Supply chains are complex. Even the most straightforward supply chains have interconnected parts all moving simultaneously. This means they are fragile, and every day in shipping is a fine line between success and disaster. Or is it?
Logistics freight management is a process that businesses large and small sometimes struggle with. The modern solution to this is to partner with a reputable and experienced third-party logistics provider (3PL) to help get cargo to its destination safely.
This guide will discuss important topics about outsourced freight management, what it means to your business, and the value that an experienced logistics provider delivers to businesses that lack the capacity to achieve efficient, cost-effective freight management in-house.
What Is Freight Management?
Freight management refers to the entire process of organizing and scheduling inbound and outbound shipments. It covers a number of processes that go into moving things throughout the supply chain, everything from the moment something is packaged to the moment it arrives at the customer’s doorstep. Freight management covers a range of topics, like:
- Route optimization – Finding the fastest and most cost-effective routes for transportation
- Rate negotiation – Finding the right carriers and negotiating the right prices for transportation
- Data collection – Collecting numbers and statistics that can be used to improve processes and streamline shipping
- Business intelligence – Using cutting-edge transportation management technology to collect data to gather important insights about shipping
- Claim management – Handling lost and damaged goods in accordance with carrier-specific shipping agreements in a way that the relationship with the carrier is maintained and preserved
- Tariff and international shipping management – International shipments must comply with all applicable regulations and tariff laws.
- Consolidation – Using shipment consolidation and cross-docking to group shipments together for more efficient transportation to their destinations
- Vendor and carrier management – Maintaining relationships with multiple carriers and every vendor and stop along the supply chain.
- Integrations – Using a fully integrated transportation management system (TMS) to work seamlessly with different departments.
Why Is Freight Management Important?
Freight management is how businesses move their resources; this is what makes it a critical business function. It touches every corner of an enterprise. How you deliver your products is a direct reflection of your business, and when it is properly managed, it becomes an enormous asset. This is why many businesses turn to a 3PL provider when they don’t have the scale to handle their transportation management. Having a 3PL provider gives you:
- Better flexibility and technology – As business scales, so must your freight management, and a 3PL provider has the flexibility to seamlessly increase capacity without any additional capital investment. They also give you access to years of industry knowledge and the latest TMS technology.
- Time to focus on other parts of the business – Resources and time that would have been spent on logistics and shipping can be allocated elsewhere, like establishing customer relationships and developing new ideas.
- Reduced costs – The ROI from outsourcing freight management comes from leveraging the provider’s expertise at optimizing transportation planning, sourcing carriers, negotiating better rates, and reducing costs per shipment through consolidation.
- Improved customer service – All it takes is one late or incorrect shipment to do permanent damage to customer goodwill. Repeated mistakes and preventable errors mean customers will look elsewhere despite superior quality or advantageous pricing.
When Do You Need To Implement Freight Management?
The signs that a business needs the help of a 3PL will vary depending on the business and the industry they are in. However, here are some common ones to look out for:
- Your old freight management software is outdated and doesn’t integrate fully with other business applications.
- Shipping costs are increasing, and it isn’t clear why.
- Key performance indicators for customer service are suffering.
- There have been recent changes to your business model.
- Your industry experiences seasonal or project-based volume spikes.
- Your business is maturing, and processes that worked early on haven’t evolved with the rest of the business.
- Your business has experienced changes with key personnel.
- Your business is launching a new product or service that will increase pressure on existing logistics processes.
- Current or possible changes to industry requirements or government regulations.
What Are the Costs of Freight Management?
From flat rates to per item models, 3PLs have varied ways to charge customers for services. Not all companies need all services, and 3PL providers work to integrate their services with your existing ones.
Pros of Outsourced Freight Management
Effective freight management is organized, efficient, quick, and cost-effective, four elements that are difficult to balance. Done right, integrated and efficient freight management is a powerful asset that touches everyone in your company.
Who Does Freight Management Help?
