Shipping products without the aid of logistics is like journeying to an unfamiliar destination without the aid of a map; eventually, you get there, but it usually takes more time and money than you anticipated. Just as an uninformed driver makes more stops and takes more roads than necessary to arrive at his destination, an uninformed shipping process results in freight making more stops and taking longer routes than necessary, increasing the cost of the shipping process. Realizing this, shipping companies that don’t have an “in house” logistics department will seek the advice of a logistic expert. But the type of logistic expertise that they retain can also have a significant impact on the cost of the shipping process.
When a company doesn’t have its own logistic expert, it has two options for implementing shipping logistics: hiring a third-party logistics (3PL) provider, or implementing logistics software. Traditionally, shipping companies have opted for 3PL. But today, shippers are increasingly choosing logistics software over 3PL for two reasons: the software offers more shipping options and it costs significantly less than hiring a 3PL provider that offers the same level of service. For companies that are considering hiring a 3PL provider, it’s important to realize that not all 3PL providers are the same. Currently, there are three types of 3PL providers: standard 3PL providers, service developers, customer adapters and customer developers.
Stand 3PL providers offer transportation logistics, but not as one of their core competencies, which ends up making them attractive due to the low cost of their services. Service developers perform transportation logistics as their core competency, but typically emphasize in “value-added” services, such as cross-docking and specific packaging. Customer adapters oversee a company’s logistics process, but don’t specialize in innovative shipping solutions. Customer developers oversee the logistics process and do specialize in innovation solutions. But the price of hiring a customer developer is can be similar to hiring your own logistics experts.
Moreover, 3PL often places small and midsize companies in the position of hiring logistics services that don’t offer comprehensive, innovative solutions or attempting to hire unaffordable logistics services that do; a situation that makes companies realize the value of logistics software, which allows them to realize comprehensive, innovative shipping solutions that increase the timeliness of the shipping process while reducing its price by eliminating the following costs: TMS software costs, 3PL costs, gain shares, freight margins, common rate base licensing costs and annual software maintenance costs.
Logistics software is available on either a software as a service (SaaS) model or as an onsite software solution, with the former offering the advantage of remote system access. But in either case, the software allows its customers to make expert logistics decisions through an easy to use interface. Research shows that companies who implement logistics software can reduce their annual shipping costs by 10 percent after the first year.