Monthly Archives: October 2016

Benefits include flexibility,cost visibility, and a shared investment in improving efficiency’s, writes Adam Robinson.

Outsourcing logistics processes can be an effective means of managing the needs of your organization. However, when you decide to take the jump to outsourcing, you will have to choose between an asset-based and non-asset based third-party logistics provider (3PL). Both types of 3PLS have advantages and disadvantages. But, a non-asset based 3PL provider may offer much more than you realize, including these 7 key benefits. 

1.  Access to Other Experience and Knowledge, not Limited Hardware.

The first advantage of a non-asset based 3PL provider is knowledge and experience.  Asset based providers have their own resources, material and fleets, giving rise to the idea that they are superior choices.  However, you must consider how a problem in that provider could evolve.  In other words, an injunction or financial penalty assessed by the Department of Transportation (DOT) could jeopardize your entire operation.  But, in a non-asset 3PL, additional resources can be diverted and accessed to keep you in operation, reports Aabaco Small Business.

2.  Flexible Solutions for Growing Companies.

Scalability is essential to the future success of your business.  Market trends will change, and your business will need to adapt to sudden,unpredictable market forecasts.  While analytical tools can help you create an accurate forecast, sometimes they are wrong.  As a result, you need a flexible solution, and non-asset 3PLs can meet that demand.  In fact, flexibility is considered the most important benefit a non-asset based 3PL provider can deliver.

3.  No Hidden Costs, and Strong Visibility.

 
It seems like every business comes with hidden costs these days.  In asset-based 3PLs, you have no way of knowing what the actual operating costs of accessing their assets are.  What are the fuel charges?  How do those charges compare to the rates you are currently being charged?

Non-asset providers have a vested interest in maintaining visibility, promoting greater use of their services.  In addition, the goal is to provide the lowest service costs possible, even if it means outsourcing additional processes to asst-based providers.  This can be confusing, but you must ultimately understand that the non-asset providers have the wherewithal to ensure their costs are kept down and passed along to you, their partner.

4.  Optimization of Your Existing Supply Chain Network.

The definition of logistics services is all of the processes that go into manufacturing, distribution, sales and returns of products.  Since an asset-based provider owns their own supply chain assets, they would not be likely to improve your network processes.  Consequently, you would get the benefit, but if you were to abandon ship,you would lose the optimization.  In a non-asset relationship, your own network becomes part of the whole network creating lasting optimization that would enhance your workflow even if you were to take a different direction in the future. 

This also includes equipment and hardware upgrades.  For example, the use of a dedicated transportation management system, created by a non-asset based partner could help you identity the best carries to use for future shipment.  Meanwhile, an asset-based partner may limit your options to their resources, increasing costs unless fleets expand, explains Industry Week.

5.  Monitoring of Your Transactions, Preventing Double-Billing and Other Errors.

An asset-based provider is comparable to a for-profit enterprise, and a non- asset based provider is comparable to a nonprofit.  Asset-based providers are vested in your payments, not your honesty.  As a result, you may be on your own with performing audits and preventing errors, such as double billing, in your transactions.  Since non-asset based providers do not benefit from these actions, it is in their best interests to monitor your transactions for accuracy and catch errors as they occur.


6.  A Non-Asset Based 3PL Provider Benefits When Your Organization Benefits, not the other way around.


When your organization benefits, the 3PL should benefit as well.  In the case of non asset-based partnerships, this concept is true.  However, asset-based partnerships are built on your use of that company’s specific resources.  As a result, you cannot be certain other cheaper rates are available.  In non-asset 3PLs, you can access more resources to get a better rate.  Since this type of company is built on working with more people to get smaller profits from each person, they can access more resources.  Ultimately, a small profit among many people adds up to a greater profit than large profits off a few people.

7.  Non-Assets Have Paid to be Recognized by the DOT, proving compliance-driven resolve.

Before 2013, any organization could claim to be a non-asset based 3PL provider.  The reporting requirements were nonexistent, and some true asset based enterprises took advantage of this to claim non-asset based operations.  That changed when the DOT mandated a $75,000 freight broker surety bond for all non-asset based providers in 2013, explains PLS Logistics.  Consequently, the true non-asset providers were the ones that could reasonably pay the bond amount without disrupting existing operations.  Ultimately, this payment shows potential shipper that non-asset providers have already taken the steps to ensure the safety of their partners.

Which One is Right for You??

No one can tell you what type of 3PL to use.  That is your right as the owner of your organization.  However, if you know the advantage and disadvantages of using a non-asset based provider, you can be better prepared to make a decision that will benefit your company in the long run.

– Adam Robinson, marketing manager for Cerasis