Transportation and Logistics Software – What Are Its Advantages?

If you are a small to midsize company that tries to ship your goods without the aid of transportation logistics, you’ll likely end paying significantly more for shipping than you would if your hired a third party logistics (3PL) provider or implemented online transportation and logistics software. Without the aid of freight logistics, the cost of the shipping process can prohibitive for small to midsize companies for two main reasons: they either pay full truckload FTL shipping (full truck load) rates to ship partial loads or, realizing the economic disadvantage of FTL shipping for partial loads, they use parcel shipping, which is also a disadvantage when shipping multiple parcels on a regular basis. In response to these situations, 3PL and transportation and logistics software can revolutionize a company’s sipping costs by providing them with options such as LTL shipping (less than truckload), integrated transportation methods based on competitive pricing and shorter shipping routes based on route analytics.

But while 3PL and logistics software function in the same capacity, the latter has two basic advantages over the former, beginning with price differential.

Price Differential

Although 3PL and logistics software companies serve the same purpose, they are principally different in their corporate make up. Third party logistics providers are freight logistics experts that act as middlemen between manufacturers and shipping companies, while logistics-software providers are freight logistics experts that specialize in creating freight logistics software, which they offer as an online software application for an affordable monthly fee. In other words, when you opt for 3PL, you end up paying more because you pay for an expert to manage your account, whereas logistics software lets you manage your own freight logistics through an easy to use interface. Essentially, 3PL providers make their money by charging you for a logistics service that you could easily perform on your own with the aid of logistics software. It’s as simple as that.

Level of Control

When you outsource a service that isn’t one of your company’s core competencies, you’re naturally at the mercy of the company that you outsource to. This is not to say to that 3PL providers are out to profit on their clients’ lack of logistics expertise in an ulterior way. But it does mean that 3PL providers are always looking for LTL shipping rates and other shipping options that offer the greatest price differential between what the options actually cost and what they charge their clients to secure those options. In some cases, the greatest price differential might result from shipping your goods with a company that doesn’t have the best reputation; a situation that you could easily avoid if you opt for logistics software. In addition to allowing more control over what companies you ship with, logistics software also allows each of your company departments to participate in the shipping decision process by accessing the software online, which can prove extremely valuable from an accounting and management perspective.

LTL Logistics Software Among Other Logistical Resources

Businesses shipping small loads through second party carriers often have difficulty finding affordable shipping arrangements. Truck Load (TL) shipping is unaffordable because a partial load would be shipped at the price of a full load, while parcel shipping can become unaffordable when a large number of parcels are shipped. When low volume shippers can afford neither TL shipping nor parcel shipping, they turn to Less than Truck Load (LTL) shipping – an arrangement where two or more partial loads fill a full semi trailer, and the shippers split the cost of the load.

For most small and midsize shippers, LTL shipping is the most affordable transportation arrangement, but maximizing its benefits requires a strong logistics function-a requirement satisfied by one of three resources-an in house logistics department, a Third Party Logistics (3PL) provider, or logistics software.

Evaluating the Resources

Traditionally, shippers keep the logistics function in-house by staffing logistics experts. When this option is unaffordable, they consider 3PL and logistics software.

The value of 3PL depends on the type of provider one uses:

  • A standard 3PL provider who provides basic logistical services
  • A service developer who provides specialized logistical services
  • A customer adapter who manages the shipping process
  • A customer developer who manages and innovates the shipping process

If you need a specific service, such as cross docking, or tracking and tracing, 3PL can be remarkably affordable, but when full shipping management is the goal, 3PL can be expensive. It can also create a feeling of disconnection from the shipping process. Compared to high-level 3PL, TMS software or LTL logistics software offer two distinct advantages:

  • It is less expensive than using a customer adapter or customer developer
  • It allows you to have full control of the shipping process

Available on a web-based model or an in-house model, the software can be implemented according to your company’s needs and policies. Additionally, the implementation process is designed for efficiency. The provider analyzes your transportation process, creates a program with the right features and functions, and delivers the final version of the program in 30-45 days.

Savings Start Immediately

Financially, the most attractive aspect of the software is its ability to deliver savings in the short term. In the first year, many shippers experience a ten percent reduction in shipping cost, with savings increasing in the years following. In an economy where recessionary spending is still common, a ten percent reduction in shipping cost can bring a welcome increase to a shipper’s bottom line. For many shippers, the savings generated by the software easily reach the six-figure mark.

If your business has a moderate shipping volume, TL shipping and parcel shipping may be unaffordable, and paying a 3PL provider to manage the shipping process may be unaffordable as well. If so, TMS software or LTL logistics software can provide an affordable resource for identifying the best shipping arrangements.

To learn which type of logistics software is right for your transportation process, contact a provider of web-based logistical solutions today.

Advantages of Logistics Software Over Third Party Logistics

For manufacturers who ship a steady supply of cargo, the cost of shipping can rival the cost of payroll. Consequently, reducing shipping costs is a full-time task for most shipping managers. Today, most shippers manage the logistical side of shipping (the part of the shipping process where costs can be cut) with one of the following resources:

  • In-house Logistics – A model of shipping logistics in which the shipping process is managed by a shipper’s own staff of experts.

  • Third Party Logistics (3PL) – A model of shipping logistics in which a third party manages one or more aspects of the shipping process.

  • Logistics software – A web-based or in-house program that allows shippers to choose its own shipping arrangements and perform important tasks such as a freight audit.

Most shippers prefer the first option, but paying a team of experts can be unaffordable. Left to choose between the second and third options, many shippers choose the latter based on the following considerations:

Cost

The cost of 3PL is based on the services a shipper receives. When a shipper receives only a few services through a standard 3PL provider or a service developer, 3PL can be affordable. However, when a shipper uses the comprehensive services of a customer adapter or customer developer, the cost of 3PL can be significant. A software-based resource can facilitate comprehensive shipping management for a fraction of the cost of high-level 3PL services.

Shipping Options

Some 3PL providers make carries arrangements using a narrow range of carrier options, such as those found in an electronic posting system. Conversely, logistics software allows shippers to choose from a limitless range of shipping options based on the appropriate shipping model (e.g. less than load or truckload), and perform a freight audit to monitor shipping costs.

Control

Shippers who use 3PL commonly complain that the shipping process feels too removed-a complaint that often results from the failure of a 3PL provider to provide ongoing, in-depth communication to the customer. Using a software-based resource eliminates this issue by placing the shipper in full control of the shipping process.

Permanence

When shippers use 3PL, they often go through multiple 3PL providers as their shipping process evolves, beginning with a standard 3PL provider and eventually using the services of a customer adapter or customer developer. In addition to being more expensive than using a software-based resource, switching from one 3PL provider to another requires forming new business contracts, continuously delegating more shipping tasks to a third party, and implementing new standards for quality control.

Most shippers wish to implement a permanent logistical solution as soon as possible, and implementing a software-based solution is the best way to do it. After the solution is implemented, it options can be changed as the shipping process changes, providing a seamless transition that does not require the customer to look for a new service provider.

Conclusion

For many shippers, logistics software is the most cost effective logistical resource. In addition to allowing shippers to choose from the broadest range of carrier options, it allows them to perform important tasks (e.g. freight audit) without the assistance of a third party. To learn more about the benefits of software-based logistics, contact a provider of transportation software.