The clue’s in the carrier: How outsourcing transportation can make good business sense  

Stephen Beard
25 December, 23

Over the last decade, the transportation industry has been turned on its head, making it more complex than ever to understand and keep up with. Long gone are the days when a brand would put out a request for proposal (RFP), choose a carrier based on the best rates, and then have their transportation taken care of for the next three years.

ECommerce has gone through rapid and intense growth over the last ten years, with more and more parcels entering the supply chain. Even before the Covid-19 pandemic, capacity and shipping had its challenges, with millions of eCommerce orders fail to be delivered in time for Christmas, as these issues rose to the surface. 

With industry growth showing no signs of slowing down and pivotal events causing large carriers to change their approach– cherry-picking business based on profitability and higher margins, rather than quantity, has become commonplace.  Given the surcharge and volume caps brands are dealing with, it is no longer viable to put all your eggs in one basket when choosing a carrier. As demand continues to outstrip supply, smaller regional carriers that were once overlooked have now become a necessity to guarantee capacity and the key to success is defining a strategy.

The new dawn of carriers

Defining and executing a robust and strategic approach to transportation is more important than ever, as brands look to multiple carriers in their network to ensure orders can be fulfilled as opposed to handling all volumes to just one. 

The challenge many mid-size brands face is having the capability in-house to   support this new narrative. With a strong focus on product, there is often less resource to dedicate to operations. Even large enterprises are finding it challenging to keep up in a game that has changed so quickly and significantly over recent years.

Insourcing the transportation function is no longer a simple task and requires the right focus and skills for the job. It is important to hire carefully when looking at this as someone who is experienced in the fluctuating ways of the e-industry will be likely to forecast and pivot where needed, to put your brand at a crucial advantage and navigate any potential risk to business continuity that may lie ahead.

Diversifying the carrier network

Postal strikes at critical times of the year (i.e., Christmas peak season) serve as a prime example of why brands need to acknowledge the risks associated with single sourcing within transportation.

An effective and diverse carrier network can be built for brands that know how to leverage these specialisms. However, with an abundance of hidden costs behind every rate card – including fuel surcharges, address corrects, and extended area zip codes, choosing the best carriers can become an overwhelming and extremely difficult exercise. Rate cards can no longer be taken at face value – without the knowledge of hidden costs, the cost of sending a parcel can vary greatly, having a significant impact on a brand’s bottom line. 

 Uniting technology and strategy 

One of the danger zones brands can fall into is believing that technology and solutions such as a transportation management solution (TMS) will act as the main solution for tackling this new complex carrier landscape. Technology can support and inform a strategy, but it is no good without a leader who can steer the ship. It is also important to note that having the right skills and leadership in place should inform which solution is the best fit for the business given technology doesn’t follow a one-size-fits-all approach. There are a variety of factors that can influence the suitability and requirements needed for a transportation solution.

Supporting sustainability 

With the right strategies in place, brands have the power to not only increase profitability but also drive forward the sustainability agenda. While in most other areas of business profitability and sustainability sit at opposite ends of the scale, within the operations function the two need to be unified. For example, when we get products closer to the customer by implementing a multi-node fulfilment network, transport costs go down due to reduced last-mile delivery, which naturally drives down carbon emissions. Using capacity on aeroplanes already carrying passengers is another great example of where this can be achieved. By optimising resources to carry cargo, the carbon footprint of the package is effectively zero as the plane would have already been making the trip. 

Making the most of alternative transportation options such as these, however, requires carrier diversity and optimization of your carrier network to negotiate. Again, knowledge is power in this scenario, making working with a partner who is aware of all these options and supportive of your own sustainability goals a key objective. 

The insourcing argument

There is often concern that outsourcing to a third party means relinquishing all power and control over transportation and being fully dependent on the external partner. Where there is a potential lack of knowledge around the transportation landscape, brands can be left feeling vulnerable. 

While these concerns are certainly valid, choosing the right partnership is crucial to alleviating any apprehension surrounding the outsourced approach. Bringing in a third-party logistics provider (3PL) can be beneficial for brands going it alone on the transportation front, but for it to work, a strong element of trust needs to be present from day one. 

The right partner

A good 3PL should be leading the conversation on transportation and bringing forward any upcoming issues that may lie ahead, along with any contingency plans that need to be considered. With the cost of transportation three to five times that of warehousing, you can’t be a good operations or warehouse partner if you’re not a good transportation partner. Proactivity around this area within the business is needed not only for brands to continue to trade effectively, but also to remain competitive and fulfil their growth ambitions – both now and in the future. 

Related posts

Advertisement
1400x220
600x600
Advertisement
TK23-022-Banner-AxlePower-1400x1200

Latest posts

19 July, 24
Two renowned businesses from Suffolk – a freight company and an electrical cable distributor – are celebrating 20 years of working together which has seen the relationship go for gold.