For companies looking for relief from high shipping costs and market volatility, a professional, third party logistics (3PL) provider can save an extra 18 to 25% off already heavily discounted LTL freight costs, if they routinely make multiple shipments to multiple locations and work with numerous freight carriers. For every $100,000 in freight costs, that’s an extra $18,000 to $25,000 in savings.
How can a 3PL lower freight costs beyond a company’s existing discounts? By negotiating additional discounts based on the 3PL’s relationship, reputation, and volume business with established carriers.
“A good 3PL will analyze current rates and freight requirements, then bid out the work to qualified freight companies hungry for the work,” explains Larry May, owner of Freight Management Systems (FMS), a Knoxville, TN-based 3PL routing approximately 20,000 freight moves each year. “An established 3PL, brokering a large volume of business with major carriers, can negotiate much better discounts than the manufacturer.”
For any manufacturer making a product or receiving parts, allowing a 3PL to bid out freight and come back with a proposal is as close to a “no brainer” as possible in a competitive market economy. After all, there are no upfront costs or hidden fees paid to the 3PL. The 3PL makes its money based solely on a pre-negotiated percentage of savings delivered to the manufacturer.
“There’s no out-of-pocket cost because we’re only paid a negotiated percentage of the savings delivered,” explains May. “The savings come from a greater discount on less-than-truckload (LTL) freight, eliminating freight bill errors, and reducing in-house payroll.”
Steve Slack, President of Book Warehouse Inc., SAS & Associates LLC says, “We realized two things: one, to call around to the various truck lines and analyze the best carrier for a particular shipment required a huge amount of man-hours. Second, to negotiate the discount rates with each carrier in what seems to be an ever-changing landscape left us feeling like we were constantly leaving money on the table. We chose a 3PL and have been glad we did.”
“I thought I’d done well with the 77 to 80% freight discounts I’d negotiated from our carriers,” says Kenneth Precise, purchasing agent for the Kennedy Company, a manufacturer of PVC sheeting and components. “But [a 3PL] cut our freight cost by another 25% and took care of all the paperwork.”
Because mistakes in LTL freight billing are common, especially in product classification, full service 3PLs should conduct freight bill audits. For instance, they should audit the National Motor Freight Classification (NMFC) code on the freight’s bill of lading to ensure it hasn’t been mis-classified at a higher rate.
“Many factors affect how a freight rate is calculated: product classification, density, weight, value, distance moved, and damageability, for example,” says May. “But the higher the NMFC classification, the higher the shipping rate, which is why getting it right is key.”
Roger Fisk, owner of Grower’s Solution, a manufacturer of commercial greenhouses and greenhouse supplies says, “When we were dealing with freight carriers, we were getting a lot of freight category changes we’d have to fight. A 3PL not only goes to bat for you to fight mistaken freight classification, but also handles claims and takes care of pretty much everything.”
Working with a good 3PL can also contain the hidden costs of freight such as chasing down quotes, invoices and documentation, which can require a substantial in-house staff if done internally. It can also help to prevent potential production line slows or shut downs when needed parts are unexpectedly held up.
Many 3PLs, such as FMS for instance, offer inbound and outbound shipment analysis, invoicing and reporting with appropriate backup documentation. One client that previously processed about 300 freight invoices a week, estimates that it reduced its required staffing by more than two employees when the 3PL began auditing, paying, documenting and consolidating its freight bills into a single weekly bill.
For manufacturers who have relied on the expertise of 3PLs, however, the benefits of doing so go beyond initial or ongoing savings.
“When we had to ship product the same day, they were able to arrange pickup within a few hours, even though we were late with the paperwork,” says Fisk. “They’ve done that for us multiple times.”
Freight Management Systems (FMS), a full service 3PL, provides LTL, volume, truckload, intermodal (rail), small package and international freight services as well as expedited, time critical and trade show shipping.
