TL Logistics Software – How Does it Compare to Third Party Logistics?

If your company is at the point that it ships enough goods to benefit from truckload (TL) shipping, achieving the optimal truckload transportation management system will require careful consideration, beginning with what logistics option you should choose. In most cases, companies have three basic options for applying logistics to the shipping process: hiring an in house logistics expert; contracting with a third party logistics (3PL) provider; or implementing TL logistics software-also known as truckload logistics software.

If your company feels like other shippers, it would probably prefer to have its own logistic expert on location. But, if adding a $70,000-$90,000 salary to your payroll isn’t acceptable, then contracting with a 3PL provider for TL shipping solutions or implementing logistics software are more affordable options.

To understand what you get when you hire a 3PL provider, it helps to distinguish the four types of 3PL providers: standard 3PL providers, which offer basic 3PL services and usually don’t feature 3PL as their main function; service developers, which offer a more specialized range of services than standard 3PL providers; customer developers, which manage a company’s entire shipping process but don’t suggest innovative shipping solutions; and customer adapters, which manage a company’s shipping process and propose innovative solutions.

If you were only looking for TL shipping solutions, hiring a standard 3PL provider or a service developer would be the most cost effective option. However, these types of providers typically place their customers with carriers that offer third party logistics providers a discounted rate that they profit from by charging their customers a rate that exceeds it.

If you think that this scenario sounds disingenuous, it is, especially as it places the provider’s interests above the customer’s in such a way that a customer has little chance of realizing optimal truckload shipping solutions, which is why it turned to the provider in the first place. TL logistics software, on the other hand, removes this situation by doing the work of a logistic expert and allowing companies to become their own logistics provider.

Like a logistic expert or customer adapter, the software evaluates every aspect of the truckload shipping process (i.e. route analysis and optimization, freight optimization, payment arrangements, etc.) and presents companies with a list of ranked shipping options that can be selected through the use of a user-friendly interface. If cost savings is a major goal in your company’s shipping process, logistics software offers a dual cost savings approach: it negates the need to outsource logistics and uncovers shipping solutions that offer the lowest price for you shipping needs.

Logistics Software Provides Companies With Freight Optimization

In the manufacturing industry, the discipline of logistics focuses on efficiently moving products from the manufacturer to the buyer. For large manufacturers, logistical operations can represent a large expense, especially when logistical elements are managed separately instead of being integrated into one solution. In an attempt to take the time and guesswork of out executing logistics, many companies totally or partially outsource their freight optimization needs to third parties. A complete outsourcing amounts to hiring a company to move products throughout the entire supply chain, while a partial outsourcing involves letting a third party manage the transportation of goods through the “stages” of the supply chain. However, implementing logistics software is a more cost effective way to achieve freight optimization that offers the same level of quality as a third party logistics provider.

There are several factors that contribute to a manufacturer’s total shipping costs, including warehouse fees, inventory fees and freight carriage fees. To minimize these fees, a manufacturer might choose to ship by air carrier instead of in tandem with freight carriage, significantly reducing warehouse fees by moving the goods from manufacturer to buyer in a matter of hours. However, to save the most money, companies have to examine all three cost areas with an eye toward developing an integrated cost savings solution. In developing such a solution, there are two basic issues that manufacturers must address: finding the right mix of freight carriage, inventory and warehouse services and finding the best price for each one.

Logistics software can help by providing an analysis of service combinations in relation to individual service cost. For small to midsize companies that deliver goods from the assembly line directly to retail outlets, logistics software can offer a basic analysis of routing options and freight rates. But companies that use multiple warehouses and multiple supply chain locations may require more, such as production scheduling analysis that develops manufacturing plans with regard to multiple supply chain locations (i.e. company’s whose products are assembled at more than one location before reaching the retailer).

The basic advantage of logistics software is that offers refined shipping solutions that meet the needs of a variety of manufacturing situations (and does so at a lower cost than hiring a third party logistics provider). For example, some solutions may focus on a particular freight carriage issue, such as analyzing how to increase delivery time by studying construction schedules and highway traffic data, while other solutions may focus on offering an integrated solution for all logistical concerns, including carrier loading, weight distribution, cube optimization and shortest path to destination. Studies show that manufacturer’s who implement logistics software regularly realize a 10 percent decrease in shipping costs after the first year.

Whether your company has its own trucking system or uses a third party, logistics software can help reduce your delivery costs without compromising punctuality, efficiency or freight safety. If you need to simplify your delivery process and reduce your cost of shipping, consulting with a logistics software provider is the best way to arrive at a solution that accomplishes both at the same time.

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.