Dustin Snipes – Enterprise Sourcing Manager, BlueGrace Logistics
“I lose control of my transportation with a 3PL.”
“I started with a 3PL and had a multitude of issues.”
“I do not see the value in a 3PL partnership.”
These are all quips heard when calling on potential new 3PL clients. When starting a 3PL partnership, the new customer gains visibility. A successful 3PL partnership gives clients visibility into their supply chain that they may not be ready to see and that may cause internal and external issues.
For example, the client had a carrier relationship before the 3PL came on board and the customer service rep would receive quotes from the carrier websites and book the shipment. When the invoice arrived, the accounting department did not have a proper system setup to make sure the quoted cost is also the invoice cost. Somewhere along the way there was a re-weigh or re-class and the invoice cost was 20% more than the quoted cost. The bill did not seem uncharacteristically high to accounting, so they processed the payment to the carrier accordingly.
There are a multitude of issues with this type of arrangement:
- There is not a quote cost to invoice cost verification system.
- This example is just one bill. What if the shipper is doing 50 bills a week? The cost can become exponential.
- Why was there a re-weigh? Is the business using a certified scale? If every pallet was weighed on a certified scale the shipment was not be subject to re-weigh costs and re-weigh fees.
- Why was there a re-class? Is the client up to date with the NMFTA? The class codes can sometimes change on a weekly basis and the shipper may not be aware!
- The shipper is responsible for freight bill pay and audit. If the client is busy shipping more than 50 bills a week and receiving stacks of paper invoices, one could see why these extra fees are just being approved and paid.
- What is the main KPI? Freight cost as a % of PO cost, so if a $100 shipment turns into a $200 shipment the profitability on that order just got reduced by 50%.
These are some of the issues found on just one shipment.
A good 3PL is going to pull up the mattress and shed some light to the bugs that have been hiding in your transportation program. As a shipper, know that the probability of issues being hidden are extremely high if they are not utilizing a 3PL. Let a 3PL handle your freight program and spend more time focused on your profits.
Do not be afraid of visibility – It is worse to not have any.