Leading companies have been choosing to bring their supply chains to the forefront of their strategic initiatives because they understand a company’s supply chain is more than the movement of goods from raw materials to finished goods for a transactional cost.
These companies have learned that efficiently and effectively moving inbound and outbound with a holistic approach, while capturing data along the way to learn how to be better the next time creates a flywheel effect that allows their company to compete at the highest levels.
The true innovators, like Amazon, Apple, P&G, McDonald’s and Unilever bring together the internal and external business processes and networks associated with delivering the best service and product under a single collaborative system that delivers the ultimate customer experience. The result of these efforts put all five of the previously mentioned companies in the “Masters” category of Gartner’s rankings of the best supply chains in the world. It doesn’t take long after looking through the entire listing of companies on the Gartner report to see these are also the best performing stocks in the S&P 500.
The results speak for themselves on the topic that building a resilient and efficient supply chain builds a competitive advantage, but too often the small to mid-sized companies struggle to emulate that of their largest competitors to allow them to play on the same field.
Over the next several paragraphs we’re going to share there is a way and that is now offered through a whole host of third party logistics companies’ freight management service solution platform.
Definition of Freight Management
To start off the discussion, freight management is the work a company outsources to a logistics service provider to optimize, execute and analyze the movement of a company’s raw goods and finished products that move through its inbound and outbound freight operations.
There is a significant amount of responsibilities a logistics provider takes on within its freight management programs and is often not well understood nor appreciated, but make no mistake the power the partnership between the company and its logistics and supply chain partner revolutionizes its supply chain to compete with the larger companies in its market.
The essence of a freight management program is a 3PL is selling its business plan they have been executing to grow their business profitably in a highly competitive market to shippers. The 3PL, or as some call them logistics service providers (LSP’s), takes its people, knowledge, technology and proven processes and operates a shipper’s entire supply chain with their “franchise” model.
Our guess is those of you who have been doing their research on freight management service solutions have probably not heard the franchise model comparison thrown out in any discussion on the topic, but as we walk through the benefits of a franchise you’ll recognize many of the same benefits touted in a franchise.
With that said, let’s look through a few of the bullet points found in benefits of franchising articleswith the benefits of a freight management program listed below each:
- Reduce Capital
- Shippers’ freight is moved via the 3PL’s transportation management software (TMS) and the 3PL’s people, thus not needing to put capital into these areas.
- Established Business Model
- The 3PL executes its business model on behalf of the shipper.
- Shorter Time to Success
- Shippers realize a quicker ROI and success within its logistics and supply chain strategies because they are not starting from zero on people, knowledge, process and technology. They are also moving the cost model from a fix model to a variable.
- Training & Support
- The 3PL trains and supports what is needed from the shipper for the freight management program to be effective.
- Network of Knowledge
- The 3PL brings the knowledge and market connections to build out the shipper’s rating and routing carrier guide.
- Staffing Leverage
- The shipper no longer is required to staff its freight and logistics functions because the 3PL performs all the functions. We do recommend to keep a liaison between the shipper and its 3PL to oversee the relationship and to help in the reporting and analysis coming out of the freight management program.
- Leverage Technology
- The shipper’s business is operated through the 3PL’s TMS, which is typically one of the best in the industry, as reviewed by the Gartner Consulting Group in its annual TMS Magic Quadrant study.
- Reduced Risk
- The 3PL brings its proven business model and executes on behalf of the shipper.
Reasons Why Small to Mid-Sized Shippers Should Decide to Work with a Freight Management Company
There are many reasons why a company decides to go with a freight management solution, but more than anything else small to mid-sized shippers find they need a better way to emulate the titans in their industry that have the capital and resources to thrive and expand through effective, innovative and efficient logistics and supply chains, as is offered in a freight management service solution from a 3PL.
