Riverside Logistics

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What does it cost to hire a third-party logistics company to manage your transportation?

Often, a third-party logistics Company (3PL) can allow you to save money!

The cost to hire a Third-Party Logistics Company (3PL) is usually done on a pay as you go basis.

For example, if you use a 3PL to handle and manage your transportation needs, the typical way that they charge you is by marking up their transportation costs before they invoice you.

Here are some good reasons to hire a 3PL to manage your transportation:

  1. BUYING POWER: Riverside has numerous clients, using the same carrier base. This allows them to leverage this volume into lower rates than if you dealt directly with the carrier yourself. The amount of discount and reduction that Riverside receives, plus our markup percentage, is usually very competitive to the level of cost you yourself could find or negotiate. This means that we are usually more competitive, even with our markup than you would be on your own. Lower cost means cost savings.
  1. EXPERIENCE: Riverside has negotiating experience across many industries. We know carriers give more competitive pricing the better they understand the characteristics of the freight (i.e. commodity, dimension, weight, origin, destination and product value). Our goal is to find the best cost/service ratio for our customers using our visibility of a larger network portion of the supply chain.
  1. MANAGEMENT: Riverside has experience and expertise that allows us to be your Transportation Department. This means you don’t have to pay for a staff to manage and execute your transportation needs. We do it. This represents a substantial advantage to you. We handle all your freight audit and pay activity, making sure that the invoices are fully documented and are correct before we pay them. 
  1. SYSTEMS: Riverside uses technology to capture the relevant transportation data to efficiently run your business. This is important in today’s supply chain. It means we can track your shipments, transaction cost, and shipping and receiving metrics. All this can be done in real time. A 3PL utilizes these systems to properly manage and execute a logistics strategy that keeps you competitive.

In summary, a transportation 3PL brings a disciplined approach to purchasing and executing your transportation strategy. The ultimate goal is delivering service to your customers at a competitive price while saving you money.

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What can Supply Chain Consultants do for me?

Consultants sometimes have a bad rap right out of the gate. After all who wants someone to tell you how to do your job or run your business?

Frankly, if your business is growing and changing you probably need a consultant to help you chart your future.

This is not a small under-taking and it can be challenging but very rewarding when approached with the correct partner. The key is understanding your objectives, what is realistic to expect as a return on your investment, and the type of knowledge that a Logistics Consultant can bring to the table.

When do you need a consultant?

Some good indicators might be the following:

  1. You are either privately held or a division of a large company in a specific market that is a new focus.
  2. You have reached 50 million dollars in sales revenue.
  3. You have primarily operated from one location.
  4. You want to grow your business by expanding geographically.
  5. You want to grow by acquisition.
  6. Your current logistics team is knowledgeable, but they have never operated multiple locations, evaluated multiple modes of transportation, or possessed the support staff to train new employees.
  7. Transportation is a big part of your total cost of going to market.
  8. The value of your business in either service or manufacturing is very high per employee.
  9. You have product coming through a port but are uncertain of what ports are best and why.
  10. Your Supply Chain Costs are increasing dramatically in Warehouse and or Transportation and you do not have a formal way to measure your investment.

Let’s look at and talk about Supply Chain and Logistics Management Consultants (LMC). They are SME (subject matter experts) on how to move your Logistics Network from where it is today, to where it needs to be in the future. Network evaluations are relatively painless, but they take time to complete properly. For example, if you feel that a 6-week consultation will allow you to plan for and adapt to a new network, don’t waste the money.

If, however, you realize that the process could and should take up to 6 months to fully realize, then go for it. Because like most things that are keys to your business success, they take time.

Supply Chain costs are rising, becoming more complex and now demand more automation. It only makes sense to have someone who has been down the path before, who can guide your team and bring in expertise if your current management does not provide that expertise. As your business expands, its demands for adequate supply chain management increase. These increases are like stepping-stones. They go up in increments or buckets. For example, you may have to go from a single warehouse to multiple warehouses. Or quite the opposite, you may have grown by opening small warehouses throughout your network and now need to take a hard look at a smaller number of warehouses, maybe even just one, with a larger single set of inventories. And, oh by the way, you may need a WMS (warehouse management system) and a TMS (transportation management system) or an upgrade to both if you already have some in place. Additionally, how do you, or how will you, handle managing you transportation needs. Will you do it “in-house” or utilize external management?. What are the upsides and downsides of each approach? How have you accommodated supply chain risk? Did you factor in the trade-offs between operating different (multiple) facilities as opposed to one large facility? This logic also holds for how, when and where you source your product. If the pandemic has taught you anything, it has taught you the value of operating a flexible supply chain for both sourcing as well as moving product through your system.

So how does a LMC Consultant provide you with value?

