Three signs it’s time to outsource transportation

How do you know if you need to expand your in-house transportation department?

A rapidly-growing business changes so fast with myriad day-to-day demands, making it challenging for many companies to determine whether they have the right resources (people or technology) to support their transportation network needs. How do you know if you need to expand your in-house transportation department? Is the transportation team so busy on transactional activities like tracking and routing shipments that they aren’t able to evaluate opportunities for network optimization or long-term planning? In this article, Covenant shares the top three signs it’s time to explore outsourcing.

Sign #1:Transportation management resource constraints. A fully-functional transportation department typically entails a multitude of skills sets - transportation strategy, transportation procurement, carrier management, load tendering, tracking / tracing, etc.  Large organizations might have the financial resources to build and develop a full transportation management team, but smaller organizations face more significant challenges to support all aspects of transportation management, often-times expecting the team that is managing the day-to-day functions to take on the strategic development as well.  To add to the challenge, many companies are managing to tight budgets, which makes the process of adding headcount to the P&L very difficult. According to the New York Times, greater demand for workers in industries like logistics and transportation has led to skyrocketing salaries. In addition, standing up a fully-functioning, effective transportation department with the expertise needed requires more than hiring skilled staff—a deep understanding of transportation processes and technology⁹ are essential.

Lyndal Harper, SVP of Transportation Management at Covenant says, “Outsourcing the transportation management function to a third-party logistics company allows companies to jump into a full suite of transportation solutions. The TMS service is truly an extension of our customers’ business, so we place a lot of focus and effort on establishing and developing a transparent, deep relationship with our partners. Through our partnership, many of our customers will ask for our insight and perspective as they develop their transportation strategies and future growth plans.”

Sign #2: Technology to support the transportation management process. The cost and impact of technology goes far beyond the purchase price. It requires time to implement, resources to train staff, and the ability to manage and maintain it for the long-term. Depending on the size of your purchase, you might be required to go through a capital expenditure process, which adds even more time and complexity.

One of the major advantages of outsourcing is that you get almost instant access to the latest technology—and can be up and running with your transportation and logistics partner quickly.

Harper says, “One of our clients in the government and military space found a considerable amount of red tape for the capital commitment to purchase a transportation management system. It was easier and faster to outsource.”

Sign #3: Visibility to transportation network costs.  Capturing and analyzing the differences between planned and unplanned costs is critical to effective transportation management. “If you can’t measure it, you can’t improve it,” says David Williams, Director of Transportation at Covenant. One place where unexpected costs can crop up is in accessorial fees. For example, if your LTL carrier tries to deliver a shipment but is turned away at the warehouse dock, the demurrage clock starts ticking and the costs begin to add up. These LTL accessorials are hard for transportation departments to rate on the front end and hard to understand on the back end. Another issue customers cite is the inability to reconcile freight invoices. Without visibility into detailed reporting and dashboards by mode, by provider, by destination, by lane, etc., it is virtually impossible to manage costs.

While getting started with outsourcing is not a small undertaking, it can be done seamlessly with the proper planning and project management processes. Want to explore the issues to consider in a transition, and how to begin the planning process? Call us and let’s talk about it. 

Three signs it’s time to outsource transportation
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