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Getting A Tech Edge: How Managed Transportation Providers Offer Shippers An Advantage

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Getting A Tech Edge: How Managed Transportation Providers Offer Shippers An Advantage

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When considering how best to manage their supply chain, shippers are increasingly turning to managed transportation system (MTS) providers, often known as 3PLs or even 4PLs, for help and one of the reasons is the technological advantage they can provide.

"Large MTS providers offer a variety of benefits to smaller shippers," explains Chris Cunnane, senior research analyst with ARC Advisory Group. "For one, they can take off the financial burden of using a TMS in-house. This reduces technology costs as well as the cost of hiring someone to use the TMS."

Cunnane has studied managed transportation system providers and is currently working on a market study, including emerging technological trends, on the topic for ARC.

Armstrong & Associates reports that the dedicated transportation market (DTM) in the U.S. generated $71.7 billion in gross revenue in 2017. That was just the domestic number; add another $53 billion for international DTM services. Additional services such as dedicated contract carriage and value-added warehousing and distribution offered by some 3PLs grow these numbers even further.

"The 3PL market has seen excellent growth in the last two years. Macroeconomic trends, combined with intensifying supply chain complexity, means demand for 3PLs is increasing," Armstrong wrote in an October update on the market. "The market grew 10.5% in 2017 to $184.3 billion, and it's on track to exceed $200 billion in revenue in 2019. Conditions are ideal for winning new business, even as 3PL competition increases." 

Turning to a 3PL can provide plenty of advantages for any shipper, many obvious, such as lower freight costs, and many hidden, such as improved inventory management. But it all starts with a technological advantage.

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GlobalTranz offers managed transportation services, but according to Ross Spanier, senior vice president, sales & managed solutions, it is the consultative services the company offers that complement its technology and turn offerings into cost-effective options for shippers.

Spanier offered an example of how that process can work when he noted how one customer, after four months of GlobalTranz managing its transportation offerings, asked for assistance in handling its Amazon.com, Inc. (NASDAQ: AMZN) fulfillment requirements.

"We helped them find a warehouse partner by leveraging our [consultative team]," he says. "That's one of the value-added benefits" of a managed transportation provider. The result was a more integrated operation that met the needs of both the client and end customer of the goods, in this case the e-commerce shopper.

While GlobalTranz, which is a non-asset provider, will not run a warehouse for a customer, its extensive contacts in the industry can be beneficial when that need is identified, but remaining at the heart of any offering is the technology itself. Shippers that utilize a managed transportation provider benefit from that provider's expertise and technology investments.

"Top MTS suppliers will increasingly differentiate themselves based upon the ability to provide control towers with real-time visibility and predictive ETAs," Cunnane observes. "These control towers use real-time supply chain data from high-tech startups like 10-4 Systems, FourKites, project44, Resilinc, riskmethods, StormGeo, and Transvoyant."

To gain similar insight, a shipper must invest in these same systems, and the personnel to manage them. An MTS provider, though, can leverage its scale in investment, thereby lowering overall costs to each customer, Spanier points out.

"Customers look to partner with somebody they can leverage," he says. "Typically, the costs of that are aligned with the business they have. We try to leverage our TMS as a component of the offering in that we invest in the integration and what we ask from the customer is that they give us the resources to do that."

It also allows customers to take advantage of the fast pace of technological change, including the incorporation of more machine learning technologies, which are quickly changing the way and speed at which operational decisions are being made.

"We can take a lot of the antiquated inefficiencies out of the system and we can pass on those cost savings to the customer," Spanier says.

Cunnane agrees. "The use of a TMS is a significant driver for ROI from a managed transportation service provider," he notes. "Additionally, MTS providers should invest in real-time visibility tools, BI, and predictive analytic capabilities. Further, standardizing on a warehouse management system (WMS), and having the TMS and WMS solutions integrated on one platform increases the ability of a 3PL to provide integrated solutions."

In its most recent survey, ARC Advisory Group found that 56% of respondents reported freight spend savings of at least 6% by outsourcing to an MTS provider. A full 32% saw savings greater than 12%.

One of the technological advantages a 3PL can provide is more robust data analytics reporting that can quickly identify bottlenecks and impediments to cost reductions. This includes improved route guides.

"The route guide is populated with carriers that the provider has ongoing relationships with and the rates are [often] better than what small shippers could negotiate on their own behalf," Cunnane points out.

"The cost savings and benefits go beyond lower freight costs, and include improved pick-up efficiency, better customer service, ability to secure capacity, access to expertise of the MTS, increased usage of preferred carriers, better procurement negotiations, lower cost mode selections, more fully loaded trailers, better routing, and more," he adds.

Regardless of the technology, though, Spanier says it ultimately comes down to the people behind the service.

"Part of the value in the technology is the people supporting it," he says. "Talent is something that [customers] look for; people that will learn their business and help them on a strategic level. That can be missed."

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