Dual Dynamics

If you are using a third-party logistics (3PL) provider for truck brokerage alone, you are leaving money on the table. I wrote that eight years ago, when commenting on the results of our annual 3PL market research.

Why did I say that? Because logistics providers have evolved and developed an array of solutions that bring extra value to customers by providing end-to-end visibility, network redesign, and redeployment of logistics assets, which empower demand-driven logistics by better connecting suppliers with end point customer demand signals. Today, that evolution is even more pronounced, but there is dragging dynamic at work—the capacity crunch.

In our 2018 3PL market research, the raw numbers from shipper respondents show that what I called a "tactical use" of a logistics partner solely to acquire low-cost capacity appears to have morphed into a strategic use. One of the most important benefits of having a 3PL work over your enterprise is business process improvement. Yet a number of respondent companies, across all industries, this year report that the benefit of partnering with a logistics provider is to get low-cost capacity. Cutting transport costs is twice as important as achieving overall value chain efficiency, according to the survey.

What’s interesting about that data point is that the majority of shipper respondents have line-of-business titles such as corporate management or supply chain management. Clearly, those company functions are concerned—or at least ought to be concerned—with the strategic enterprise evolutionary uses of best-in-class third-party logistics partners. And they are, to some degree.

But coping with the lack of what has been taken for granted and treated as a commodity for decades has reinforced the truth that, absent truck lift, the supply chain change dynamic stalls. No business process improvement just now; it’s all hands on deck for capacity.

The well-documented reasons for the capacity crunch have acculturated many shippers to accept higher costs, especially as carriers increase pay and signing bonuses, up benefits, and buy fly new equipment. As one example of where competition for drivers is heading, K.L. Harring Transportation recently began offering guaranteed minimums to drivers for each week out on the road, irrespective of miles driven.

Clearly, increased trucking costs are the new normal. Also as clear is the other dynamic, which is emphasized a little less these days but all the more important to offset cost increases in other areas: Use your logistics partner strategically and offset rising transport costs.

Leave a Reply

Your email address will not be published. Required fields are marked *