Transportation logistics, specifically freight shipping, is riddled with hard and soft costs, which are often unaccounted for by corporations. This is especially true in businesses that don’t have a supply chain manager.
Many clients we’ve worked with over the years have assigned transportation logistics services to transportation, shipping, or warehouse managers. These managers handle freight shipping as part of their regular duties and, as such, can’t typically look at the big picture and overall profitability of their transportation logistics operation as a whole.
Hard and Soft Costs of Transportation Logistics?
Hard costs are easier to see and reconcile than soft costs. Hard costs related to transportation logistics include:
- Carrier Shipping Rates – We often see transportation managers using one or two carriers. The benefit of a 3PL when looking at carrier rates is that a 3PL (like Amware) will typically partner with all the major carriers. Additionally, a 3PL should provide a platform for customers to compare these rates and book the most cost-effective shipment through the application.
- Warehousing – Inventory needs can fluctuate, so understanding how your inventory moves through the warehouse will help determine your average cost per square foot of storage.
- Labor Costs of Logistics Department – Everyone from management to general assembly labor should be included in this KPI.
Soft costs are harder to pinpoint and calculate even when you know what they are. In most cases, soft cost calculation requires an intensive amount of manual labor. Some of these costs include:
- Labor Inefficiency – Is the labor you have working efficiently and effectively? Absence, smoke breaks, water cooler conversations, wasted time on phones and personal devices, etc., contribute to an ineffective labor force. On the management side, we often see transportation managers spending excessive time gathering shipping quotes from individual carriers. This soft cost often goes unnoticed because it’s a job-related task.
- Non-Competitive Carrier Rates – Shipping rates constantly fluctuate, so utilizing a single carrier will often have you paying much higher rates.
- Carrier Performance – This is a HUGE soft-cost area. How often is the carrier delivering shipments on time? Is your billing accurate/ Are goods arriving free from damage?
How a 3PL Helps Reduce These Costs
A 3PL will work to do the following, which, in turn, will reduce both hard and soft costs as it relates to your transportation logistics:
- Offer Cost-Effective Shipping Rates – Because they utilize a transportation management software platform, a 3PL will enable you to choose your rate from the most competitive carrier. They can also help by reviewing your current shipping volume and making recommendations on consolidating shipments. The TMS platform will also reduce the soft cost related to management spending time gathering shipping quotes.
- Reduced Labor Costs – By utilizing the services of a 3PL, you gain the ability to leverage their expertise and labor for product assembly and shipping management. When you work with a 3PL, you only pay for the labor you need.
- Carrier Management – a 3PL will act as your support arm to the carrier. Whether billing, filing a claim on a damaged pallet or looking at on-time deliveries, 3PLs can provide insight and support, reducing losses and increasing margin.
The Amware Difference
Amware is a 3PL specializing in less than truckload and full truckload shipping. Amware also offers public warehousing with assembly and packing services. Amware’s transportation management software, Amrate, can function as a stand-alone application in the cloud or be integrated into most ERP and inventory management software platforms. For a free trial of Amrate, click below. Contact us today and learn how the Amware difference can make a difference in your business.