Although owning a small to midsize company can allow you greater control over your business’s daily functions; if you own a small to midsize company that has shipping needs, chances are that you have little control over the logistical aspects of your shipping process. Because most small to midsize companies don’t have the payroll to hire logistics professionals or construct an internal freight council, they are left with two options for truckload transportation management: relying on warehouse management and/or purchasing personnel or hiring a third party logistics (3PL) firm. Because truckload (TL) shipping solutions are a critical pricing element in the freight shipping process, many companies prefer to delegate transportation logistics to logistics experts and hire a 3PL provider.
When a company hires a 3PL provider, it almost always realizes TL shipping solutions that are more cost effective than shipping solutions arrived at in the absence of expert logistics. However, outsourcing logistics is currently falling out of fashion, with the main reason being that small to midsize companies can become their own logistics provider by implementing TL logistics management software. Unlike 3PL firms, TL logistics management software is not priced as an expert logistics service, but as an online or internal software application (depending on a company’s preference) that can be customized to a company’s unique shipping needs. In addition to providing truckload management, logistics software can also yield integrated shipping solutions or be used to manage any form of transportation, including rail, air and sea.
To understand how TL logistics management software saves you money compared hiring a 3PL firm, it helps to understand how a 3PL firm works. When small to midsize companies outsource their truckload logistics to a 3PL provider, the typical truckload solution is less than truckload (LTL) shipping, where two or more shippers ship partial loads that create a full load and spilt the full load price. But 3PL providers don’t just go with the LTL carrier that makes the most sense for their clients in terms of LTL shipping concerns such as route length, warehouse fees, number of pick-ups and deliveries along the shipping route, etc. Instead, they begin by identifying LTL carriers that will offer the best freight discount, which allows 3PL firms to make money on the price differential between what they charge their customers and the discounted shipping price.
When companies use TL logistics management software, they not only reduce the price of their logistics solutions; they also realize a greater number of shipping options due to the removal of a 3PL firm’s business interest from the logistics function. As an example of how much money companies can save from using TL logistics management software instead of 3PL providers, research shows that companies can reduce their total shipping costs by 10 percent after one year of using logistics software.