Managed transportation involves shippers outsourcing freight and logistics processes to a third-party logistics (3PL) provider or logistics services providers (LSP).
What is Managed Transportation?
Managed transportation is the process of using a 3PL or LSP to handle freight and logistics activities, including services like procurement, rate management, execution, optimization, and freight audit and payment.
Outsourced managed transportation provides benefits to shippers who use it to gain more efficiency in their operations and streamline logistics and supply chains. Due to these benefits, it is common for both large organizations and small companies to outsource managed transportation to 3PLs and LSPs.
Components of Managed Transportation
What is managed transportation? Managed logistics typically include:
- Transportation Management Systems (TMS).
- Freight Audit and Payment.
- Carrier Management.
- Reporting and Analytics.
Benefits of Managed Transportation
Outsourcing managed transportation provides many benefits that make it worthwhile for shippers focused on improving their processes and operations.
These are some important benefits of managed transportation:
- Improved Access to Capacity: It’s challenging to consistently find the amount and type of capacity needed for each shipment, especially with volatile dynamics within the industry. Third-party logistics providers and LSPs help customers find better access to freight capacity for every equipment type at the best rates.
- Better Visibility: Managed transportation providers enhance supply chain visibility into the providers they work with, which is beneficial to optimizing processes and providing a better customer experience.
- Reduced Costs: 3PLs and LSPs create more efficiency within shipping and logistics, which ultimately helps control and reduce supply chain costs. Managed transportation providers are also often able to get the best rates by relying on economies of scale and network optimization, and they can create a variable cost structure that benefits shippers. These companies can also improve financial processes by supporting freight audit and pay.
- Better Use of Resources: Managed transportation companies allow shippers to outsource non-core processes, which can use resources more efficiently.
- Enhanced KPIs: Managed transportation services include finding ways to improve key performance indicators like streamlining shipment speed, reducing damage frequency, and improving ROI.
- Improved Communication: A 3PL or LSP can become the common link between the shipper and a network of carriers, providing a hub for better communication, especially when using a transportation management system.
- Better Operations: LSPs support many aspects of operations, helping optimize risk management, operational control, reporting and analysis, and more.
Considerations When Implementing Managed Transportation
Being strategic maximizes the chances of success when outsourcing managed logistics. These steps can help implement this service in the best way possible:
- Determine Needs: Not all shippers have the same needs that a 3PL or LSP will address, so it’s essential to determine specific needs and discuss them with the 3PL.Each business has specific freight volumes and shipment frequencies, a unique size and budget, plans for growth, etc.
- Use Data: Data provides useful insights that support optimization and efficiency, so collecting it helps with the implementation of managed transportation services. Using a TMS is the best way to collect and bring together disparate data from various sources and use it effectively, and it also provides real-time data. This data supports decisions on needs and guide the managed transportation provider’s services. Then, having it set up makes it easier to track KPIs and the benefits the 3PL/LSP is providing.
- Learn How the 3PL Works: When outsourcing managed transportation, companies tend to charge a service fee. Determine this and other factors of working with the LSP.
- Determine Structural Changes: Figure out how outsourcing will shift internal tasks into external ones and how that will impact the workforce and resources. Figure out how best to transition and whether resources could go to other areas.
Learn how the MercuryGate TMS enables 3PLs to provide and execute managed transportation services to customers
How to Choose the Best Managed Transportation Service Provider for Your Needs
It’s essential to find a managed transportation partner that will provide benefits and not become a liability. Take these steps to choose from managed transportation providers:
- Identify targeted business needs, such as freight volume and plans for growth.
- Compare managed transportation companies by looking at their offerings and considering benefits.
- Narrow down the list to the companies with services that match business needs and will continue to do so in relation to scaling.
- Vet the list of companies based on references and experience.
- Pick the managed transportation providers offers the best value based on all of these areas.
Need help starting the search? Look into MercuryGate’s partners providing managed transportation.
Managed Transportation + TMS = Great Power & Results
Outsourcing managed transportation can provide a host of benefits to a company. The same is true of a transportation management system (TMS), which offers technology that can help optimize processes, consolidate data to gain business insights, and improve a transportation network functionality.
The two become even more beneficial when they’re used together. Managed transportation providers who use a TMS are best at consolidating freight most efficiently, planning effectively to use resources best, creating better cash flow, and finding ways to improve KPIs like cost and speed per shipment.
Learn more about how MercuryGate can provide the benefits of an effective TMS for 3PLs.
Try MercuryGate’s ROI calculator to estimate the earnings and savings you could expect from MercuryGate TMS.