Here’s how: If competent, they can create a roadmap of “AS IS” and “TO BE” showing how you stack up against industry baselines, how you maximize your competitive supply chain profile and how to develop a sustainable “TO BE” supply chain that helps rather than hinders your business as it expands.

All in all, the question is not whether you need a LMC consultation, its whether you can afford NOT to hire and use one. Market conditions are moving faster than ever. How long would it take your management team to learn what they need to know? Savings in speed can provide a lot of value. Rather than debating a topic for a year a consultant can provide solutions much faster. How much is that worth to your business? If you do not hire a consultant will opportunities vanish?

Typical savings that we encounter from our own consulting efforts usually generate savings in Supply Chain costs, NET savings, of between 15% and 25% long term. If you’re in it for the long term and you have a business that is growing, you need to strongly consider hiring a LMC Consultant to help steer your business through the myriad of supply chain issues affecting your business now and in the foreseeable future.

Riverside Logistics, has been in business for over 25 years and has accumulated a very “long and strong” set of capabilities to analyze, recommend, and execute a Logistics plan for you company. Give us a call at 804-474-770 extension 82 . We are here to help!

 

 

 

 

 

 

 

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How do I reduce the risk and cost of my supply chain but improve my service?

There are three immediate issues that you should focus on in 2022.

  1. Risk – can your supply chain withstand network disruptions
  2. Cost – what kind of cost pressures will manifest themselves during 2022
  3. Service – Can you provide/receive a reasonable level of service through your supply chain

Let’s look at each of these issues one by one and parse them into components that need attention over the next 12 months. Now is the time to be looking at, developing plans for, and executing a sound supply chain strategy in 2022.

SUPPLY CHAIN RISK

How breakable is the supply chain you employ to get product, raw materials, componentry, finished goods, from your vendor community? Do you have safeguards in place to remedy breakdowns in the “supply” chain? For example, if your supply chain has products that originate outside the domestic US, will you be able to get them either in the quantity needed, when needed, or at all for that matter? Do you have multiple supplier sources lined up to allow you to switch from one supplier to another seamlessly or are all your eggs in one basket for key product sources? There have been, up to this point, numerous embargoes, shutdowns, slowdowns, etc., that have impacted sources of supply. Covid-19 was a huge factor, and still is, in sourcing decisions. Put yourself in a position that allows you to flex with the network, not suffer from it. Have multiple sources of supply in multiple locations.

COST

According to the FMC (the “Fed”) inflation was initially thought to be transitory. If you have been sourcing either products or services (such as transportation) you know that inflation is here to stay in 2022. Specifically, freight rates on all modes have been going up steadily, some at double digit rates. Although we know that this is not sustainable in the long term, it is a fact-of-life in 2022. Motor carrier rates have skyrocketed. Labor shortages, weather, input costs such as fuel, all have had a huge impact on and cause for increased rates. So, what can you do about it in 2022? Our advice is to get into long term contracts of a year or longer. Lock-in now at the best rates you can and keep them in place for as long as you can. Once again, variety will help you. Leveraging volume with few logistics suppliers is not a recommended strategy in today’s market. Keep your modal options as well as your individual relationships open to as many carriers as you can manage effectively.

SERVICE LEVELS

Everyone seems to have gotten over the initial shock of having goods take much longer to get from point A to B these days. The recommended strategy for service going forward is two-pronged. Set realistic expectations with your customers. Make them aware of the challenges in the logistics network and let them know what you are doing to help mitigate the issues. One clear point is that you must have multiple options to move product because many logistics suppliers are simply under water. There is less capacity for more demand. This causes the network to go out of balance which in turn takes a long time to heal. The second prong of the strategy involves  looking at options that you haven’t considered before. Dedicated capacity, Private carriage, Multiple-stop truckload vs LTL. Anything that allows you the ability to circumvent supplier issues is relevant in today’s marketplace. The more options the better. A third-party logistics company (3PL) can help provide more solutions.

Riverside Logistics. a twenty-five-year-old, third-party logistics company based in Richmond, Virginia, that prides itself on being able to handle logistics a myriad of challenges confronting its clientele. They have close to 1MM square feet of useable warehousing and participate in local, dedicated, and long-haul transportation markets. They also do Logistics Management Consulting with clients to improve the execution of their Logistics networks.  We know that we can provide solutions that are both cost and service effective in today’s marketplace. Give us a call and we’ll be happy to try and help you.

About the author

Jim Durfee
Vice President Business Transformation
Headquarters: Riverside Logistics, Inc. , 5160 Commerce Road, Richmond, VA 23234
Riverside Logistics is a full-service third-party logistics company (3PL), delivering world-class supply chain management solutions.

If you would like more information or have questions about this article,  please call Jim at 804- 474-7700 Option #4.

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So, you found the right warehouse location, did you look at the transportation cost that goes with it?

