2018 continues to be the year of the carriers as capacity continues to be stretched thin. The lack of readily available truck capacity has resulted in more expensive rates and difficulties in booking shipments. There are a few underlying causes for the capacity crunch, such as economic growth, the ELD mandate, and dangerous weather conditions. We have discussed these issues extensively in previous blog posts, so if you’re interested in learning more, please check out the embedded links. For this article, we will focus on the ways a 3PL can help shippers adapt to the capacity crunch and perhaps gain advantages over its competition. In today’s unpredictable marketplace, it is more important than ever to address inefficiencies and performance gaps in your supply chain. The capacity crunch will make these weaknesses even more glaring if they are not confronted. Partnering with a reputable and reliable 3PL such as LTX can provide many benefits that can allow a company to thrive in the present marketplace. Now let’s get into the details.
The climbing shipping rates are a direct result of the capacity crunch. As supply (capacity) becomes scarcer and demand remains level or even increases than costs (rates) will increase as well. This is perhaps the first lesson of free-market economics, but its importance cannot be underestimated. 3PLs have the competitive advantage of buyer power. Because 3PLS represent many different customers and large amounts of freight volume, they can better negotiate advantageous freight rates for their clients. The greater the 3PLs buying power, the more indispensable their business becomes to the carrier. This is what drives 3PLs’ power in negotiations. This power can result in not only better rates but increased service provisions and other valuable options for the 3PL’s clients.
Shippers often have difficulty in identifying carriers that would create the most value for their operations. Every resource that a shipper expends on searching for optimal carrier relationships takes away from their core value-adding activities. For example, if you are a t-shirt manufacturer, would you want to spend large amounts of time and money on carrier identification and shipping operations, or would you prefer to invest the resources into your core t-shirt manufacturing business? Contracting with a 3PL can take these issues off your plate and provide upgrades in your shipping operations. These upgrades could translate into competitive advantages for forward-thinking firms. Strong 3PLs have access to a large carrier pool which allows them to identify carriers that would be most beneficial to their respective clients in both efficiencies and cost-savings. Furthermore, effective 3PLs can help manage the day-to-day fleet operations. This could take the form of driver hiring, payroll, and auditing processes. With the ELD mandate continuing to reshape the marketplace, freight operations will increase in complexity. Partnering with a 3PL is a good way to confront these issues head-on and come out a stronger and more efficient company.
Another advantage that 3PLs can offer for businesses struggling with the capacity crunch is in technology. Shippers can take advantage of advanced technology such as transportation management software (TMS) without having to deal with the massive price tag. This type of technology can help identify available capacity as well as pinpoint areas of inefficiency in your supply chain. Both solutions can help lessen the negative effects of the capacity crunch. Most 3PLs will offer a wide variety of technological solutions for their clients. LTX, for example, offers a wide variety of options for our clients. Check out our technology solutions page to learn more.
LTX specializes in less-than-truckload shipping, but we have the expertise to effectively manage a variety of different shipping modes. Any reputable 3PL will be similar in its ability to offer flexible multi-mode solutions for clients. This flexibility is incredibly beneficial for shippers because it allows them to take advantage of areas of capacity that they would normally be unaware of. Strong 3PLs can consolidate shipments effectively as well as identify the ideal shipping mode for a piece of freight. This can result in both cost and time reductions which can boost a company’s profitability.
There is a lot of uncertainty surrounding the future of the freight industry. The shortages in trucking capacity are causing many headaches for supply chain managers. Partnering with a 3PL such as LTX is a great way to address current problems, as well as mitigate the risk of future ones. If you would like to take the next step and revolutionize your supply chain, then please contact us below today!