Logistics Software Solutions - How Do They Compare to Third Party Logistics?

Third party logistics (3PL) is the most popular choice for freight logistics among small to midsized companies. In order to help companies that regularly make shipments that are too large to financially benefit from parcel shipping and too small to financially benefit from full truckload (FTL) shipping, companies turn to third party logistics providers to get them the best deals on less than truckload (LTL) shipping, integrated shipping methods and to reduce the delivery of products to retailers. To these ends, 3PL providers significantly reduce their clients' shipping costs compared to what they would spend on shipping without the aid of freight logistics. But they obviously do so by charging their clients for freight logistics services.

So, what's not to like about hiring a 3PL provider to reduce your company's shipping costs and ensure that your goods are delivered in a timelier manner? After all, is there really such a thing as realizing freight transportation solutions without seeking the help of freight logistics experts? Yes and no. If freight logistics isn't one of your company's core competencies, you'll certainly need to get logistics solutions from those that specialize in providing them. But you don't have to turn to a 3PL provider and pay a middleman to provide you with shipping solutions when you can instead use online logistics software.

The difference between 3PL and logistics software solutions-also referred to as logistics management software-typically doesn't lie in one having more logistics expertise than the other; rather, it has to do with how the logistics information is supplied, how much it costs and how much control companies have over their shipping process. Essentially, a third party logistics provider uses logistics management software to provide you with shipping solutions, whereas online logistics software lets you act as your own logistics provider for an affordable monthly fee. In no case will you find a 3PL provider that offers their services for the low price that you pay for logistics software solutions, nor will hiring a 3PL provider offer you as much control over your shipping options.

Having complete control over your shipping process has two main benefits: you can research the companies that you're considering hiring and you never have to deal with a middleman's business policies affecting the price or availability of certain shipping options. Aside of the financial and shipping management benefits offered by logistics management software, its greatest strength is its extreme ease of use. Although the term logistics software implies computer expertise, logistics software comes with an easy to use interface that neither requires expert computer knowledge or expertise in logistics, meaning that each of your company's departments can be involved in its shipping process.

When my condiment business got large enough that I needed to start shipping outside of my locale, I encountered a dilemma: to hire a 3PL firm or use logistics management software? After doing some research, I discovered that hiring a 3PL firm amounted to hiring someone to provide me with logistics software solutions that could arrive at on my own by using online logistics software. Naturally, I decided to go with the online software and save money.

TL Transportation Software - How Does It Compare to Third Party Logistics?

If your company has grown to the point that it is ready to start shipping its goods to other states, then you've probably heard more than your fair share of transportation logistics talk. In the freight logistics industry, you'll rarely meet someone that seems as if they don't know what they're talking about, and each consultant or company can tell you why their logistics solutions are the best.

So, how do determine the good from the bad and mediocre from the awful? To put first things first, your initial concern with achieving the right shipping solutions should be how much they cost versus the benefit that they'll deliver. With this in mind, most midsized and growing companies that have truckload (TL) shipping needs quickly arrive at a crossroads: should they hire a third party logistics (3PL) provider or should they implement TL transportation software?

Also known as truckload logistics software, TL transportation software is offered by software companies that specialize in transportation logistics. TL transportation software can be implemented into your company's shipping process as either an online software application that allows for remote access or an internal application, depending on your wants and needs. In either case, the software comes with an easy to use user interface that allows you to become your own logistics provider.

When you opt for logistics software, you don't have to hire logistics professionals to operate the software, and that's where part of the cost savings comes in versus hiring a 3PL provider. When you hire a 3PL provider, you're paying for logistics professionals to act as middlemen between your company and freight carriers, whereas with logistics software, you're paying for a computer application that has been developed by logistics professionals.

In addition to costing less as a service, logistics software also gives its users greater control over the shipping process by providing them with more shipping options. Because 3PL providers make their money by charging their clients more than a TL shipping solution actually costs, in order to keep their rates reasonable, they only partner with carriers that offer preferred "discounts". What this means, of course, is that you only have the option of shipping with carriers that allow 3PL providers to make a profit, regardless of whether a non-discounting carrier might be able to save you the most money concerning other shipping cost factors, such as route length.

Some companies are happy to use 3PL providers because they simply don't want to handle logistical concerns. But this attitude is usually based on the idea that, if a company doesn't boast logistics as one of its core competencies, it won't able to handle transportation logistics. When you opt for you opt for TL shipping software to achieve TL shipping solutions, you quickly realize that this isn't the case. While 3PL can certainly provide you with valuable TL shipping solutions, there's simply no need to spend extra money and have a decreased range of shipping options when you can easily handle your own logistics with the aid logistics software.

