Managed Transportation Services:
3 More Reasons for SMBs to Switch
Few of the small and medium-sized businesses (SMBs) that use freight broker services have elected to capitalize on full-fledged managed transportation services. Their rationale: freight activity is limited so the volume can be handled with a skeletal internal staff. That’s a risky strategy in a capacity-constrained market where SMBs lack the systems and buying power to make their freight attractive to carriers.
First, let’s be clear about the difference between freight brokerage and managed transportation services. Freight brokers earn a commission for arranging shipments. The shipper provides them with shipment details – mode, lane, etc. – and then they execute that shipment. With managed services, the people who plan the shipments are employed by a 3PL that receives the shipments from the customer’s system, handles all planning – consolidation, route planning, mode shifts, etc. – and then executes.
In our last post, we covered 3 common arguments freight managers at SMBs make CEOs against outsourcing transportation management. Here are three more.
1. "We'll lose control."
The notion that if it is out of your hands, it is out of your control simply doesn’t hold up. Control is actually enhanced by outsourcing to a partner that has superior systems that can provide data on costs, carrier performance, delivery performance, asset utilization and other key measures. And if the boss wants an answer – what was our freight spend this quarter versus last quarter? – he can source that data himself, on the spot. He doesn’t have to wait for George or Ethel to get back from lunch. SMBs often lack the resources to make major systems investments. But outsourcing to the right 3PL partner brings all the benefits of advanced systems with no capital investment.
2. "We will lose our direct relationships with carriers."
Freight managers have spent years building carrier relationships and they worry about losing what they’ve built in one fell outsourcing swoop. In reality, that does not happen with managed transportation services. The 3PL will probably use most of the same truckload carriers that are already in place. For LTL there would likely be turnover due to the nature of the freight. But, in either case, there is no need to lose those direct relationships with carrier contacts. While the 3PL will want to handle any contract or rate-related discussions, a good 3PL partner will encourage active shipper participation in phone calls and planning meetings with the carrier.
3. "An outside partner won't respond as quickly to unexpected requirements."
In reality, it’s just the opposite. SMBs will simply not have the bench-strength and carrier base to respond quickly to volume surges and other unexpected requirements. 3PLs are built for scale. Larger staffs are cross-trained across multiple clients to step in when they’re needed. More importantly, 3PLs have established relationships with thousands of pre-approved carriers. A volume surge that would have triggered a frantic hunt for trailer space, at any cost, is business as usual for a 3PL. Through managed transportation services, the freight manager gains a reputation as a responsive and resourceful team member that can react quickly and professionally to meet the demands of the business.
To get more detail on the benefits for SMBs of outsourcing freight management, read our paper, “CEOs at SMBs Need to Focus on Freight – and Fast.”