23 September 2013 00:00 [Source: ICB]
New government transportation regulations, tightened competition among chemical shippers for limited carrier resources, shrinking internal logistic departments and need to better control supply chain operations and costs mandate that companies re-evaluate existing logistic processes to address market challenges.
A 3PL can improve a company’s response time in reacting to a fast-paced world
As many 3PLs tout the same services and capabilities, how do you determine which outsource is best for you? While there is a long list of 3PLs, only a handful specialise in the chemical industry.
Below are some key criteria by which a chemical shipper should evaluate and choose an outsource partner to support their supply chain operations.
DEPTH OF EXPERIENCE IN CHEMICALS
Virtually no 3PL is an expert in every single industry. While different companies may offer similar tools and resources, the difference is the one that knows your market and how to apply their expertise to your business.
Only 3PLs experienced in the chemical industry have the knowledge, networks and databases necessary to address industry-specific issues. While many good 3PLs are available on the market, not all hire, train and retain operations staff with significant chemical industry experience.
Some may claim to have experience in chemicals, but do not serve a high percentage of clients in the sector. The decision to trust your company’s logistics to an outside organisation is only as good as the 3PL’s ability to execute.
Contracting a third-party consultant with chemical industry experience proved essential for one producer of chemical additives that wanted to get better rates for hauling hazmat materials not only across country, but on an international basis.
Not understanding different options available when contracting rates for domestic shipments, the chemical producer was paying the same rate to move both hazmat and non-hazmat product and was paying too much for non-hazmat loads.
By choosing a 3PL with contract expertise, market intelligence and established relationships with carriers that ship hazmat chemicals, the chemical shipper not only captured better rates and the best lanes, but negotiated a non-hazmat rate with existing carriers for shipment that included an accessorial fee for hazmat shipments, when applicable.
On an international basis, the 3PL offered the resources to identify the best carriers and rates for international transportation as well as the knowledge and experience related to distribution of chemical products to different countries.
By understanding compliance regulations pertaining to product importation/exportation of hazmat chemicals with different countries, as well as the US, the 3PL assured smooth transport of product into and out of countries.
As a part of compliance, the 3PL assisted in correctly identifying the product category of chemicals to ensure proper labelling and containment during shipment. This task is especially critical to ensure compliance for products identified as hazardous.
EASY TO DEPLOY AND UPGRADE TMS
Chemical companies without the resources or budget to acquire and maintain an in-house Transportation Management System (TMS) often contract the services of a 3PL that offer the technology and industry knowledge to support them in meeting specific supply chain requirements.
When assessing 3PLs, ask the following:
If the 3PL with whom you are working, or thinking about engaging, cannot answer at least five of these questions appropriately, you may need to continue your search for the best resource.
Once equipped with this technology, chemical companies can optimise transportation assets throughout the entire logistics process to reduce costs, better control operations and improve customer service.
However, not all TMS resources offered by 3PLs are alike. Best-in-breed, web-based or software-as-a-service (SaaS) TMS technology should be a prime consideration. In addition to providing broad capabilities, these systems are scalable so chemical companies can gradually invest in new capabilities or expand coverage in different divisions as business grows.
Beware of 3PLs that offer “homegrown” or IT-based solutions that often require as much as 30% of a 3PL’s resources to be dedicated to system upgrades and maintenance rather than spent on providing clients with improved logistics support and customer service. Updates to these systems also are not automatic as with web-based or SaaS TMS updates.
When a distributor of chemicals and plastics and a manufacturer of specialty and performance chemical products looked to centralise in-house control and gain visibility over its diverse domestic transportation operations, it sought an on-demand TMS solution that would easily interface with its SAP while providing full functional integration of all domestic transportation activities across five business units and more than 200 shipping locations.
After interviewing five different 3PL candidates, global specialty chemicals company chose a provider based the strength of its combined supply chain management technology to handle the complex transportation requirements of five business units.
Using the on-demand TMS functionality and established carrier network of the 3PL, the chemical distributor streamlined all transportation-related processes, reduced freight costs and improved shipment visibility and reporting.
SPEED OF IMPLEMENTATION
With little to no IT footprint or software requirements, web-based TMS implementations should take as little as three to six months; cloud-based TMS have even shorter timelines. Critical capabilities can come on board first, while others can be launched at a later date or deployed at new locations. Maintaining timelines is critical to rapid deployment.
For example, when an SAP system upgrade revealed shortcomings with an existing in-house TMS, a global producer of industrial chemicals and performance products outsourced the project to a 3PL that offered not only a state-of-the art TMS solution to support its North American domestic freight and import/export logistic functions but the logistics expertise to complete full functionality integration for all domestic outbound shipments across eight business units and more than 40 shipping locations in just six months.
During the system integration, the chemical producer and 3PL worked closely together to design, configure, test and deploy an extensive set of TMS capabilities for contract management; load planning and optimisation; automated mode/carrier selection and carrier interfaces; automated EDI-based “match-pay” freight payment; and extensive reporting and business warehouse interfaces, including five integration points to the SAP planning and execution process.
It is important to know a 3PL’s experience in addressing different issues and working with clients through rough spots. There is no substitute for experience. The more issues that a 3PL has successfully solved for others, the easier it will be to solve another client’s specific challenges.
One Fortune 500 chemical producer relied on a 3PL for getting the funds from executives to contract specific managed services to gain better control over its existing supply chain operations as it could not expand its internal staff.
Experienced in providing transportation solutions to customers in the same industry but with varying scenarios, the 3PL provided informed answers to the questions posed by executives and gave examples of the successes and pitfalls associated with certain actions.
Chemical shippers need a flexible 3PL partner that can accommodate client’s current and future business needs and challenges. As the world economy and company business plans change, so do logistics solutions.
A 3PL must continue to identify and jointly solve potential client risk, assess opportunities for cost reduction and customer service improvement, and suggest process changes that promote and focus on projects producing the greatest “economic value of change”.
Freight management contracts can be developed on a fixed or variable fee basis, with fees based on the freight spend and volume shipped. The resultant operating costs would be tied to business levels, with costs going up and down commensurate with business volumes.
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