Evaluating your transportation management strategy

Transportation management has become increasingly critical in recent years as supply chains have grown in complexity and new transportation challenges have emerged. This has led supply chain and logistics leaders to rethink their transportation operations and weigh the pros and cons of managing operations internally versus outsourcing to a third-party.

In favor of maintaining in-house, technology vendors offering transportation management software (TMS) make compelling cases. They have plenty of examples of companies that have chosen to use software to successfully manage things internally with a positive return on investment. However, there’s no shortage of 3PLs or managed transportation services that tell similar success stories of companies that turned their operations over to them.

According to Gartner’s 2021 Logistics and Contract Manufacturing Outsourcing survey, 70% of respondents planned to bring at least one portion of outsourced logistics services back in-house. Leading the way was managed transportation services with more than 20% of those surveyed planning to bring it back in-house over the next two years.

There are a number of factors supply chain organizations cited for bringing logistics services in-house, including performance, resiliency and financial benefits. In addition to these reasons, there are several others that I hear consistently from organizations who are debating the decision to in-source transportation operations, such as:

Technology access and affordability

In the past, especially for small and mid-sized shippers, the cost of TMS technology was often prohibitive for in-sourcing transportation. Over the past several years, the variety of TMS solutions on the market has increased, along with the capabilities of those solutions. This variety means that companies have more choices and the opportunity to find and select a “best fit” solution based on their level of complexity and transportation use cases.

At the same time TMS solutions made the move to SaaS and cloud-based solutions. This shift has helped to remove some of the higher upfront costs and implement solutions in less time. In turn, this has helped to improve the ROI. It also means that you will be receiving future capabilities and functionality on a regular basis (sometimes monthly) compared to the traditional upgrade path of on-premise solutions.

Wavering trust

As transportation costs continue to increase, many leaders cite that they feel there is a lack of transparency with their chosen managed transportation provider. Some of this can be attributed to a lack of strong SLAs set forth at the beginning, but many company executives feel that the exchange of data and information is lacking. They feel that the levels of reporting that their partners are providing are not dynamic enough in the current environment or fail to accurately capture the organization’s key performance indicators.

Ownership of carrier relationships

As transportation capacity challenges continue, many shippers are looking to take back or increase their level of ownership of their carrier relationships. They express growing concern over a disconnect between themselves and their primary transportation providers. The idea of being a “shipper of choice” and gaining more capacity commitments from their preferred carriers has become a major point of discussion. Organization leaders fear that if they rely on an outsourced partner that they miss out on the opportunity to create and cultivate long-term carrier relationships.

There are compelling reasons on both sides of the debate. There are even options that take a hybrid approach. For example, you may maintain and own more of the carrier relationship while the vendor handles the actual planning and execution of the transportation operation.

When deciding the right path for your organization, consideration also needs to be given to factors such as skill and availability of talent, IT resources and how senior leadership views transportation (something we must do vs. a strategic advantage).

Brock Johns is a senior principal analyst in the Logistics and Customer Fulfillment team at Gartner. Brock’s research focus is primarily on transportation technology, with a focus on transportation management systems and freight audit & payment. Brock also conducts research on multi-enterprise supply chain business networks. He can be contacted at [email protected].

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