Omar Bradley offered a truism, that amateurs study tactics, armchair generals study strategy, and professionals study logistics. This is just as true in the world of business as it is in the military. Logistics is the art of getting supplies where they’re needed so other functions can happen. In the modern business world, logistics means freight shipping – both internally and externally. In this field, freight rates and carrier rates are the price of doing business.
Freight shipping is one of those expenses that can be minimized, but never totally eliminated. It’s also a manpower time sink, and because of this, more and more companies are outsourcing their freight needs to third party logistics companies. These are outfits that have people who do nothing but look over the assorted rates and package deals offered by the major freight carriers and try to find the best deal possible for their client, with a nice commission on top for them.
All in all, third party logistics management makes sense for organizations that are above a certain size (too small, and they don’t generate enough volume to be worth the trouble of maintaining the account) and below a certain size (at which point the company can have an inside staff that does the same function for less).
Alternatives to third party logistics offers are in house logistics software. Much the same way that travel agencies quickly became redundant with online booking services, logistics software vendors are trying to render the third party logistics company obsolete. Building automatic data scrapers that can do the basic work of comparing logistics rates to different parts of the country or world is fairly straightforward, as is a price search algorithm.
While these systems primarily offer a way to avoid third party logistics fees, they also offer a bit more direct control over your company’s shipping needs, and some managers and executives like that hands on feel. They can also be used to significantly automate a lot of routine functions in the shipping department and the mail room. They can also be used to identify process problems – there’s a saying that every time something was sent out overnight, someone higher up in the chain didn’t do their job correctly, and when you’re looking directly at the costs of expedited shipping, it becomes easier to focus on the process issues that lead to it, than when you’re looking at a third party statement of account.
Ultimately, which one works best is a function of your business’ needs and internal culture; some businesses simply don’t want to bring that job in house. Others need to. Both are viable strategies depending on what your operation’s needs truly are.