If I sound passionate about logistics software, it's because TL transportation software has allowed my midsized company to significantly reduce its shipping costs after one year (almost a 10 percent reduction and growing). Like many small to midsized companies, I once outsourced my logistics. But when I took a chance on logistics software, I realized that the claims were true: I could successfully arrive at my own TL shipping solutions.

How Does a Logistics Software Solution Compare to Third Party Logistics?

If you're searching for new shipping solutions, you may have encountered the debate that asks: which is more beneficial to the shipping process: implementing a logistics software solution or outsourcing logistics to a third party logistics (3PL) provider? To answer this question, its helps to consider the three things that every company wants out of the shipping process: cost effectiveness, excellent delivery time, and safe delivery of freight. With these things in mind, we take a look at whether a logistics software solution or a 3PL solution offers the greatest value.

Cost Effectiveness

In terms of cost, you'll always pay more to receive a comprehensive, innovative approach to the shipping process from a 3PL than you will to implement a logistics software solution, and the reason why is simple: when you hire a full scale 3PL provider (i.e. a customer adapter), you pay a company to do what logistics software does without employing anyone. In other words, the software allows you to become your own logistics provider. Although other types of 3PL providers can be hired for less than the cost of customer developers (i.e. standard 3PL providers, service developers, and customer developers), they don't provide the same level of service, with standard 3PL providers and service developers only offering specific services, and customer developers handling the full shipping process without proposing new solutions.

Excellent Delivery Time

Excellent delivery time depends on route analysis and optimization, as well as the availability of integrated shipping solutions. In simple shipping situations, route analysis could consist of analyzing route time in relation to distance, road surface quality, traffic patterns, etc., while in complex shipping situations, such as global shipping or moving unfinished products from location to location during the manufacturing process, route analysis could consist of the strategies mentioned above along with developing integrated shipping arrangements that could combine road, air, sea, and rail shipping, or any combination thereof. Improved delivery time can be achieved with both logistics software and 3PL. But logistics software, due to its impartiality, will present a broader range of options.

Safe Delivery of Freight

The safe delivery of freight is achieved through freight optimization, particularly in terms of using the right stacking strategies and ensuring that like products are shipped together. The cost of broken freight is perhaps the least mentioned aspect of shipping cost, and preventing it from happening can be achieved with either 3PL (e.g. standard 3PL provider or service developer) or logistics software. However, unless a shipper is looking for freight optimization alone, using logistics software would be the better choice financially.

In my research on logistics software, I've studied how logistics management software compares to 3PL in numerous aspects of the shipping process.

TL Logistics Software - How Does it Compare to Third Party Logistics?

If your company is at the point that it ships enough goods to benefit from truckload (TL) shipping, achieving the optimal truckload transportation management system will require careful consideration, beginning with what logistics option you should choose. In most cases, companies have three basic options for applying logistics to the shipping process: hiring an in house logistics expert; contracting with a third party logistics (3PL) provider; or implementing TL logistics software-also known as truckload logistics software.

If your company feels like other shippers, it would probably prefer to have its own logistic expert on location. But, if adding a $70,000-$90,000 salary to your payroll isn't acceptable, then contracting with a 3PL provider for TL shipping solutions or implementing logistics software are more affordable options.

To understand what you get when you hire a 3PL provider, it helps to distinguish the four types of 3PL providers: standard 3PL providers, which offer basic 3PL services and usually don't feature 3PL as their main function; service developers, which offer a more specialized range of services than standard 3PL providers; customer developers, which manage a company's entire shipping process but don't suggest innovative shipping solutions; and customer adapters, which manage a company's shipping process and propose innovative solutions.

If you were only looking for TL shipping solutions, hiring a standard 3PL provider or a service developer would be the most cost effective option. However, these types of providers typically place their customers with carriers that offer third party logistics providers a discounted rate that they profit from by charging their customers a rate that exceeds it.

If you think that this scenario sounds disingenuous, it is, especially as it places the provider's interests above the customer's in such a way that a customer has little chance of realizing optimal truckload shipping solutions, which is why it turned to the provider in the first place. TL logistics software, on the other hand, removes this situation by doing the work of a logistic expert and allowing companies to become their own logistics provider.

Like a logistic expert or customer adapter, the software evaluates every aspect of the truckload shipping process (i.e. route analysis and optimization, freight optimization, payment arrangements, etc.) and presents companies with a list of ranked shipping options that can be selected through the use of a user-friendly interface. If cost savings is a major goal in your company's shipping process, logistics software offers a dual cost savings approach: it negates the need to outsource logistics and uncovers shipping solutions that offer the lowest price for you shipping needs.

In my research on truckload transportation management, I've studied the value of truckload logistics software to the TL shipping process.