The advantages of insourcing logistics management
It used to be that outsourcing was in vogue and always the first choice among the learned business school elite. The trend is reversing as logistics management software has evolved and become highly affordable by mid-sized businesses. By using advanced and capable software more and more companies are insourcing logistics management and saving the markup of third party logistics providers.
While it’s true 3PLs did have their place in the market; they did so by procuring expensive TMS software. Now a new software revolution has come along and placed highly capable logistics management solutions into shipper’s hands and eliminated the need to outsource their logistics.
A typical actual 3Pl markup is 13%. How can you tell this? Read the income statements of publicly held 3PLs like CH Robinson, Echo Global, XPO and Hub Group just to name a few. In some cases, especially those who haven’t tightly monitored their outsourced logistics, that markup can exceed 20%. Even shippers with a modest freight spend can understand that with very little cap-ex and monthly subscription fees, they can save real money and probably enhance their customer’s experiences.
SaaS TMS Software has been growing rapidly and prices have dropped significantly. Specialized functionality is also available at a modest price. You can also job out things like RFQs and carrier qualification to create a stable of available contract carriers for truckload shipping. LTL carrier bids can be easily managed and displayed with competitive rates on the same screen in a modern TMS.
It is not that 3PLs can’t add value, the better question is, how can they make these high margins and retain your business? There is plenty of talent in the labor force to effectively manage your logistics. Many current employees of 3PLs would gladly leave the boiler rooms of their current employment for a steadier career at your company.
ShippersEdge has been providing SaaS logistics management software for over 15 years. Talk to us about how to insource logistics management. Call 952-777-4421 or visit us on the web at www.shippersedge.com/info for more information.