We recently sat down with enVista’s Michael Groman and asked him to share some of the most frequently asked questions he and his team receive about 3PLs. Those questions are presented below, as are Michael’s insightful answers.
Q: Are my freight costs competitive?
A: This question is always on the minds of customers or our prospective clients.
However they have previous relationships that they value, and don’t always want to take their freight out to bid. In many situations, there are similar or better service providers that can show significant value when a prospect allows a new third-party to take a look at the freight spend and the operation – sometimes it’s about hard dollar savings, other times it’s about service and peace of mind. The freight industry is an ever changing environment where many variables can cause the market to ebb and flow. Therefore, the rate you currently agreed to in January could see a large drop in price in May or June and you would never know because you never provided prospective partners a chance to quote.
Q: Should I allow any 3PL or broker to quote on our freight?
A: This is a loaded question but the short answer is no.
Many new rules and regulations have hit in 2013-2014 including the amount of time drivers can operate and new surety bond requirements for 3PLs. Many new regulations have taken hold due to abuse in the market and since then, there has been a great reduction in the amount of carriers that are operating. Ideally, a thorough search of the company (Better Business Bureau ratings, Dun and Bradstreet, Ansonia etc) would show you which ones are legitimate and trustworthy. Also, calling references is a great way to understand their relationships with the customer. After you have done a little research it would do no harm to allow the 3PL to quote out on some existing shipments or lanes. The results may surprise you.
Q: I’m happy with my freight provider (3PL), so why should I shop around?
A: Relationships are important, especially when it comes to your freight spend.
If you have been working with the same 3PL and the same individual for 15 years, you may be hesitant to provide a quote opportunity to an outside 3PL. Ideally, projects and set rates should not exceed 6-12 months as market conditions and fuel costs change frequently. If you are paying the same rate on a lane that runs year-to-year or month-to-month, allowing an outside 3PL quote could provide you with a benchmark of what you are paying and what you should be paying. The benefits of this are apparent while the drawbacks are not.
Q: This sounds great, but do all shippers do this?
A: Although infrequent, a growing number of customers are relying on companies outside of their preferred network the opportunity to quote.
If you have been paying $2,500.00 on a shipment yearly with a partner that you have known for fifteen years and ask for a rate from a prospective 3PL and they shoot you a quote back for $1,500.00 on the same shipment…wouldn’t you start to wonder?
Q: What is an example of a customer giving you (or a 3PL) an opportunity where you saw success?
A: Recently, a few prospects provided us with a chance to quote on a shipment that they have run with the same reputable broker for five years.
We gave them a quote that was $300.00 less than what they were currently paying, and provided them 2 unique solutions. We saved them over $300 dollars on a shipment that ran 10-15 times per month and opened their eyes to the fact that shopping around can yield interesting and beneficial results. Since then, we have saved them thousands of dollars on one lane and given them another partner that provides them with the customer service and value they were looking for. We have also taken on additional responsibilities for the customer and developed a successful relationship.
Q: How do I start this process?
A: A very simple recommendation is to screen 3PLs and give them a chance to quote.
The worst case for the customer is that the 3PL returns a rate much higher than the current provider. This is not a bad thing as it gives you a benchmark that the rate you are receiving is below the market. That’s good news! The alternative is that you receive a rate that can save you a lot of money and potentially extend into a long term relationship with that 3PL on future shipments. As you can see, there aren’t many negatives to giving outside 3PLs the opportunity to quote. The next time you receive a call, give it a go and see what the results are…you may be pleasantly surprised.