Logistics Software Solutions – How Do They Compare to Third Party Logistics?

Third party logistics (3PL) is the most popular choice for freight logistics among small to midsized companies. In order to help companies that regularly make shipments that are too large to financially benefit from parcel shipping and too small to financially benefit from full truckload (FTL) shipping, companies turn to third party logistics providers to get them the best deals on less than truckload (LTL) shipping, integrated shipping methods and to reduce the delivery of products to retailers. To these ends, 3PL providers significantly reduce their clients’ shipping costs compared to what they would spend on shipping without the aid of freight logistics. But they obviously do so by charging their clients for freight logistics services.

So, what’s not to like about hiring a 3PL provider to reduce your company’s shipping costs and ensure that your goods are delivered in a timelier manner? After all, is there really such a thing as realizing freight transportation solutions without seeking the help of freight logistics experts? Yes and no. If freight logistics isn’t one of your company’s core competencies, you’ll certainly need to get logistics solutions from those that specialize in providing them. But you don’t have to turn to a 3PL provider and pay a middleman to provide you with shipping solutions when you can instead use online logistics software.

The difference between 3PL and logistics software solutions-also referred to as logistics management software-typically doesn’t lie in one having more logistics expertise than the other; rather, it has to do with how the logistics information is supplied, how much it costs and how much control companies have over their shipping process. Essentially, a third party logistics provider uses logistics management software to provide you with shipping solutions, whereas online logistics software lets you act as your own logistics provider for an affordable monthly fee. In no case will you find a 3PL provider that offers their services for the low price that you pay for logistics software solutions, nor will hiring a 3PL provider offer you as much control over your shipping options.

Having complete control over your shipping process has two main benefits: you can research the companies that you’re considering hiring and you never have to deal with a middleman’s business policies affecting the price or availability of certain shipping options. Aside of the financial and shipping management benefits offered by logistics management software, its greatest strength is its extreme ease of use. Although the term logistics software implies computer expertise, logistics software comes with an easy to use interface that neither requires expert computer knowledge or expertise in logistics, meaning that each of your company’s departments can be involved in its shipping process.

TL Logistics Software – How Does it Compare to Third Party Logistics?

If your company is at the point that it ships enough goods to benefit from truckload (TL) shipping, achieving the optimal truckload transportation management system will require careful consideration, beginning with what logistics option you should choose. In most cases, companies have three basic options for applying logistics to the shipping process: hiring an in house logistics expert; contracting with a third party logistics (3PL) provider; or implementing TL logistics software-also known as truckload logistics software.

If your company feels like other shippers, it would probably prefer to have its own logistic expert on location. But, if adding a $70,000-$90,000 salary to your payroll isn’t acceptable, then contracting with a 3PL provider for TL shipping solutions or implementing logistics software are more affordable options.

To understand what you get when you hire a 3PL provider, it helps to distinguish the four types of 3PL providers: standard 3PL providers, which offer basic 3PL services and usually don’t feature 3PL as their main function; service developers, which offer a more specialized range of services than standard 3PL providers; customer developers, which manage a company’s entire shipping process but don’t suggest innovative shipping solutions; and customer adapters, which manage a company’s shipping process and propose innovative solutions.

If you were only looking for TL shipping solutions, hiring a standard 3PL provider or a service developer would be the most cost effective option. However, these types of providers typically place their customers with carriers that offer third party logistics providers a discounted rate that they profit from by charging their customers a rate that exceeds it.

If you think that this scenario sounds disingenuous, it is, especially as it places the provider’s interests above the customer’s in such a way that a customer has little chance of realizing optimal truckload shipping solutions, which is why it turned to the provider in the first place. TL logistics software, on the other hand, removes this situation by doing the work of a logistic expert and allowing companies to become their own logistics provider.

Like a logistic expert or customer adapter, the software evaluates every aspect of the truckload shipping process (i.e. route analysis and optimization, freight optimization, payment arrangements, etc.) and presents companies with a list of ranked shipping options that can be selected through the use of a user-friendly interface. If cost savings is a major goal in your company’s shipping process, logistics software offers a dual cost savings approach: it negates the need to outsource logistics and uncovers shipping solutions that offer the lowest price for you shipping needs.

Logistics Software Allows Shippers to Conduct Their Own Freight Optimization

If you plan on starting a manufacturing business or currently own a manufacturing business that needs new shipping solutions, a critical part of maximizing your bottom line will be arriving at shipping solutions that offer the best delivery result at the lowest cost. To arrive at such solutions, shipping companies have three basic options: they can hire an in house logistics team; they can outsource their logistics to third party logistics (3PL) providers; or they can implement logistics software. For small to midsized companies, the cost of hiring in house professionals is often prohibitive, leading them to outsource their logistics.

But before you outsource logistics, its important to know that most 3PL providers adhere to rigid shipping heuristics, making them a poor choice for companies that want innovative shipping solutions. Logistics software, on the other hand, allows companies to realize innovative shipping solutions on their own. By accessing a user-friendly interface, companies can conduct freight optimization without possessing logistics expertise. When you implement logistics software, the software acts as a logistics expert and guides you through the phases of the freight optimization process, which we describe below.

Channel Selection and Development

Channel selection and development begins with identifying shipping channels that have strong matching potential to your companies shipping needs according to various criteria, including: freight volume, shape of freight and freight destination. After performing channel selection, logistics software aids shippers in identifying and enlisting carrier companies that carry a high volume within a company’s ideal shipping channels.

Carrier Selection

Carrier selection commences with identifying and evaluating specific carrier companies. Logistics-software evaluates these companies according to the price and delivery efficiency of their shipping options. Commonly realized shipping options include LTL shipping solutions, TL shipping solutions and a combination of TL and LTL shipping solutions. Carrier selection also results in integrated shipping solutions between water, air and land carriers to offer the best shipping price and delivery time.

Transportation Route Design

As a part of the carrier selection process, logistics software allows companies to identify transportation routes that decrease shipping cost and improve delivery time. The transportation route design process entails three basic steps: discovering the fastest routes, discovering carriers that match shipping volume and negotiating rates with carriers and confirming shipping capacity.

Route Execution and Management

After your company has chosen carriers based on shipping route analysis and carrier offerings, logistics-software allows you to perform route execution and management. During the route execution and management process, logistics software offers two essential benefits: it allows you to function as a shipping captain, monitoring your overall shipping network performance; and it allows you to perform customer service and conduct billing and reporting. If you currently outsource your freight optimization needs to a 3PL provider, consider implementing logistics software today. Research shows that companies can reduce their annual shipping costs by 10 percent after the first year of implementing logistics software.

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