There are several important things you should look for when selecting a logistics company. This guide will help you understand what to look for and why each element matters to your operations.
1) The Ability to Leverage Economies of Scale when Purchasing Transportation
Leverage is very important when looking to reduce shipping costs. By leveraging your spend with others, you can receive more competitive rates from carriers. When looking to partner with a logistics company, inquire about the size of their total spend for a particular mode of transportation. If you partner with a 3PL company that only spends $20 million in LTL, you might not get rates as good as if you partnered with a 3PL that spends $200 million in LTL. And of course don’t focus solely on the amount of money that a logistics company spends – look at how well the logistics company fills your other criteria as an outsource partner. Also important is the relationships they have with their carrier base, because business is still about relationships.
2) Technology that allows Complete Tracking over All Modes of Transportation
Most companies rely on the carriers tracking site to monitor their shipments. And since most companies have shipments moving by multiple modes (Truckload, LTL, Intermodal, International) it can be time consuming to check many sites to get this information. Your logistics company should be able to track your shipments regardless of the method of transport. When used properly, this information can automatically update your customers (and your office) on the location of your products, confirm rates being charged, and allow you to monitor the efficiency of your transportation choices.
3) Experience in implementing Best Practices for Vendor Routing, Carrier Selection, Shipping, and Receiving Procedures
“Best Practices” are given that name because they work better than anything else. A logistics company usually has vast experience in developing Best Practices. However, it’s also very important that the company have experience in implementing them. You should understand their selection process and why they make certain choices before you ever pass over the first shipment. This is especially important if your packages have certain requirements – for example, items that could be harmed by low temperatures may not be suitable for transport by air, and your logistics company should have a plan in place for dealing with any special requirements you have. A logistics company can also share Best Practices with your team for the transportation related functions they handle, so that everything is operating like a well oiled machine.
4) Technology that Optimizes Shipping and Manages Multiple Carriers and Carrier Rates
The shipping industry is extremely complex and choosing a carrier is more than just getting the best rate. You need to investigate a carrier’s insurance, check their safety rating, review any shipping contracts, and monitor rate tariffs. Any one of these components can change several times during the course of a relationship. However, technology can manage this information in real-time, helping you determine the best carrier to use for a given shipment. The technology needed to do this is expensive, but the best logistics companies will include a TMS (Transportation Management System) that you can access to help ensure that you get a truly competitive rate and a carrier that is fit to transport your shipment.