The freight management solution also brings transparency to their freight costs through its pricing structure where the shipper pays the 3PL a monthly service fee for executing its freight program and the motor carrier charges are a pass through of the negotiated rates the 3PL put in place for the shipper.
The flexibility of the freight management program puts the shipper in the driver’s seat by giving them the choice to either a la carte the services they want from the 3PL or outsource its entire logistics and supply chain operation.
As with all outsourced solutions, the third party can do what they are best at in a variable cost structured fee freight management model is the 3PL’s business model to handle all aspects of a company’s shipping and logistics needs – so they can focus on growth, sales , marketing, and customer service.
The last and often overlooked reason shippers move to a freight management model is data. With data comes knowledge and with knowledge comes the power to make change. To understand where problems are as it relates to service and price is critical to drive the flywheel of success within any shipper’s logistics and supply chain strategy. Too often we see shippers on their heels and reactionary and this puts them at a disadvantage when negotiating freight rates and does not allow them to identify their service and chargebacks from their customers that is suboptimizing their business.
With the plethora of data coming out of a freight management program a shipper is able to differentiate its business and ensure its competitive advantage throughout the year as they see their performance numerically laid out in a way to see the trends to then apply industry best practices.
Top 15 Telltale Signs Your Company Should Consider Freight Management
Still not sold on the idea of outsourcing your company’s freight operations?
Listed below are reasons why others have decided to move to a freight management solution:
- Service KPI’s Suffering
- Struggling to Find Freight Capacity
- New Technology Required
- Increasing Freight & Operating Costs
- Project or Seasonal Volume Spikes that Cannot be Managed Internally
- Continuous Growth that is Becoming Harder to Support Internally
- Operating Your Business on Spreadsheets
- Geographical Changes
- Change in Key Personnel
- Business Model Changes
- Launching a New Service or Product within the Business
- Not Sure Your Resources Will Allow Your Company to Manage Inbound & Outbound Freight for Cost and Process Improvement Reasons
- Disappointing Customer Reviews
- Cloud and Security Concerns with Your Company’s Logistics and Supply Chain Systems
- Lacking Data to Analyze and Improve Logistics and Supply Chain Operations
- Struggling to Get Beyond Reactive to Proactive with Supply Chain Initiatives
Conclusion on Why Freight Management Works for Small & Mid-Sized Companies
The time for rethinking existing freight management strategies is right in front of us. Effective freight management initiatives help supply chains stay relevant and competitive with the likes of Amazon and other mega competitors in today’s markets.
When the activities of a supply chain are brought together into a single vision, supply chain management drives a competitive advantage by executing faster, reducing friction through all touch points between internal and external stakeholders, thus bringing more transparency and efficiencies throughout the process to deliver the end product to the ultimate customer in a manner that exceeds their expectations.
Mid-sized companies could be discouraged if it were not for the freight management service solution logistics service providers offer in the logistics and supply chain market because of the tremendous advantage larger companies have inherent to their size.
- Volumes allow them to leverage their buying power for the best freight rates.
- Freight providers are stumbling over themselves to get in the door offering freight capacity.
- They have a balance sheet flush with capital to employ the very best transportation management technology to execute and analyze their supply chain for excellence.
- The talent pool is broader and deeper because they have the budgets to build teams that specialize in various functional disciplines across the entire company.
- And the combination of volumes, talent, technology brings together the very best cost, capacity and service options available.
So, if you are still interested in learning more we recommend the following articles:
- Why Shippers Select Managed Transportation Service (Benefits & ROI Calculation Model)
- The Comprehensive Guide on Managed Transportation Services
- The Complete Guide to Freight Management Service Solutions
- How Much Does Managed Transportation Cost? A Comprehensive Guide
- 2020 Best Managed Transportation Companies (And How to Choose)
- Freight Costs: An Insider’s Look on Freight Pricing Buyers Should Know
- Best Transportation Management System (TMS) Software Packages
- Comparison between Freight Broker and Managed Transportation Services Freight Operation Models
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