A recent discussion on Linkedin regarding 3PL’s in the transportation market included a number of foolish comments made by a clearly disgruntled freight carrier sales rep. Below are the highlights from his misinformed, one dimensional, price hoarding rant, followed by my b*#!@ slap…
- “Most shippers of any regular frequency have become fairly saavy during the “great recession”. Most accounts I call on are turning away 3PLs because they don’t provide a value added. Even in the case of a small shipper (5-10 LTL shipments per month), I regularly see the difference in the 3PL price and the direct-to-carrier price to be under $10.00 on an average pallet sized shipment…”
- “A few 3PLs are great partners for both the customer and the carrier. Most are not. They regularly call the carrier with no idea of what is going on with a shipment THEY scheduled or the customer cannot get an answer on a shipment, claim, pickup, etc…”
- “I have worked in one of the largest markets in the country and in one of the smallest and the song remains the same, an 800 number, a computer and assorted tariffs from multiple carriers do not a logistics provider make.”
- “…what I do know about most 3PLs is: 1) They depress freight rates which directly impacts the livelihood and opportunity of carrier associates. 3PLs don’t create freight, they create lower profitability on the freight that exists. 2) They will undercut their carrier “partners” without hesitation yet howl in indignation if a carrier dare “back solicit” a customer. 3) Frequently mislead or directly lie to a customer about how the customer-3PL-customer relationship is defined from a legal perspective. 4) No carrier does business with a 3PL because they want to. Why would they? It invariably results in the carrier moving the same freight at a decreased O/R.”
I’m also going to disagree with you on a number of fronts. There may be a number of 3PL’s who operate as such but you clearly underestimate the value in which a 3PL brings to a carrier. It’s obvious as to why you would have such bias. A good 3PL partnership does not hurt the carrier, it hurts the rep. The historic mentality of a carrier rep is to sell on price, price, price.
Of course, a carrier will make less direct profit on a shipment when the revenue is less. What you are overlooking is that the carrier has significantly less overhead on that shipment. The revenue may be less, but the profit % will be higher. The carrier is not paying a sales rep salary, car, commission, expenses, insurance, cell phone, etc. on that shipment. They are not paying the rent, electric bill, office supplies, phone service, etc. for sales to secure that shipment. With a 3PL using EDI and TMS, the carrier is not paying the administrative expense of tracking, uploading W&I or POD’s or communicating this with customers via phone or email. I could go on and on. This is a statistical reality and of course I would expect this to be overlooked by a sales rep losing out on commissions and thinking this is just a matter or price v. price.
Also way understated is the value of the 3PL. You are right that a carrier would not deal with a 3PL if it didn’t have to. But they have to – because a good 3PL can and does provide value that the carrier cannot. The carrier cannot provide a single source for data management, data warehousing, a single source for tracking, shipping documents, addresses, product information, carrier procurement and rate negotiating, unbiased carrier scorecards, etc. some of the best carriers, partners like SEFL or Con-way, can only provide the services that SEFL or Con-Way provide. Even YRC, who has some of the better technology, is leagues behind what a good 3PL can do. Customers cannot pay the hundreds of thousands of $ to purchase a TMS and even if they did and attempt to manage their own transportation, they are doing so at the expense of their core competencies.
A carrier and especially a carrier rep can only provide “Freight” Services, and as we all can see, this discussion group is for freight as well as LOGISTICS and SUPPLY CHAIN – two things which go way beyond the scope of what any one direct carrier can offer.
-Nick Klingensmith, Director of Sales and Personnel Development