Following deregulation of freight in the 1980s, initially the role of the third party logistics provider was to provide knowledge the shipper didn’t have to supplement their internal team. Over the next 40 years this role changed. The 3PL gradually replaced the shipper’s in-house team and the shipper no longer retained in-house logistics knowledge. With today’s increasingly complex supply chains, rapid speed of change, and advances in technology, it’s time to reevaluate the 3PL’s role in the shipper’s logistics management.
Ensuring Continued Value
There is almost always some logistics problem a company is unable to solve themselves that prompts the decision to select the 3PL. Typically, the solution results in the company saving money on their transportation spend and so the 3PL begins to take on a larger role. After the initial solution, however, it’s important for the company to stay involved in what the 3PL is doing to ensure that they are providing continued value that positively impacts the bottom line. To ensure that you are receiving continued value, here’s three questions to ask:
- How much transparency do I have around my freight spend?
- Do I have the proper metrics at my fingertips to measure my supply chain performance in real-time?
- Does the 3PL know more about our business than we do?
Outsourcing Tactical Execution or Knowledge?
When examining the role of the 3PL, the answers to the three questions above will help you understand if you have outsourced the tactical execution, or the knowledge. If it is the latter, you may want to reconsider. Choosing an alternative to a 3PL can seem like a daunting task because everyone thinks that they have to hire a bunch of people. Instead, companies should be looking for an alternative that allows them to bring their knowledge back in house, but not necessarily the tactical execution.
Managed Services Brings Knowledge In House
Today’s best alternatives to a 3PL will leverage technology and collaboration. This creates both value and a competitive advantage. One alternative is to bring the function in house and create a logistics team. When this function is brought in house, the internal team can outperform a 3PL because the group is focused solely on benefiting their organization. They can react and adapt quicker to the wants and needs of the company. Some large corporations will create a Managed Services group which provides in-house help for their individual companies or divisions.
Another alternative is external Managed Services complemented with technology. This option allows a shipper to re-acquire the knowledge that may have lost, while avoiding the expensive burden of a large tactical logistics staff.
We are in the information age and knowledge is power. In order to compete at the speed of business today, companies require a different type of logistics solution than was available 40 years ago. A Managed Services solution that combines market intelligence and consulting, along with technology that provides real-time actionable data and the ability to quickly execute on new strategies is that solution.