The one constant in global logistics today…change.
Economic climates in manufacturing hotspots change, commercial regulations and political sanctions come and go, and new types of risks in the supply chain threaten businesses.
And we have all witnessed firsthand how labor issues can disrupt the flow of goods with the recent issues in US West Coast ports.
Through all this, the laws of supply and demand still hold true- allowing steamship carriers to dictate price and capacity, greatly affecting how shippers are able to maintain their landed cost of goods.
For shippers to thrive despite this complexity requires awareness of global business climates, proactive strategy, the right logistics warehouse, infrastructure, and flexibility to adapt to ever-changing conditions. More and more shippers are finding that they can no longer go it alone, so they turn to specialized service providers to support their global supply chains.
So how do shippers properly evaluate whether service providers are adding value? It’s no longer a matter of “I can save $50 on an ocean container, so I’ll use this provider” – transactional thinking can lead to exposing a supply chain to risk.
When evaluating third-party logistics providers, there are three basic areas in which they should be performing:
Risk Management – Perhaps the most crucial area where 3PLs add value is by mitigating risk for shippers. A supply chain at risk can expose a business to many things including missing time sensitive delivery windows of component parts or finished goods, delays in crossing international borders, or costly fines for non-compliance.
Those are tangible things that can be seen and corrected fairly easily - but what are the longer term effects a broken supply chain can have on a company’s brand name? Today’s consumer has access to many alternatives and wants immediate gratification. Failure to deliver product on time will degrade a company’s brand; an optimized supply chain is critical to business success today more than ever.
Visibility – Supply chain tracking in ocean transportation has been elevated through EDI technology and web-based trace & trace systems. Shippers know when containers are booked, picked up and on board a vessel, “in–transit”, cleared customs, landed, and delivered or drayed to their distribution point. Where a 3PL service provider can add value is by providing supply chain visibility. Visibility is integrating PO, transportation and inventory data to provide a clear picture of the supply chain. Visibility is having foresight to plan & flexibility to adapt to unforeseen issues to ensure product keeps moving from source to final consumer. 3PLs who provide visibility do so with a blend of technology and proactive service.
Cost Management – Finding the right balance between reducing the bottom line impact of transportation costs and maintaining a stable chain is an art. Logistics managers need partners who actively find the most optimal ways to transport their products. Tight delivery timelines require a provider to proactively manage each logistics detail to ensure there are no delays. When capacity is tight, being able to find space at a fair market rate can be invaluable. Other times, an out-of-the box solution is needed when unforeseen issues disrupt the flow of goods internationally or domestically. Shippers should always challenge providers to provide a blend of high level of service and fair market price. Regular evaluation of service and price performance is important as a shippers’ logistics needs change.
Logistics managers are faced with daily challenges. Having the right mix of service providers that understand these challenges, and how to overcome them is how value is created.
The eBook, “International Transportation: Price Matters, But At What Cost?” was developed for logistics managers to evaluate your own supply chain strategy & logistics infrastructure, while finding the right balance between level of service and cost.
Russ Romine, VP International Transportation LEGACY Supply Chain Services