July 2011 | Commentary | Checking In

Using a 3PL: Are You Getting Your Money’s Worth?

Tags: 3PL

Keith Biondo is the publisher of Inbound Logistics magazine.

If you are using a 3PL for truck brokerage alone, you could be leaving money on the table. Why? Because logistics providers have evolved and developed an array of solutions that bring extra value to their customers.

Fuel price increases, stringent regulations, higher taxes, sustainability issues, and government labor intervention add costs to transportation. All carriers want to be competitive and gain your business. But at some point, there is a bottom to the pricing cuts that can be offered without driving themselves or their competitors out of business.

I’m reminded of this because I spent time reviewing thousands of comments submitted by readers and carriers as part of our 3PL Perspectives research. For example, one vice president of a large Midwestern carrier expressed this pointed opinion: “3PLs have ruined the business, and all ought to go out of business.”

You can blame the messenger, but many shippers responding to our survey said they select logistics partners solely on their ability to secure trucking services at the lowest price. One traffic manager at a mid-size manufacturer said he did not use 3PLs because his prices were always lower than what they could secure. Did any of those respondents mention using a 3PL to manage an inbound program, to supply a TMS for overall route analysis, to analyze a logistics network from customers to vendors and back again, or to rationalize overall supply chain efficiency?

Nope. Those respondents focused purely on silo transactions, treating transport as a commodity, not as a pathway to increased enterprise efficiency or as a way to solidify customer relationships. Gaining transportation efficiency is the name of the game these days. But who says you can’t play more than one game at a time, especially if the stakes are high?

Naturally, carriers’ customers—whether intermediaries or shippers—will argue for price concessions. Perhaps that carrier VP thinks some 3PLs have the scale and technology to drive a harder bargain than individual shippers could. Or perhaps he believes that many shippers rely on intermediaries exclusively to drive transport costs down. There’s evidence to support that. But at some point, it becomes a zero-sum game, and there is only so much blood you can squeeze from a stone.

As you’ll see in the Top 100 3PLs listing, many providers have expanded their value-added solutions. That means that customers using only the transactional solutions in their partner’s portfolio have, to some extent, helped pay to initiate, implement, and build-out advanced logistics solutions and expertise that they are not using. Ironically, by not using those solutions, they leave that money and value on the table, too.