Logistics Software Solutions – How Do They Compare to Third Party Logistics?

Third party logistics (3PL) is the most popular choice for freight logistics among small to midsized companies. In order to help companies that regularly make shipments that are too large to financially benefit from parcel shipping and too small to financially benefit from full truckload (FTL) shipping, companies turn to third party logistics providers to get them the best deals on less than truckload (LTL) shipping, integrated shipping methods and to reduce the delivery of products to retailers. To these ends, 3PL providers significantly reduce their clients’ shipping costs compared to what they would spend on shipping without the aid of freight logistics. But they obviously do so by charging their clients for freight logistics services.

So, what’s not to like about hiring a 3PL provider to reduce your company’s shipping costs and ensure that your goods are delivered in a timelier manner? After all, is there really such a thing as realizing freight transportation solutions without seeking the help of freight logistics experts? Yes and no. If freight logistics isn’t one of your company’s core competencies, you’ll certainly need to get logistics solutions from those that specialize in providing them. But you don’t have to turn to a 3PL provider and pay a middleman to provide you with shipping solutions when you can instead use online logistics software.

The difference between 3PL and logistics software solutions-also referred to as logistics management software-typically doesn’t lie in one having more logistics expertise than the other; rather, it has to do with how the logistics information is supplied, how much it costs and how much control companies have over their shipping process. Essentially, a third party logistics provider uses logistics management software to provide you with shipping solutions, whereas online logistics software lets you act as your own logistics provider for an affordable monthly fee. In no case will you find a 3PL provider that offers their services for the low price that you pay for logistics software solutions, nor will hiring a 3PL provider offer you as much control over your shipping options.

Having complete control over your shipping process has two main benefits: you can research the companies that you’re considering hiring and you never have to deal with a middleman’s business policies affecting the price or availability of certain shipping options. Aside of the financial and shipping management benefits offered by logistics management software, its greatest strength is its extreme ease of use. Although the term logistics software implies computer expertise, logistics software comes with an easy to use interface that neither requires expert computer knowledge or expertise in logistics, meaning that each of your company’s departments can be involved in its shipping process.

The Benefits of Implementing Freight Logistics Software

More Control

Freight logistics software-also known as truckload logistics software-lets companies supreme control over the economy and timeliness of their shipping process by allowing them choose their own shipping options. When companies outsource to a third party logistics (3PL) provider, the provider develops shipping solutions that are in its best business interest, meaning that shipping companies can miss out on shipping options that would benefit them the most. Because logistics software is tailored to apply to a company’s unique shipping process and offers an easy to use interface, it does not require logistics expertise of its users. In addition, because logistics-software is offered on a SaaS model, it can easily be re-adapted to a company’s shipping needs as they change over time.

Lower Cost

Logistics-software costs less than 3PL for a simple reason: it is priced as a software solution and not as a logistics consultancy service. The cost of logistics software is based on a company’s shipping requirements, allowing companies to pay for only as many services as they need. For example, if a small company’s shipping needs consist only of less than truckload (LTL) shipping arrangements, the options offered through logistics-software will reflect these needs only. In addition to saving companies money on the logistics function, logistics software also allows companies to save on shipping solutions. Whereas some 3PL providers (e.g. non-asset based providers) charge shipping companies over and above the cost of a shipping solution in order to profit from a carrier discount, logistics-software insures that companies never pay hidden fees.

Integrated Shipping Solutions

When shipping companies outsource their logistics to asset-based logistics providers, they only realize shipping solutions that can be accommodated by the asset-based provider’s transportation assets (e.g. trucks, boats planes, etc.). But with logistics software, companies can realize shipping solutions that involve various modes of transportation to a certain location. For example, logistics-software may reveal that shipments to a certain location would be cheaper to transport by air for the majority of the trip due to warehouse fees that would result from ground shipping. Considering the cost of the shipping process, realizing integrated shipping solutions on a daily basis can dramatically impact a company’s bottom line.

Significantly Improved Bottom Line

Logistics-software can improve a company’s bottom line by presenting the most economical shipping options for a company’s shipping needs. But it can also save companies money by removing the need to hire in house logistics professionals when they grow large enough to purchase their own shipping fleet. Although logistics-software is often presented as an ideal solution for small to midsized companies that can’t hire their own logistics experts; it is also used by companies whose annual shipping costs exceed six figures, allowing them operate without the cost of logistics professionals. Research shows that companies can reduce their overall shipping costs by 10 percent after only one year of using logistics software.

Logistics Software is the Ultimate Transportation Management Program

It’s difficult to think of an area of business that hasn’t benefited from SaaS offerings. And if you own a manufacturing company or plan on starting one, you may be familiar with truckload transportation management software, a form of logistics software that is available on both a SaaS model and as an internal software solution. The value of logistics software is typically discussed in relation to third party logistics (3PL), with its main benefits being that it offers logistics solutions at a significantly lower price than 3PL while offering more shipping options.

Logistics software offers the same logistics expertise as 3PL providers for a lower price because it’s priced as a software service and not as a logistics consulting service. It offers a broader range of shipping solutions because it doesn’t act as a business entity that prefers its own shipping solutions or the solutions of its associates. But there are also other benefits of using logistics software instead of 3PL; below, we take a look at three reasons why logistics software is the ultimate transportation management program.

Companies Can Become Their Own Logistics Providers

When shipping companies get large enough, they usually purchase their own shipping fleet and hire a team of logistics professionals to oversee it. But for small to midsize shipping companies, the financial necessity of outsourcing logistics means that they have to maintain a relationship with a 3PL that 3PL clients regularly characterize as being distant and disconnected, and it’s easy to see why. If you aren’t a logistics expert, it’s difficult to maintain a business dialogue within someone who is. But logistics software effectively places the power of the logistics function in the hands of shipping companies by providing an easy to use customer interface, making it an ideal transportation management program.

Companies Receive a Comprehensive Logistical Approach

There are four types of 3PL providers: standard 3PL providers, service developers, customer adapters and customer developers. But only customer developers offer a comprehensive approach that results in new shipping solutions. The problem? Cost wise, hiring a customer developer is essentially like hiring your own team of logistics professionals. And if you can’t afford that, then hiring a customer developer is a bad decision as well. Companies hire standard 3PL providers and service developers when they have a specific need, but not when they when they want the best systematic shipping process; and customer adapters are hired by companies that simply want their shipping process “managed”.

Companies can Significantly Reduce their Annual Shipping Costs

Research shows that companies that implement logistics software can reduce their annual shipping costs by 10 percent at the end of the first year. With the aid of logistics software, shippers typically pay more than they need to in freight transportation and a variety other costs commonly associated with the shipping process, including but not limited to: TMS software costs, annual software maintenance costs, gain shares, freight margins and common rate based licensing costs.