Logistics Software Provides Companies With Freight Optimization

In the manufacturing industry, the discipline of logistics focuses on efficiently moving products from the manufacturer to the buyer. For large manufacturers, logistical operations can represent a large expense, especially when logistical elements are managed separately instead of being integrated into one solution. In an attempt to take the time and guesswork of out executing logistics, many companies totally or partially outsource their freight optimization needs to third parties. A complete outsourcing amounts to hiring a company to move products throughout the entire supply chain, while a partial outsourcing involves letting a third party manage the transportation of goods through the “stages” of the supply chain. However, implementing logistics software is a more cost effective way to achieve freight optimization that offers the same level of quality as a third party logistics provider.

There are several factors that contribute to a manufacturer’s total shipping costs, including warehouse fees, inventory fees and freight carriage fees. To minimize these fees, a manufacturer might choose to ship by air carrier instead of in tandem with freight carriage, significantly reducing warehouse fees by moving the goods from manufacturer to buyer in a matter of hours. However, to save the most money, companies have to examine all three cost areas with an eye toward developing an integrated cost savings solution. In developing such a solution, there are two basic issues that manufacturers must address: finding the right mix of freight carriage, inventory and warehouse services and finding the best price for each one.

Logistics software can help by providing an analysis of service combinations in relation to individual service cost. For small to midsize companies that deliver goods from the assembly line directly to retail outlets, logistics software can offer a basic analysis of routing options and freight rates. But companies that use multiple warehouses and multiple supply chain locations may require more, such as production scheduling analysis that develops manufacturing plans with regard to multiple supply chain locations (i.e. company’s whose products are assembled at more than one location before reaching the retailer).

The basic advantage of logistics software is that offers refined shipping solutions that meet the needs of a variety of manufacturing situations (and does so at a lower cost than hiring a third party logistics provider). For example, some solutions may focus on a particular freight carriage issue, such as analyzing how to increase delivery time by studying construction schedules and highway traffic data, while other solutions may focus on offering an integrated solution for all logistical concerns, including carrier loading, weight distribution, cube optimization and shortest path to destination. Studies show that manufacturer’s who implement logistics software regularly realize a 10 percent decrease in shipping costs after the first year.

Whether your company has its own trucking system or uses a third party, logistics software can help reduce your delivery costs without compromising punctuality, efficiency or freight safety. If you need to simplify your delivery process and reduce your cost of shipping, consulting with a logistics software provider is the best way to arrive at a solution that accomplishes both at the same time.

Logistics Software Aids in Retail Vendor Compliancy

Vendor compliancy occurs when a vendor meets a set of requirements imposed on it by a buyer of its products. Vendor compliance focuses on making it easier for the buyer to receive goods, process them upon reception, and bring them to store shelves, where applicable. Unfortunately for manufacturers, the most complex compliance standards are usually handed down by companies that have the largest buying power, a fact that causes some companies to question whether the money necessary to implement the standards would be worth the profits that resulted from doing business with an entity. In the long run, adapting business standards to meet compliance standards is almost always beneficial, as nothing can replace the selling power of having large contracts with major companies and retailers. However, affording the infrastructure necessary to facilitate compliance can still be a problem in the short run.

Retail Vendor Compliancy and Logistics Software

When you look at a major buyer’s retail vendor compliancy scorecard, a rating system that ranks vendors according to their compliance to a number of requirements, it’s often difficult to ascertain how to begin meeting the requirements. However, upon closer inspection, many companies find that a majority of compliance issues, and certainly the most critical ones, are associated with the shipping process, such as product labeling, product packaging, and method of shipment, to name a few. Yet, here there emerges another roadblock for many vendors: how to gain more control over the shipping process through logistics. Most companies receive their shipping logistics from one of three sources: an in-house logistic department, a third party logistics (3PL) provider, or by implementing logistic software, which allows you to become your own logistics provider without possessing logistical expertise.

In-House Logistics

Meeting shipping needs in-house is the traditional preference of companies that can afford to hire their own logistic experts, who typically earn around $80,000 per year. This fact alone prevents many companies from going in-house with their shipping process, as well as the fact that most companies pursue in-house logistic arrangements upon purchasing their own fleet, once and for all ending their dependence on 3PL.

3PL

What you receive from 3PL depends entirely on what type of 3PL provider you contract with: standard 3PL providers, who offer basic shipping services and seldom practice shipping logistics as a core practice; service developers, who offer more specialized services but not a comprehensive approach to the shipping process; customer adapters, who manage an existing shipping process but don’t propose new solutions; and customer developers, who manage the shipping process and do propose new solutions. For vendor requirements, customer developers make the most sense. But you can receive the same level of focus through logistic software at a fraction of the cost.

Logistics Software

Also referred to as freight transportation software, logistic software is priced as a software as a service (SAAS) offering, making it less expensive than other logistic options. What this means for vendors is less money spent on meeting vendor requirements, and an annual reduction in shipping expense that can be delegated toward other compliance needs. After using freight transportation software for one year, most companies experience a 10 percent reduction in shipping expense that increases in years following.

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.