This is our first post we are co-authoring alongside one of our great long time Cerasis bloggers, Chuck Intrieri, around the rise of specialty and niche logistics providers. This post will focus on the rising use of specialty logistics providers and how it changes the look at supply chain and logistics management from a tactical approach by an in house team, to a strategic approach between the manufacturer or distributor and the various niche logistics providers to create growth sustaining logistics solutions based on the needs and desired outcome of the customer.
Outsourced logistics partnerships are taking companies to places they’ve never been before, both in terms of emerging logistics markets as well as the level of supply chain complexity and strategy necessary to meet ever-changing global demands.
As manufacturers and distribution companies become more inclined to partner with multiple niche logistics providers, maintaining expertise in specific verticals, operating regions, technology offerings, or service capabilities, supply chains are evolving into multi-tiered networks, deposited by numerous layers of transportation and logistics contracts from raw materials procurement to domestic point of consumption.
For example, at Cerasis, we are considered a logistics provider, and our niche is less than truckload freight management (although we also support full truckload and small package/parcel) in North America (US, Canada, and Mexico). We believe this focus allows us to get the most value for our customers’ Less than truckload freight. LTL freight management is a transportation mode to ship your freight which requires a transportation manager to have the ability to juggle many things in order to maximize efficiency and maintain overall transportation costs. There are not any reliable LTL load boards, such as in Full Truckload, nor is it as straightforward as the small package marketplace mastered by FedEx and UPS. Shipping LTL is a complex, process heavy, and hard to measure way of procuring transportation for your freight, unless you are lucky to have the talent, resources, and flexible smart technology. As companies grow, and they ship more LTL freight, it gets harder and harder to manage and feel confident you are making the right decisions to continue customer satisfaction and proper management. By focusing on this niche, we have really maximized our expertise, and our customers, who ship freight, get that benefit of years of experience. Therefore, our freight shipping customers get more long term sustainable value through our transportation management system and expert freight services which focuses on less than truckload freight management.
Not all businesses have the vision or wherewithal that some manufacturers or distributions have in redesigning its supply chain network. Often they are more concerned with putting out tactical fires than sparking strategic initiatives, which is why businesses turn to logistics providers in the first place.
Outsourcing has traditionally served as a means for companies to unload a non-core activity, managing a commodity-type service, for example, reducing freight spend or inventory carrying costs. Not all outsourced logistics partnerships are alike, of course. Some are purely tactical, relying on asset-based resources; others are more strategic, requiring a thorough and systematic consultative approach. Partnerships generally fall somewhere in between. But as businesses migrate toward more complex levels of outsourcing, the scope and detail of their supply chain has to change.
When companies consult logistics providers for assistance, typically the company need specific solutions. While some logistics providers try to be all things to all customers, a difficult, perhaps impossible, task in today’s increasingly diversified 3PL mix, logistics providers create greater value by offering the best possible solution.
Sometimes this solution requires a collaborative approach among multiple service providers, and this is where we have seen the rise in the us of the 4PL dynamic (For a great resource on 3PL vs 4PL, make sure you visit our informative post which breaks down all layers of logistics).
But not all logistics providers are capable of taking a step back and seeing the forest (the outsourcing market) for the trees (customer needs). In the 3PL industry at large, some logistics providers become caught up in driving continuous improvement in day-to-day operations and do not address strategic ways to properly meet clients’ changing needs. Reducing freight costs by 10 percent is not a value proposition, or at best is a weak one. Improving inventory turns by 30 percent or increasing market share by three points are strong value propositions offered by logistics providers.
For example, Cerasis has affiliate partners, who are also logistics providers that have a niche as well, that allow us to focus on what we do well, technology and service for LTL freight management, and what they do well, such as international freight forwarding, once our trucks gets to the port and it’s ready to go overseas.
But as with any outsourcing initiative, the stakes are equally high when relinquishing control to third party logistics providers.
The notion of a multiple logistics providers arrangement can be troublesome for companies, especially when analyzing costs. The layering of profit for multiple providers may seem ominous for the outsourcer; and for the service provider, it stresses the importance of bird-dogging strategic value to mitigate these concerns.
As always, the focus needs to be on the shipper and what their desired outcomes are so then the niche logistics provider can create solutions based on those outcomes. After all, it is always about the customer and the relationship.
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