For more info including Freight Tips and a Shipping 101 primer, visit www.shipfms.com, call 866-922-7491 toll free; Fax 865-922-7492; or write to Freight Management Systems at 3517 Neal Dr., Knoxville, TN 37918.
How can a 3PL lower freight costs beyond a company’s existing discounts? By negotiating additional discounts based on the 3PL’s relationship, reputation, and volume business with established carriers.
“A good 3PL will analyze current rates and freight requirements, then bid out the work to qualified freight companies hungry for the work,” explains Larry May, owner of Freight Management Systems (FMS), a Knoxville, TN-based 3PL routing approximately 20,000 freight moves each year. “An established 3PL, brokering a large volume of business with major carriers, can negotiate much better discounts than the manufacturer.”
For any manufacturer making a product or receiving parts, allowing a 3PL to bid out freight and come back with a proposal is as close to a “no brainer” as possible in a competitive market economy. After all, there are no upfront costs or hidden fees paid to the 3PL. The 3PL makes its money based solely on a pre-negotiated percentage of savings delivered to the manufacturer.
“There’s no out-of-pocket cost because we’re only paid a negotiated percentage of the savings delivered,” explains May. “The savings come from a greater discount on less-than-truckload (LTL) freight, eliminating freight bill errors, and reducing in-house payroll.”
Steve Slack, President of Book Warehouse Inc., SAS & Associates LLC says, “We realized two things: one, to call around to the various truck lines and analyze the best carrier for a particular shipment required a huge amount of man-hours. Second, to negotiate the discount rates with each carrier in what seems to be an ever-changing landscape left us feeling like we were constantly leaving money on the table. We chose a 3PL and have been glad we did.”
“I thought I’d done well with the 77 to 80% freight discounts I’d negotiated from our carriers,” says Kenneth Precise, purchasing agent for the Kennedy Company, a manufacturer of PVC sheeting and components. “But [a 3PL] cut our freight cost by another 25% and took care of all the paperwork.”
Because mistakes in LTL freight billing are common, especially in product classification, full service 3PLs should conduct freight bill audits. For instance, they should audit the National Motor Freight Classification (NMFC) code on the freight’s bill of lading to ensure it hasn’t been mis-classified at a higher rate.
“Many factors affect how a freight rate is calculated: product classification, density, weight, value, distance moved, and damageability, for example,” says May. “But the higher the NMFC classification, the higher the shipping rate, which is why getting it right is key.”
Roger Fisk, owner of Grower’s Solution, a manufacturer of commercial greenhouses and greenhouse supplies says, “When we were dealing with freight carriers, we were getting a lot of freight category changes we’d have to fight. A 3PL not only goes to bat for you to fight mistaken freight classification, but also handles claims and takes care of pretty much everything.”
Working with a good 3PL can also contain the hidden costs of freight such as chasing down quotes, invoices and documentation, which can require a substantial in-house staff if done internally. It can also help to prevent potential production line slows or shut downs when needed parts are unexpectedly held up.
Many 3PLs, such as FMS for instance, offer inbound and outbound shipment analysis, invoicing and reporting with appropriate backup documentation. One client that previously processed about 300 freight invoices a week, estimates that it reduced its required staffing by more than two employees when the 3PL began auditing, paying, documenting and consolidating its freight bills into a single weekly bill.
For manufacturers who have relied on the expertise of 3PLs, however, the benefits of doing so go beyond initial or ongoing savings.
“When we had to ship product the same day, they were able to arrange pickup within a few hours, even though we were late with the paperwork,” says Fisk. “They’ve done that for us multiple times.”
Freight Management Systems (FMS), a full service 3PL, provides LTL, volume, truckload, intermodal (rail), small package and international freight services as well as expedited, time critical and trade show shipping.
For more info including Freight Tips and a Shipping 101 primer, visit www.shipfms.com, call 866-922-7491 toll free; Fax 865-922-7492; or write to Freight Management Systems at 3517 Neal Dr., Knoxville, TN 37918.
