While service costs are certainly a key consideration, the long-term success of the relationship is dependent on more than dollars and cents. Look for a fit based on cost, core competency and corporate culture.
In time and over the life of their business, the shipper will want to capture, track, measure, analyze and compare every penny of their logistics spend in order to manage their ongoing logistics operation.
For purposes of an initial market search and screening however, it will suffice to understand whether the service providers being considered can offer pricing that is generally below, at, or above market rates. The reasoning here being that, given time and opportunity, the perfect service provider will quickly manage the shippers business more efficiently so that they can lower their rates further if necessary in order to compete with market rates for a comparable service.
Key to this initial cost benefit analysis is to compare apples to apples in terms of service levels, incoterms, accessorial fees and value-added shipping systems that will offer process efficiencies or better control over customs and security information.
Global trade, technology and the history of mergers and acquisitions in the industry have created such a variety of service providers and solutions that it’s hard to differentiate between the brokers, forwarder and 3PL’s. Services can be bundled into or broken out of an end-to-end solution. Sometimes bundling services IS the provider’s competency.
The perfect provider should have positive referrals from customers in the same vertical market, similar volumes, origins, destinations, equipment and required modes of transportation. They should employ the best people and have systems and processes that differentiate them from the marketplace with respect to the required services.
Going forward, the shipper will want to quantify the service provider’s performance in these core competencies to measure against industry standards in an ongoing cost benefit analysis and KPI program.
Small and medium sized companies spending less than $1M per year on logistics services might be challenged to negotiate significant discounts and optimal service levels from the big, multinational logistics companies. This dynamic has given rise to hundreds of small and medium sized providers who cater to smaller customers.
The service provider will become a long-term, integral partner to the shipper. As such, the shipper and provider should align on the less tangible qualities that could make or break a successful relationship. For example, the shipper and provider should be similar in the following ways:
• Big, small or medium sized company
• Process driven vs. market driven
• Automated or manual
• Bureaucratic vs. entrepreneurial
• Communication style
The shipper will control costs, mitigate risk and create a competitive advantage for their company by finding the perfect service provider based on a fit of cost, core competency and corporate culture.