September 2011 | Commentary | 3PL Line

Drawing Value from Managed Drayage Solutions

Tags: Transportation

Chris Cline is president, Corporate Traffic Inc., 904-727-0051

Many shippers view drayage (the service offered by a motor carrier for pickup and delivery of ocean or rail containers) as a necessity and a fixed cost. But new approaches to drayage can bring significant savings and benefits to both shippers and drayage carriers.

Traditionally, shippers have either relied on steamship lines to secure drayage services for them, or contracted directly with drayage carriers. While both approaches have advantages, cost-efficiency is not one of them.

Most drayage drivers are owner-operators who contract with smaller trucking companies, and are therefore expected to cover the costs of operating and maintaining their trucks. To make a sustainable living, drivers must pass along to customers the cost of fluctuating fuel prices, resulting in increased costs for shippers, as well.

Enlisting Help

Consequently, many shippers are turning to third-party logistics providers (3PLs) for managed drayage services. While this may seem to impose the extra costs of a middleman, many shippers find numerous advantages to outsourcing this function.

First, 3PLs often have enough buying power to leverage lower rates from drayage carriers, and can pass along a portion of those savings to shippers. For drayage carriers, the prospect of steady, repeat business from the 3PL and its clients is well worth the discounting.

Another advantage to the managed-dray approach is the ability to enhance drayage carrier efficiency by combining round-trip freight. Shippers who deal directly with drayage carriers routinely have to pay round-trip rates, because once the carrier gets the goods from Point A to Point B, it has to make a deadhead return trip with empty vehicles. Carriers must factor this unproductive time into their pricing.

3PLs can often match drayage carriers with return-trip shipments, sparing shippers round-trip rates. In addition, drayage carriers can charge less for each leg of the trip, because they can proportionately distribute their increased costs across multiple shippers in one shipment.

Shippers may be tempted to negotiate directly with a drayage carrier, and coordinate with other shippers to achieve the same transportation efficiencies and cost savings as working with a 3PL. While this seems like a viable option, shippers must consider the time investment. Negotiating rates with carriers and arranging loads with other shippers requires a substantial time, staff, and technology investment to realize significant savings.

Not a DIY Project

Experienced 3PL providers monitor and coordinate container and chassis movement and location, while performing the due diligence to verify carrier safety records. Carrying out all these functions requires significant technology resources and investment.

To execute these tasks, all in-house logistics departments maintained by shippers must be robust. This means having the financial resources to sustain the costs involved. For many shippers, relying on the services of a qualified 3PL has proven to be much more cost-effective.

And with today's liability exposure reaching farther up the logistics chain, the middleman, in effect, provides an insulating layer of liability during drayage movement.

Shippers must make decisions that are best for their own circumstances. The savings managed drayage services can provide may make a significant difference in today's volatile economy.