By Samskruthi Parthasarathi
If you are an SME looking to improve profit margins, negotiating with your logistics provider may be crucial in keeping costs down. This is not as complicated as it seems if you know what to look out for. Here are some points to discuss with your 3PL before you sign on for their services.
Ask for standardized and inclusive rates
Be aware that the total freight cost often involves quotes from multiple freight forwarders at various rates. Hidden costs, such as unpacking charges, hazardous surcharges, and documentation charges sneak in and leave you surprised that the total freight cost is different from the final invoice. Ask your 3PL for transparent and standardized freight quotes. A freight quote does not have to be an enigma as long as the abbreviations for the various charges are explained to you and you are made aware of activities at the ports. The more you are aware of the charges levied for movement of cargo from point A to B, the less stress you will have.
How informed is your 3PL?
Does your 3PL have access to informed and important information when making a decision? Do they compare rates between freight forwarders, shipping schedules and delivery times before picking the best option? Are they part of an online logistics marketplace that offers detailed information to make a cost-effictive decision?
How do they utilize their resources?
You can ask outright if their team has real world logistics experience and knowledge so that they are not wasting valuable hours in procuring quotes and handling various suppliers or co-ordinating deliveries and shipments. What organizational tools and supplier relationships do they have or do they seem strained for resources and information? Do they have any methods to streamline the processes of their core businesses so that these benefits can be passed on to you?
Is the 3PL good and managing multiple orders or is their inefficiency adding further pressure on margins? Nowadays, there are online administrative as well as back office services that optimise technology and collate data effectively. Is your 3PL open to working with new players with innovative suggestions or are they obsessed with the good old days? Have they heard of blockchain or is their office swimming in paper and documents?
If your 3PL is organized, they will have means to track and also share with you regular updates on shipments. If they don’t, consider that a red flag. Delays in shipment lead to losses in revenue and even additional costs from penalties – which will all trickle down to your profit line. If you don’t know where your goods are, you’re going to have inventory stock-outs and loss of sales. Ensure that your 3PL is tech enabled and receives automated and regular updates on cargo and delivery times.
Beyond the typical capabilities of a 3PL, for an SME that wants to seriously cut costs, ask about business forecasting services. For example, ILC consultants are trained at using data from past shipments including delivery times, weights, volumes, quantities, types of cargo and costs to offer clients customised costs and eliminate variability for future shipments. The consultants know exactly what they’re dealing with and how to offer lower prices and avoid hidden charges completely.
Does your 3PL know how to take advantage of consolidating shipments from several countries and ship them via a centralized hub port? This will dramatically cut your costs and also reduce documentation and customs fees, and you will feel fewer burdens from operating in a price sensitive market.
You’ll be surprised to learn how many businesses forget to insure cargo. It is a small cost compared to the total invoice, but highly recommended to avoid later losses and for you to have peace of mind over risks of damage. When you think about your goods travelling by air, sea and road or while sitting in storage, doesn’t insurance seem like good sense? If your 3PL doesn’t think so, it may point to carelessness in other areas too.
It’s actually incredible how much documentation is needed for a shipment. It all needs to be correctly implemented and recorded. If your 3PL does not follow up on this closely, you are going to be hit with customs delays and penalties. Ensure that your 3PL is fastidious, perhaps even using a tool that centralizes all supplier information, documentation, and shipping instructions in a single place that is quickly accessible and easy to share.
If your 3PL is known in the region and has a good relationship with its suppliers and vendors, you will be able to enter into contract rates with select vendors for frequent freight requirements. Your 3PL will already have a shortlist of viable vendors to choose from which will also save time for you when shopping around. At ILC, we frequently negotiate on behalf of our clients to ensure you have a reliable vendor partnership at an agreeable rate. Consider such a service when looking to simplify your logistics requirements. And the cost saving is definitely going to follow with contract rates.
Streamlining the logistics process does not have to appear daunting. With the right 3PL, your core business will grow, while you can focus time and efforts on developing better partnerships and edging out your competitors. With the right 3PL, these extra services do not have to be expensive, but rather, should save you monetary and human resources in the long run.