The Disadvantages of Hiring a Third Party Logistics Service

Whether your company ships its products locally, nationally or globally, the price that it pays for shipping depends heavily on logistics. From fuel surcharges to warehouse fees, logistics management focuses on every aspect of the shipping process in an attempt to accomplish two things: the delivery of products in a shorter period of time and the delivery of products at the lowest cost of shipping. To accomplish these goals, many companies turn to a third party logistics service (3PL); a company that works with small to midsized companies to transport their freight by land, sea or air. In most cases, 3PL's make the majority of their profits by consolidating freight from different companies and receiving discounts from less than truckload carriers (LTL), airlines or expedited shipping companies, meaning that 3PL's essentially profit from not passing discounts on to their customers. Nevertheless, 3PL companies do provide an essential service for companies that can't afford their own shipping fleet or full truckload shipping (FTL). In fact, the only way that most small to midsized companies could do without 3PL is if they had the ability to conduct their own freight logistics.

Today, small to midsized companies have this ability when they choose freight logistics software over hiring a 3PL. Freight logistics software-also referred to as freight transportation software-has several advantages compared to 3PL, with the most obvious one being price difference. Freight transportation software is an online computer application and is priced accordingly, whereas 3PL providers serve as logistics experts and cost significantly more. Another financial advantage of freight transportation software is that you aren't dealing with a logistics provider that makes money off of the price differential between what you pay for logistics and the actual cost of shipping your goods; instead, you're dealing with a freight logistics software company that makes money by providing a software application for a monthly fee, which essentially means that you cut out the middle man and reap the full financial benefit of logistics.

Although 3PL providers do help companies ship their goods in a timelier, less expensive manner than if they shipped their goods using parcel carriers or FTL providers, 3PL nonetheless profits off of companies whose size necessitates that they look for the most affordable shipping options, including the price required to discover and secure those options. By using freight transportation software, small to midsized companies can realize the same logistical benefits provided by a third party logistics service at a significantly lower price, as well as exert more control over the logistics process. As an online software application, freight transportation software can be accessed from any online computer terminal, allowing each of company's departments to apply its expertise. Whether you ship your products locally, nationally or globally, freight transportation software puts the power of logistics in your hands in an easy to understand module, allowing your company to reduce its shipping costs by as much as 10 percent after the first year of use.

As the owner of a midsized furniture company in the Midwest, I once used a third party logistics service to handle my shipping needs. But then I found out about logistics software, which allows you to make your own educated shipping decisions and save money by cutting out the middleman. I'm telling you about logistics software because of how much money it can save you, money that has helped keep my business up and running in hard times.

Hiring a 3rd Party Logistics Provider Vs Implementing Logistics Software

Product transportation is an inevitable part of the manufacturing business. Whether the goods are shipped locally, nationally or internationally, they have to reach retailers in order to produce business. However, as important as transportation is, companies often overlook the opportunity to reduce shipping costs. While the bulk of a manufacturer's bottom line is predicated on the quality and price of its products, reducing transportation costs can reduce a company's operating costs by thousands of dollars a year. Unfortunately, most companies lack the time and resources to determine optimal shipping procedures. That's why many companies now use transportation logistics software to help reduce shipping costs.

Also known as logistics management software, transportation software specializes in offering integrated shipping solutions that are tailored to a company's specific needs. For small companies that have simple shipping procedures, the software can be used to improve delivery time by studying such factors as road construction and highway traffic patterns. But for larger companies whose shipping process is complicated by multiple assembly locations and warehouse needs, the software can combine disparate elements of the shipping process into a single, integrated shipping solution that saves significant time and money.

In many cases, large manufacturers opt to hire a 3rd party logistics provider to implement logistics solutions on their behalf. While studies show that companies can cut shipping costs by ten percent after one year by either hiring a 3rd party logistics provider or implementing logistics software, hiring a logistics provider is more expensive than using this software. Just as logistics experts can act as transportation brokers, determining the timeliest way to get products to retailers and save companies money by eliminating MS software costs, 3PL costs, annual software maintenance costs, gain shares, freight margins and common rate base licensing costs, so can logistics software. The only difference is that logistics software is a more cost effective means of implementing logistics.

One example of how large companies can profit from logistics software involves choosing a more "expensive" means of transport over a less expensive means to reduce overall shipping cost. For example, while air shipping rates are typically more costly than ground rates, companies whose products make various warehouse stops can actually end up paying enough warehouse fees that shipping by air becomes the less expensive option. In addition, by cutting out the warehouse stops, a company's shipping process becomes timelier. An example of how logistics software can benefit small companies can be found in LTL shipping. Companies that commonly ship less than one full truckload of products often ship by mail carrier. However, when a partial load is shipped LTL, multiple partial load shippers share the shipping cost, which can be significantly less than shipping by mail. Whether or not to implement logistics software is not a debate about effectiveness, but about shipping management and cost savings. In terms of the latter, companies always benefit from implementing logistics software versus hiring a 3rd party logistics expert.

The easiest way for companies to streamline their shipping process and reduce shipping costs is to implement transportation logistics software. While some companies hire a 3rd party logistics expert to apply logistics solutions on their behalf, companies that use logistics software receive the same benefits while saving a significant amount of money.