By Kyle Gholston, CTB, Vice President of Conexus, LLC
A recovering housing market, record level U.S. exports and improved unemployment numbers are all key factors pointing to a slow but steady economic recovery in the United States. But while companies are celebrating their profits and looking at improved sales in the months and years ahead, far greater concerns loom on the horizon for shippers as the ever talked about driver shortage becomes a reality. To help mitigate potential capacity shortage, shippers are turning to 3PLs to help cover lanes that otherwise would be difficult to fill. If you are looking to partner with, or currently use, a 3PL provider, these guidelines will help you leverage the most out of your 3PL relationship.
- Choose Carefully. Up until recently, access to the Internet and $10,000 was all it took to get a broker surety bond and become a transportation broker. The U.S. Congress however, recently passed a piece of legislation that raises the surety bond price to $75,000, effective in the summer of 2013. This is good news for shippers as the new requirements will likely be too high for fraudulent brokers to acquire a new surety bond. However, do your homework. Ask for customer references and a work history before entering into an agreement with any 3PL. If the company has been in business less than two years, consider looking for an alternative. The Transportation Intermediaries Association (TIA) is a great place to look for qualified, legitimate 3PLs as TIA requires all members to abide by a strict code of ethics when dealing with carriers and shippers.
- Use 3PLs for more than just a back-up plan. Being choosy about a 3PL is wise but don’t treat them only as a back-up plan for a last minute load that needs covering. There is a common misconception that 3PLs can always move a load at the last second. While 3PLs can often find the capacity needed in a pinch it’s not a guarantee and you could be missing out on many of the benefits a 3PL can offer if you only use them in this fashion. Instead, treat a 3PL like any other transportation provider. Give your 3PL an opportunity to service your typical lanes and see how they stack up against your other providers. You might be surprised at the results.
- Ask what your 3PL does best. Like most companies, the majority of 3PLs have niches that they excel in. Ask a 3PL up front what they specialize in. Is it flatbed, LTL, international shipments? Most companies started off focusing on one mode and added in others along the way. Ask them what their strengths are in both modes and lanes. Depending on office and yard locations a 3PL will likely have areas of the country that they can guarantee capacity while offering substantially lower rates. This knowledge will help you better match your transportation needs to the right 3PL.
- Use your 3PL as a solutions provider. One of the great things about 3PLs is that you can use them as much or as little as you want. Use them as you would an asset-based carrier to handle only specific lanes, or treat them as an extension of your supply chain. Many 3PLs can operate as an out-sourced traffic department and can manage as much or as little of the shipping process as you have a need.
- Less does not necessarily mean more. When receiving quotes from your transportation providers consider more than just price. While it’s true that 3PLs can often offer a substantial savings over asset-based carriers, consider the quality of carriers that are being used to move your freight. Ask your 3PL about its carrier selection process and be wary of 3PLs that utilize conditional carriers. A good 3PL will, at minimum, make sure all carriers are insurance verified, have a satisfactory safety rating, an established business history and an authority that is in good standing.
- Consider the handling of claims. While most 3PLs don’t like to admit it, accidents do happen and when they do, make sure you’re working with a 3PL who has your best interests in mind. If you have to file a claim with a carrier, a good 3PL can help facilitate the claim and be a liaison between you and the carrier on your behalf. Some 3PLs carry insurance so that if the carrier defaults on a claim, the 3PL will actually step in and cover the cost of the claim, but this is not standard practice. Ask the tough questions and find out the policies of your 3PL and get everything in writing so you set the proper expectations beforehand.