Freight Logistics Software Vs Third Party Logistics: Which Is Better?

Today, two types of freight solutions appeal to shippers that rely on carriers: logistics software (a.k.a. TMS software) and third party logistics (3PL). Logistics software allows shippers to become their own logistics provider by using a software program, while 3PL providers negotiate arrangements between shippers and carriers. Frequently compared and contrasted, logistics software and 3PL each offer unique benefits. However, the former has the following important advantages:

Less Expensive

Standard 3PL providers and service developers, which offer particular services and not comprehensive solutions, are usually quite affordable. When you hire a provider that offers innovative management of the shipping process – namely, a customer developer – the cost can compare to hiring an in-house logistics department. Logistics software provides logistics through a software as a service (SaaS) platform. It can also be implemented as an in house solution. Instead of relying on a costly customer developer, you can save money and realize more control by using a software solution.

More Control

A top complaint of 3PL customers is they feel distanced from their shipping process and the entity that manages it. Different 3PL providers have different approaches, but few of them integrate the shipper in the shipping process in a formal capacity. For some shippers, having the shipping process fully managed by another entity is appealing. Due to its expense and vendor issues it involves, most shippers wish to be involved in the process. Freight logistics software does more than “involve” shippers in their own shipping process; it puts them in control of it.

Better Options

3PL providers make freight arrangements by listing an available load in an electronic posting system, where it can be matched with an available carrier, or by negotiating with carriers that don’t use a posting system. Because the former method is usually the easiest, many 3PL providers use it to arrange the largest percentage of shipments – a scenario that limits shippers to carriers who use a posting system. Logistics software removes this barrier and exposes you to more carrier options. In some instances, a shipper misses the best carrier option because the carrier who could provide it will not work with the shipper’s 3PL.

Greater Security

No shipping process is as secure as one that the shipper handles on its own. When outsourcing to a 3PL, shippers naturally lose the capacity to scrutinize the carriers with which their loads are placed. Although 3PL providers select carriers with the customer in mind, they also select them with themselves in mind – a dichotomy that can jeopardize the interests of shippers. Freight logistics software alleviates security concerns by putting you in control of the shipping process.

Conclusion

Logistics software is a viable replacement for 3PL, particularly for shippers who wish to control their own shipping process. Next to payroll, shipping is the second largest operating expense for most shippers. This means that rejuvenating a stale shipping process with better carrier options can have a significant impact on a company’s bottom line – an impact that logistics software allows you to achieve.

Shipping Logistics Software: Frequently Asked Questions

In lieu of staffing a logistics department, many shippers turn to Third Party Logistics (3PL) providers to secure the best carrier arrangements. However, depending on the type of shipping management you need, 3PL can be as costly as staffing in-house experts. It can also make you feel distanced from the distribution process.

Instead of using 3PL, many businesses now use shipping logistics software – a class of applications that perform the logistical analysis traditionally performed by experts. If you are considering the software as an alternative to 3PL, but you have questions about its benefits and applications, the answers below can be helpful:

How much knowledge is required to operate the applications?

Ideally, the user should have a proficient understanding of transportation logistics, but a consummate understanding of logistical analysis is unnecessary. After performing logistical analysis based on the data you supply, the applications provide you with a list of recommended options via a user-friendly interface.

How much can the applications reduce the cost of freight transportation?

Research shows that top-notch shipping logistics software can reduce the cost of freight transportation by ten percent in the first year. Depending on your transportation process, the percentage could be even higher.

Can the applications support a transportation management system?

TMS software can support a Transportation Management System (TMS) by helping shippers perform the crucial processes of freight transportation management: planning and deciding on transportation arrangements, monitoring the transportation process, and measuring Key Performance Indicators (KPIs).

Are applications available that support LTL transportation?

Yes. The applications can be designed to support any freight transportation need, including LTL transportation. If you routinely ship partial loads, LTL software can help you identify more affordable transportation arrangements than Truck Load (TL) or parcel shipping.

Are the applications available on a web-based model?

Yes, the applications are available on a web-based model. They are also available on an in-house model. Most shippers choose the latter due to its cost effectiveness and the ability to access the application remotely.

How much do the applications cost?

The cost of the applications depends on several factors, particularly whether it is implemented on an in-house, or a SaaS (Software as a Service) model, along with the logistical options you need. The best way to receive an accurate cost assessment is to have a provider of logistics software review your freight transportation process and administrative needs.

What if the transportation process changes after implementing an application?

The application you implement is not set in stone. If you experience new shipping needs, you can add new logistical options to the existing system. In terms of adding new options, implementing a web-based application typically offers the most flexibility.

Conclusion

Shipping logistics software is a cost effective alternative to staffing experts or contracting with a 3PL provider. Unlike 3PL, it puts you in direct control of freight transportation, helping you identify the best transportation arrangements in terms of freight safety, delivery time, and transportation cost. To learn more about the benefits of TMS software and other types of logistics software, contact a provider of web-based logistical solutions today.

Logistics Software Helps Companies Reduce Shipping Costs

In the shipping industry, logistical solutions focus on stream lining the process of moving products through the supply chain. For large manufacturers, the shipping process represents a significant expense, which explains why such companies are now using logistics software-also known as freight transportation software-to evaluate and improve the financials of their shipping process. To benefit from logistics, some companies choose to completely or partially outsource their logistical needs. In the first case, companies hire a third party logistics expert to oversee their shipping process. In the second case, they hire logistics experts to manage particular stages in the delivery process. In each scenario, significantly minimizing the cost of the delivery process and reducing delivery time is the ultimate goal.

There are several factors that influence a manufacturer’s total delivery costs, including inventory fees, freight carriage fees and warehouse fees. But instead of focusing one particular factor, logistics aims to integrate each aspect of the shipping process into a single manageable solution. For example, in order to make an impact in inventory, freight carriage, and warehouse fees, a company might decide to start shipping by air instead of by ground. While air shipping is more expensive than ground shipping, it can eliminate warehouse and inventory fees for companies that ship long distance. Similarly, a company might also switch from air shipping to ground shipping where warehouse and inventory fees are negligible.

In developing the best logistics solutions for your shipping process, there are two chief issues to address: finding the right combination of carriage, inventory and warehouse services and finding each of them at the best price. Logistics software begins by identifying the optimal combination of these services and then analyzes them by price. In the case of large companies whose shipping process is complicated, the initial goal of logistics is to reduce complexity by integration, while for smaller companies whose shipping processes are simpler, a simple analysis of shipping rates and delivery routes may be sufficient. A complex shipping process is usually defined by multiple warehouse stops and product assembly that occurs in various stages at different locations, while a simple delivery process amounts to products that travel nonstop to the buyer.

Whether a company’s shipping solution is simple or complex, freight transportation software offers solutions that benefit large companies and small companies alike. For example, logistics software can be used to analyze highway traffic patterns and the prevalence of construction zones along particular shipping routes. In addition, the software can be used to analyze aspects of freight loading such as cube optimization, best fit, vehicle loading and weight distribution. Without the use of logistics, the smaller aspects of the shipping process often remain unstudied and needlessly increase a company’s shipping costs. Whether your company ships locally, nationally or internationally; according to recent research, hiring a third party logistics expert or implementing logistics software can reduce your shipping costs by as much as 10 percent after the first year; and for most companies the percentage increases significantly thereafter.