Transportation Outsourcing: Determining the Best Path for You

Many shippers reach a fork in the road where they have to determine which transportation functions to keep in house and which ones to outsource. What factors should go into that decision?

“I believe shippers need to ask themselves a set of questions,” said Megan Bishop (formerly Kuntz), Manager at enVista, in a recent episode of Talking Logistics. Among those questions:

  • Is transportation management a core competency?
  • What is our overall transportation budget for this year and beyond?
  • Do we have the manpower and time to continuously manage the operation, as well as to drive continuous improvement?

A growing challenge is finding, training, and retaining the right people to manage the operations in-house. In Megan’s experience, “some shippers don’t know or aren’t good at determining how many people they need to efficiently run their transportation operations. I’ve seen cases where companies have too many people in their operations because their processes are inefficient, or where they should allocate fewer people to operations and more to doing analysis work.”

Another dimension to the people side is IT resources, which can limit how well and quickly a shipper can execute a project, whether it’s implementing a transportation management system (TMS) or undertaking another initiative that requires the support of IT. “You have to ask yourself, where does my project sit in IT’s ‘To Do’ list?” says Megan. “If you aren’t the person screaming the loudest, then you’re just gonna have to sit and wait.”

When it comes to outsourcing, shippers are confronted with many terms: 3PL, broker, managed services provider. These terms are often used interchangeably, even though they generally refer to different types of business models and service offerings. A bigger issue, however, is with the term “outsourcing” itself, as Megan discusses in the clip below:

Simply put, for many shippers, outsourcing implies loss of control, which is generally not true, especially in a managed services relationship.

So, how do you determine which path — which type of service provider — is the best one to take? “That’s the million dollar question,” said Geoff Milsom, Director at enVista, who also participated in the episode. He went on to say:

When we work with clients we try to understand what is their strategy moving forward, what are they good at, how have they dealt with outsourcing relationships in the past, how savvy are they from an IT perspective, how many resources do they have…Shippers have to evaluate all of these pieces, including what type of support they have from upper management…It’s always going to be about finding the lowest cost to own, but you also have to factor in the risks involved with the decision.

And what factors or attributes define a successful service provider-customer relationship? Megan and Geoff share their perspectives in the clip below:

Not surprising, establishing ongoing and open communication is critically important, as well as spending time onsite with the client to thoroughly understand their business model, strengths and weaknesses, and strategy.

I encourage you to watch the rest of my conversation with Megan and Geoff to gain additional insights and advice on this topic. Then post a question or comment and keep the conversation going!

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