them. By specializing in smaller sections of their local areas, these companies began to develop a niche. The larger carriers had a choice to make, whether or not they wanted to compete, or concede these lanes, and they elected the ladder. Although the Freight Industry didn’t have any “mandates” on customers having to use certain carriers, the big guys seemed to corner the market on virtually all heavyweight shipping needs, mainly because of their size and notoriety.
Fast forward to 2010, and yet another entity has developed, and taken the Transportation Industry by storm. The concept of Third Party Logistics has swept through the shipping industry and transformed the way companies do business.
3PL’s came along and decided, to not just focus on a customers small parcel business, or heavyweight freight business, but to take a look at their entire supply chain. So they came up with the idea of going to the small parcel industry, the large traditional carriers, the regional carriers, and the freight forwarding community to negotiate rates, to go out and offer ALL services to a client base. To say the idea worked would be an understatement, the 3PL market today is in the area of $110 billion dollars.
Below are the top 7 features and benefits of using a Third Party Logistics company over a Traditional Carrier:
1) Flexibility- Having the ability to choose from multiple carriers who specialize in certain regions of the USA, benefit customers in that in many cases, the traditional carrier may not have a solid distribution process to a certain destination, thus being able to pick from multiple resources, allows the customer to plan more strategically to enhance their Supply Chain. TC”s are very predictable, long haul or short haul shipping, is what they do.
2) Improved Transit Times- The ability to better one’s transit times means the faster they get their product to market, thus speeding up the time they are paid from their customers. Or the faster they can bring materials to their facility for production, the faster they can get their product out to market. Just in Time Management, also begins to play a part in a Supply Chain, which leads to customers being able to keep less inventory, and build on demand for better efficiency. TC’s can have great transit times in some areas, but be slow in other areas-typically they give you very little options to improve the transit time.
3) One Stop Shopping- The idea of being able to go to a single source and having all the resources that is needed is huge. The Y2K age has brought about the need for speed. Shippers are constantly searching for more efficient ways to get their job done. Better technology, more resources, shorter lead times are a few of the reasons that shippers have turned to 3PL’s. The ability to go to an online site, have competitive rates in place from a myriad of carriers, and be able to track and trace those shipments, have taken the place of the 800 lb. shipping gorilla. As mentioned already TC’s are very vanilla, and you get what you get.
4) Versatility- 3PL’s allow for small, to medium size companies, the ability to align resources with business objectives. By using a 3PL, the small guys can make themselves seem larger in the market place. TC’s align themselves with the larger Fortune 500 companies, and service the smaller companies as a means to an end.
5) Total Supply Chain Management- A company has the ability to control costs and efficiency throughout their whole supply chain with a 3PL. A traditional carrier allows specific lane costs cutting, but doesn’t look at the customer’s Supply Chain as a whole.
6) Convenience- The ability to deal with 1 company for multiple services far outweighs having to deal with multiple companies for single service.Also, your accounting department will love you. as using multiple TC’s can cause much confusion in the accounting department.
7) Partners- If you can find a 3PL that is looking out for your best interest, they can become a partner of sorts. A good 3PL will be constantly looking out for their customers best interest, throughout the life of the relationship. They have no biases toward any one carrier or methods that you are used to get the job done. Traditional Carriers are heavily biased and will only help you, as long as you are doing business with them.
A third party logistics company, or abbreviated 3PL or TPL, is a firm that provides a one stop shop service to its customers of outsourced services or parts, or all of their supply chain management functions.