Anyone that relies on delivering a product or service and has to manage supply chains for raw materials and finished goods. When you can rely on fully-managed shipping, it also helps:
- Sales teams pinpoint delivery
- Business analysts use shipping data to improve processes and reduce costs even more
- Production divisions forecast production and storage together
- Finance divisions easily budget, because having a freight management system in place lowers costs
- Customers have a supplier they can depend on
- Top managers rest easy knowing their logistics and supply chain worries are a thing of the past
- Transportation and logistics managers, because they no longer spend their days putting fires out. Instead, they can strategize about improving shipping procedures.
How Outsourced Freight Management Helps You
3PL providers deliver the technology, industry experience, and carrier contacts to reduce costs and streamline processes. The best strategy to save money and improve shipping comes through a well-thought-out, strategic approach. If you simply don’t have the time or capacity to accomplish this, then an outsourced option is the next best choice, especially if your business ships internationally or are planning for extensive growth.
Cost Savings and ROI
3PL providers help you save money in two important ways:
- Reduced costs and streamlined processes – Simple management and improved internal controls reduce overall shipping costs. This is an inherent advantage that 3PL partners provide.
- Lower shipping costs through negotiated rates – Freight management providers leverage relationships with carriers to find the best shipping solution for your products.
Cons of Outsourced Freight Management
When you partner with a 3PL to manage your supply chain and logistics services, you start a long-term relationship with a company that will make changes that will impact your entire company. Like anything in life, outsourcing freight management comes with its own risks, like:
Partnering With the Wrong Company
Like any business partnership, it is possible to find a company that isn’t congruent with yours culturally or professionally. Logistics is a key component of your business, and the right partnership with a transportation management provider is one that takes your needs into account and shares your business goals.
Difficulty Integrating Information Technology
Integrating a company’s key systems can be a monumental challenge for some companies because of the complexity of their networks. A 3PL provider that lacks experience with large or complex enterprises is at a significant disadvantage.
How To Choose a Freight Management Provider
Step 1: Evaluate your business needs – Take into account how much your business is changing, how much it could potentially change, your shipping challenges, your company culture, and the level of control you want to maintain. This list helps you decide what you want out of your 3PL partnership.
Step 2: Look for a provider that can scale with your business – Your 3PL must be able to grow alongside your business in order to fully satisfy your shipping needs.
Step 3: Learn about the company – Experience is vital, so ask for references and talk to a 3PL’s current clients to get real-world feedback. This gives you a much better understanding of how a 3PL will operate.
Step 4: Look into the TMS they use – Transportation management software does the heavy lifting for most 3PLs, and professional logistics companies showcase them on their websites. Ask for a demonstration and information about how the 3PL will integrate it into your current networks. Pay close attention to who owns the data in the TMS system and discuss what happens if the relationship is terminated. (As a 3PL based on the MercuryGate TMS, Sheer falls under this method where its freight management clients can either take their MG instance to another of the 100ish 3PL’s using MG, or the client can choose to bring the software and operate it within their four walls with their staff.)
Key Elements of the Best 3PL Providers
- Shared goals – You and your 3PL must define what success looks like. Establishing mutual goals helps providers proactively create solutions for your unique situation and challenges. Cooperation is key to this success.
- Modern Technology – Today’s supply chains are rapidly changing, and recent events have shown them to be fragile. Clients expect their providers to add value to their company, and for outsourced providers, this means innovation. 3PLs take a proactive approach to technology, and they deploy the latest supply chain solutions to provide the most value to their clmidernients.
- Transparency and communication – From the beginning, 3PLs must be transparent and clear about communicating goals and performance. To provide total freight solutions, they are dependent on their knowledge of their client and the industry in which they operate. This requires communication and full partnership.
How Sheer Logistics Fits In
This complete guide to freight management is intended to show managed transportation services as something any business of any size can benefit from. Sheer Logistics is an experienced 3PL that uses technology and proven logistics best practices to provide outstanding supply chain management and complete freight solutions for all our clients.
We’re proactive – Using real-time data and business intelligence, we’ll analyze and boost virtually every aspect of your logistics network before challenges come up.
We’re not a carrier – That means zero conflict of interest. We’ll be your advocate in competitive bidding, ensuring you get reliable carrier capacity at the right price.
We do our homework – We assess your current technology and process flow so we can recommend improvements that save time and money.
Call us today for a shipping assessment and find out how a professional 3PL provider can revolutionize your supply chain.