What is Managed Transportation?
Components of Managed Transportation
- Transportation Management Systems (TMS).
- Freight Audit and Payment.
- Carrier Management.
- Reporting and Analytics.
Benefits of Managed Transportation
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
- 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.
How to Choose the Best Managed Transportation Service Provider for Your Needs
- 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.