The Importance of Relationships With Carriers and 3PLs
In a Third Party Logistics Model (3PL) a third-party logistics service provider receives transport and logistics activities from a manufacturer and works with both the manufacturer and the supplier to organize the logistics.
In this relationship, the client remains in charge of oversight but outsources operations to the provider. Procedures include anything from warehousing to packaging, order fulfillment, and delivery, depending on the specific contract.
Ultimately, the 3PL model involves coordination between all parties (the logistics service provider, shipper, and carrier).
Read on to learn about fostering relationships with carriers and 3PLs to achieve supply chain efficiency.
As a leader in transportation spend management, Trax drives global logistics efficiency by empowering organizations to achieve transportation spend maturity. Our FAP and TSM solutions provide end-to-end visibility as well as automation to streamline operations for shippers, carriers, and 3PLs.
The 3 Types of 3PL Relationships
A recent study by Darko and Vlachos (2022) uncovered three types of 3PL relationships that occur in the supply chain: transactional, tactical, and strategic.
In transactional relationships, most of the outsourced activities are contractual. These activities and functions are often things that can be automated and aren’t critical to the business model. Because these relationships are typically short-term, they don’t offer many performance improvements.
Conversely, tactical and strategic relationships are long-term commitments based on collaboration. Ultimately these relationships result in interdependency such that both parties have something to gain.
In Darko and Vlachos’ multiple-case study, the researchers investigated the evolution of 3PLs and factors that influence the client-3PL relationship. The results showed that 3PLs provide more than just logistics and warehousing solutions. Clients also expect the relationship to include creating value through decision-making, collaboration, and sharing information freely.
Developing a Beneficial 3PL-Client Relationship
To foster a mutually-beneficial 3PL-client relationship, both parties must address multiple areas of the business and move beyond non-strategic transactional agreements to an embedded relationship. According to SupplyChainBrain, an embedded 3PL relationship involves making major investments in facilities and technology, increased transparency and information sharing, and mutual commitments to business success.
There are times of uncertainty and ambiguity throughout the supply chain, and therefore 3PLs and clients need to work together to make informed decisions that are mutually beneficial. When making important decisions, both parties must consider the services required and the current phase of the business lifecycle.
Working together toward common goals is essential in the 3PL model. This is the only way to stay aligned as expectations change. Collaboration involves trust on both ends of the relationship and should begin at the start of the 3PL relationship or the supplier risks losing some of the value the service provider offers.
To achieve complete collaboration, the client needs to be willing to share information with the 3PL. Information sharing increases innovation for the customer, which is a key factor in supply chain success.
Just as the 3PL-client relationship requires attention, so does the shipper-carrier relationship. Organizations can promote a positive relationship with carriers by providing accurate forecasts, giving the reps time to do business reviews, ensuring easy access in and out of the facilities, paying carriers on time, and showing appreciation.
It’s important to note that the shipper-carrier relationship needs to be bidirectional. As stated in Retail Touchpoints, “...the shipper and carrier need to have something to gain in the commitment towards the next level in their partnership.” Therefore, this relationship is much like the client-3PL relationship in that it requires trust, sharing information, and making decisions.
Benefits of Strong Relationships with Carriers and 3PLs
By working together with a 3PL and the chosen carriers, enterprises have the opportunity to experience the following benefits:
- Cutting Costs: When a company employs the right 3PL solution, operational efficiency increases. Leveraging the right technology and communicating freely between all parties saves both time and money.
- Proactive Decision-Making: When shippers maintain strong relationships with their carriers and 3PL, they can move from being reactive to proactive. When capacity fluctuates, sharing information and leveraging the most reliable technology is what keeps organizations competitive in the market.
- Reliable Business: Maintaining a steady cash flow is more important than ever during times of economic uncertainty. Nurturing existing carrier relationships provides a level of stability by promoting long-standing business relationships.
- Visibility: The right 3PL provides end-to-end visibility into all supply chain operations, which in turn allows shippers to provide more accurate data to carriers. By achieving complete visibility, enterprises can derive meaningful insights from the data and use it to adapt to changing market conditions.
- Added Expertise: By working with a reliable 3PL along with carriers, organizations uncover operational inefficiencies which can be addressed to better streamline supply chains. Leveraging the 3PL’s areas of strength in terms of technology, suppliers can better measure a carrier’s performance. By producing Carrier Scorecards with information such as on-time deliveries, billing accuracy, accessorials, and damages, suppliers and carriers can address problems proactively and work toward a mutually beneficial solution.
End-to-End Supply Chain Solutions
The relationship with carriers depends upon shipper collaboration with the right 3PL. Recently, Trax partnered with Truckstop.com to help carriers, shippers and brokers work together seamlessly.
Trax provides end-to-end visibility and advanced TSM technology, while Truckstop.com ensures compliance and onboarding technology.
A prime example of the Trax technology contribution is TraxPays, which is an invoice payment service we provide.
Combining their efforts, the partners address supply chain challenges from both the shipper and carrier side to secure the shipper-carrier relationship.
To learn more about Trax solutions, and to take the next step toward transportation spend management maturity, contact us today.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.