Running Your Own Freight Management: 3 Reasons It Doesn't Make Sense
If you are a small to mid-sized business (SMB), chances are good that you run your own freight department. Every few years, the boss might trigger an evaluation of the strategy—“Freight isn’t our business…are we better off bringing in an expert?” —but most businesses stay the course. If you’re the boss, here are three common reasons you’re likely to hear for maintaining an in-house freight department and why, in a changing freight market, these reasons may no longer make sense.
1. “Service levels will decline.”
The common perception is that a hired supplier won’t have the same commitment and, therefore, won’t sweat the details like someone within company. The reality is that service levels most often improve after outsourcing. According to the 2016 State of Logistics Outsourcing report, 93% of 3PL users report that the relationships are successful, and 83% said customer service has actually improved.
2. "We'll end up paying more."
Freight managers like to talk about their rate negotiation skills—often for good reason. They are probably driving the lowest rate they can get given their limited volume. But here’s the thing. Beating up carriers on rates is an old-school strategy that doesn’t work in a tight capacity market. Carriers are less likely to buckle on rates when there are 10 other shippers negotiating for the same lane. Today, better rates are a factor of freight volume. While a small freight department might have $2 million in LTL spend, a 3PL might have $50 million or $100 million. With that kind of leverage, the 3PL will command a much lower rate that can be passed on to the SMB.
3. "Why change? It's working."
Freight managers at SMBs typically do a superb job with the tools they have, and they’ve got the statistics to prove it—impressive graphs that show costs over the years going down as service quality improves. But better doesn’t necessarily mean good when the barometer is your own performance. 3PLs leverage advanced transportation management technology to optimize shipments and employ best practices gleaned from hundreds of different customer implementations.
Time to Take a Closer Look
The freight market is undergoing big changes and the time is right for SMBs to reevaluate current freight management strategies. The key question this evaluation must answer: can an internal department with a small freight spend secure the capacity and rates the business requires?
Are you looking to understand if outsourcing freight management makes sense for your business? Contact Redwood Logistics at www.redwoodlogistics.com or call (773) 342-5780 for a no-obligation transportation assessment.