The 3PL Battle for the Future


Scott McDevitt | Propel Software Solutions

P and P Studio/“Once a new technology rolls over you, if you’re not part of the steamroller, you are a part of the road,” said author Stewart Brand. The logistics industry, in particular, has seen this play out over the past few years with an influx of cutting-edge technologies, services and financial investments. And if one thing is guaranteed, it’s that technology advancements aren’t going to suddenly stop.

Looking ahead, we’re seeing a challenge for third-party logistics companies that have built their company around brokerage. The model for brokerage has been quite successful, especially in recent years, with the boom in manufacturing and with capacity crunches. However, new technology players have started making a dent. Carriers and technology providers, having realized that brokerages make their money on marking up the rates, have developed online technology that ultimately does the same thing: provide shippers with a freight quote and carrier. The only difference now, is that shippers are getting these rates for free and don’t see the value of using a brokerage provider. There is an obvious squeeze to cut out the “middle man” of brokerage 3PL providers.

So how can you as a brokerage provider ensure you’re staying ahead of the change curve and succeed in the years to come? Here are four ways you can get your business ready for the future.

1. Shift from Brokerage to Fully Managed Logistics

Shippers are aware that technology is rapidly changing their businesses and they don’t have the time or manpower to continually adapt. A fully managed, third-party logistics company (sometimes referred to as a 4PL or logistic service provider) can offer cutting-edge technology, ongoing business intelligence and reporting, and manage carrier relationships for the shipper. Ideally, as a fully-managed 3PL you will be providing your client quarterly or semi-annual business intelligence and updates. These should focus on claims, freight audit (bill-scratch) reports and carrier scorecards among other reports a robust transportation management system (TMS) can provide. This lets the shipper focus on growing their business. As they put trust in you, your company is providing them with actionable issues that are currently hurting their bottom line.

Ultimately, a good 3PL relationship will save shippers not only a tremendous amount of time, but also money. These are services and value that a free, online spot freight quote can never match.

Part of what will set you apart from your competitors is not only your expertise and knowledge of emerging technology, but also your willingness to adopt them.

2. Provide Tracking Visibility

Real-time tracking visibility is inherently complex given the number of carriers and their various APIs. In addition, many smaller carriers don’t have any “real-time” tracking on their loads. This means a lot of manual work for 3PLs to follow up on loads, but it’s a prime way you can show your dedication and proactiveness. Notifying the shipper of an issue before their customer calls asking where their order is ensures they aren’t put in an awkward spot, and it shows you care about them looking good. This might require adding additional staff that focus solely on tracking shipments and preemptively addressing issues your TMS technology flags.

3. Audit Freight Bills

Error rates in freight bills are still tremendously high, with reports of 4 to 7 percent of freight charges being incorrect. As logistic and transportation costs rise, it is becoming even more important to get bills audited and find those mistakes. When talking to potential clients, ask them for their past 180 days of bills and pricing agreements. Also, complete a freight audit for them to show the money they could be saving. With existing customers, 3PLs should have strong relationships with the carriers’ billing departments to get overcharge invoices corrected quickly by filing the claims with the carriers and pressing for quick recovery.

Auditing freight bills must also ensure that National Motor Freight Classification (NMFC) codes on the shipper’s bill of lading are correct and the load is not being misclassified at a higher rate. This is a common occurrence with shippers who don’t pay attention to their freight classes or who don’t realize they have been put into a Freight All Kinds (FAK) class that is more than what their product classification is assigned. You might be able to negotiate a lower class or FAK, giving huge savings back to the shipper who didn’t even know the money that was being wasted.

Reviewing proposed NMFC class changes that will impact your client is another proactive step you can take to create that extra amount of expertise and stickiness. All proposed amendments to NMFC class changes are provided at least 30 days in advance to the public. This provides you with some time to let your client know and potentially push back on the carriers to make the change “revenue neutral” for them, saving your client a tremendous amount of money.

4. Know What’s on the Technology Horizon

Blockchain, autonomous vehicles, big data and 3D printing are just some of the buzzwords you hear every day. You probably don’t have solutions to these technologies, but you should be prepared and have a pretty good answer when a customer or prospect asks you about them. Part of what will set you apart from your competitors is not only your expertise and knowledge of emerging technology, but also your willingness to adopt them. And not all technology trends are futuristic at this point. Artificial Intelligence, blockchain and APIs are bringing some incredible freight visibility to shippers and third-party logistic providers.

The issues discussed above, tracking, auditing and freight visibility, are all features you should be able to pull out or provide your client through a TMS. A robust TMS will provide you with business intelligence reports, tracking visibility and more. If your current TMS isn’t providing you with an intuitive and easy-to-use interface, robust reporting features, system speed, bill of lading auditing, tracking visibility, and secure solution, it might be time to explore different options.

Proactively providing solutions and real value-add will differentiate you from the free online services and ultimately help you grow your company. Will technology like artificial intelligence, blockchain, 3D printing, and other changes impact your business? Absolutely. But can you still be prepared to meet your clients’ needs? Absolutely. Timeless business principals of providing extra value, excellent customer service and true partnerships won’t change. Your ability to shift from just a transactional relationship to a partnership will ultimately be the winning strategy for you to succeed in today’s technology-driven world.

Scott McDevitt is President and CEO of Propel Software Solutions, based in Exton, PA. He may be reached at [email protected]