There was a time when managed transportation services were mostly utilized by small to medium-sized shippers that lacked the internal resources to make it part of their core business strategy.
The rule of thumb was that companies with more than $100 Million in annual freight spend should manage their transportation in house; otherwise, it should be outsourced. However, I don’t think this rule applies anymore. In fact, I see companies of all sizes successfully outsourcing some or all of their transportation management to third parties.
A decade ago, I’m not sure I would have recommended this strategy, but now that the managed transportation industry has matured and the transportation environment has evolved, companies of all sizes can potentially benefit from outsourcing some or all aspects of their transportation operations.
While there are several good reasons to reconsider your stance, I want to examine the four that I feel are most prevalent.
Technology is changing rapidly across supply chains, and transportation is no exception. There are the traditional technologies such as Transportation Management Systems (TMS) and Electronic Data Interchanges (EDI) that have been around for years, but emerging technologies such as real-time visibility platforms (e.g., FourKites, Macropoint, Project44, etc.), blockchain, and artificial intelligence are now becoming more readily available. As more players enter the field, it can be difficult to keep up with these new technologies, let alone assess and determine if they are right for you company. How do you know if the technology has staying power? Once implemented, are you actually going to derive expected value?
Managed services providers are investing in and evaluating a lot of these new technologies as part of their business model and can include external technologies as well as internal development. They possess the ability to try new things and spread the financial risks across multiple accounts while keeping their customers up on the latest technology.
Visibility goes hand in hand with technology. Knowing where you product is and when it is going to arrive is more important now than ever, and managed service providers understand the complexity of this problem. Leading managed service providers utilize control towers that allow them to combine information from different sources such as supply chain visibility platforms, internally developed tools, traditional EDI, weather data, and even news feeds to help provide an accurate snapshot of where your shipment is and when it will arrive. The control towers are even starting to provide updated ETAs using artificial intelligence, allowing shippers to further optimize their operations.
Continuous improvement is an area where I see many companies lacking in capabilities for transportation, for most organizations do not have a team dedicated to identifying transportation improvement opportunities. Many service providers have very strong improvement programs in place and offer a standard project methodology as well as dedicated resources seeking opportunities for enhancement within your transportation network. This is not just an “every now and then” approach, but a true continuous approach.
Transportation knowledge is an area that hasn’t necessarily changed, but should never be overlooked or taken for granted either. This is an important aspect of managed services, and it can be a great benefit to client companies in multiple ways beyond just the obvious. As providers have matured they have gained more knowledge and have a deeper pool of clients to pull experiences from.
Managed service providers have many clients that are likely experiencing many of the same transportation challenges (OTIF & MABD, I’m looking at you) and are able to utilize shared experiences to help all their customers. Additionally, most providers have customers in different verticals that they can “borrow” ideas from to help another vertical. Also having a large base of knowledgeable transportation personnel can help scale operations for clients during their peak periods.
Understanding if you can benefit from managed services takes thorough evaluation of your current organization and operational procedures. Chainalytics can help your company take an objective look at your transportation functions — from procurement to payment — to assess where your processes and tools rank in today’s transportation environment, and help your transform your transportation operations into best-in-class through internal changes as well as helping you select a managed service provider that best fits your organizational needs. Contact us if you’d like to learn more.
Kirk Graves is a senior manager in Chainalytics’ Transportation competency. His experience includes evaluating transportation operations and systems to access current practices and providing recommendations on process and system improvements.