More often than you would think, warehouse siting decisions are made without considering the transportation part of the equation. Transportation costs usually are at least 3 times as much as warehousing costs. In some cases, transportation can be one of your largest expenses in your supply chain. Why this is the case, is beyond me, but don’t be one of those companies that finds the perfect spot for your warehouse, only to discover after-the fact, that you can’t get capacity to service it, or that the rates to haul freight into and out of it are higher than you expected, or both.

Typically, warehouse site selections hinge upon three or four basic categories:

  1. Availability of structures suited to your needs in the locale your entering
  2. Labor costs and availability in the area you are looking to locate to.
  3. Inventory costs such as taxes in the locale and state, think California vs Nevada here.
  4. So, what did you miss? Transportation. Is the location highly accessible by truckload, intermodal, and LTL modes? Can they service it daily? Will there be enough capacity available to your facility to handle your outbound shipping volumes? This is especially critical if you are a high volume FTL shipper. How far away are you from key markets you want to service, one day, two days, longer? How much does this matter, a lot or a little? From a transportation standpoint, is this going to make your life difficult? For example, in the winter, are you in a snowbelt location that could disrupt your ability to ship because carriers cannot get into your location.

Now let’s shift the key question set over to transportation costs. In transportation there are head haul and back haul markets. A good example is the northeast market. You pay a lot to run freight into the northeast because drivers don’t want to go there because its congested and hard to get around, and  there are also many toll roads. On top of that, and more importantly, there aren’t as many loads going out from the northeast as there are coming into the northeast. So, if you have a location shipping to the northeast a lot, then your freight rates will be higher than if you have a location in the northeast that you are shipping out from.

Seasonal concerns are an issue. If you site in the deep south, you will have to contend with what is known as “produce season”. This is when every truck wants to go south to pick up produce going north. Rates into the deep south go way down (during this time frame) but capacity is hard (sometimes impossible) to find coming out from this area. Same holds true for “lawnmower” season in TN/Ohio market. There are examples of when seasonality works for or against you. Being cognizant of this is extremely important to your warehouse siting decisions. You could end up putting yourself in a more/less competitive position by making the right or wrong warehouse location decision.

As you can see from the above discussion, transportation cost and service levels should play a big role in your warehouse location decision. The impact of a bad decision could have a large negative impact on your ability to be competitive and to service your customer base the way that they need to be serviced.

 

Jim Durfee – Vice President Business Transformation

If you would like more information on our consulting services please call at 804- 474-7700 Option #4

 

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Do you use Logistics contracts, or do you buy on the spot market? If you spot buy, I’ll bet that’s been painful lately.

The current commercial transportation market is a “mess” right now. “Mess” is a technical term; it means everything is going in the wrong direction. Capacity is hard to find. Rates are going up by leaps and bounds. Service levels are dropping like a stone. Carrier relationships are becoming frayed. It’s just a “mess” out there in the logistics space.

If you have annual contracts in place with your transportation providers, then you are somewhat insulated from the vagaries of the marketplace for right now. Eventually as the environment persists, and it will, this will catch up with you too. Regardless of your contracts, you may still be seeing carte blanche service embargoes from the LTL segment. These have hit a broad base of shippers and 3PL’s, no matter their size and scale. Depending on your location the pain could be severe as you scramble to change carriers (if that’s an option) to get capacity to handle your freight.

If you buy on the spot market, good luck and God bless! First off, you must find a truck to haul your products. Then you must live with the price of the truck. Truck rates have gone thru the roof, with no end in sight right now. It’s a trickle-down effect. As the truckload segment gets maxed out, the freight shifts down to more expensive modes like LTL (less than truckload). As LTL gets overwhelmed the same thing happens to parcel. Networks get out of balance; rates continue their march skyward and good service levels become a thing of the past.

How did this happen? In a macro sense, it’s a simple equation. More freight, less drivers, and workers to handle it. Carriers furloughed drivers anticipating that the Covid pandemic would persist, and freight volumes would reduce for quite some time. The opposite happened. Freight volumes dipped, then came roaring back. Carriers could not adjust their pools of labor, drivers, dock workers, etc., fast enough to compensate and the network became overloaded.

When is it going to change back to the “good old days”? Not sure about the when, but if I were you, I would plan for the long haul well into late 2022.

What can you do about the spot market if that’s where you live? Tap into a reliable 3PL who already has contracts in place and can provide you with consistent rates for FTL, LTL, Parcel, and Intermodal (if you use it). 3PL’s typically negotiate their rates in annual contracts. Because of this they can provide you with rate stability. The biggest problem in business is dealing with the unknown. If you cannot predict your costs, then you cannot predict your future. A 3PL solution to the current mess is a step in the right direction to controlling your logistics costs.

 

Jim Durfee – Vice President Business Transformation

If you would like more information on our consulting services please call at 804- 474-7700 Option #4

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