A guide to managed transportation services

May 16, 2024 / US

Table of Contents

What are managed transportation services?

In today’s rapidly evolving logistics industry, effective transportation management plays a pivotal role in optimizing supply chain operations. Managed transportation services are a strategic solution, helping shippers alleviate the complexities of moving goods from one point to another with efficiency.

Managed transportation services are a comprehensive outsourcing solution wherein businesses entrust the planning, execution, and optimization of their transportation activities to a specialized third-party service provider. A multifaceted engagement that encompasses various services to streamline the transportation of goods, a managed transportation partnership removes the burden of transportation management from the shipper. Instead, an experienced, field-proven partner handles all aspects of transportation management.

In the current landscape, where supply chains are becoming increasingly complex, managed transportation services can transform logistics operations.

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Understanding managed transportation services

At its core, a managed transportation service partnership entails the strategic outsourcing of transportation functions to expert service providers for optimized planning, execution, and control. These freight management services include carrier selection and negotiation, transportation procurement, route planning, load optimization, and more.

This strategic partnership extends beyond overseeing basic freight movement and encompasses a spectrum of activities designed to enhance efficiency, reduce costs, and ensure timely delivery. This arrangement allows businesses to focus on their core competencies while leveraging the expertise and resources of a dedicated transportation management partner.

One key component is a transportation management system (TMS), a software solution that acts as the central hub for managing and optimizing transportation-related activities. A strong TMS facilitates real-time visibility, route optimization, and performance analytics, contributing significantly to overall operational efficiency.

Additionally, managed transportation service providers can also operate as a freight brokerage, acting as an intermediary that connects shippers with carriers. This includes selecting the most suitable carriers for a particular shipment and negotiating contracts that align with the client’s goals and budget. Carrier selection and negotiation play a crucial role in optimizing costs, improving service levels, and mitigating risks associated with transportation.

Different types of logistics service providers (LSPs):

Third-party logistics providers (3PLs) offer outsourced logistics services, including transportation, warehousing, distribution, and freight forwarding. They may offer a range of services tailored to the specific needs of their clients. By outsourcing specific transportation activities to 3PLs, businesses can leverage their expertise, resources, and technology for more efficient and cost-effective logistics operations.

While 3PLs use their own solutions to manage specific processes, such as shipping or warehousing, fourth-party logistics providers (4PLs) take full ownership of your logistics program, working with your team to optimize all aspects of supply chain management. 4PL providers go beyond the services offered by 3PL providers by managing and optimizing the entire supply chain on behalf of their clients, including overseeing multiple 3PL providers.

Logistics outsourcing plays a pivotal role in achieving economies of scale, no matter the kind of partner. By partnering with a logistics service provider (LSP), businesses gain access to consolidated transportation solutions that drive down costs. For instance, logistics partners can leverage proprietary, cutting-edge technology to enhance visibility and real-time tracking, allowing businesses to make informed decisions and adapt swiftly to evolving market dynamics.

Benefits of managed transportation

The advantages of embracing managed transportation services include cost reduction, efficiency improvements, and enhanced visibility. Embracing a proactive approach, businesses can conduct a comprehensive cost-to-serve analysis, a critical tool in the world of supply chain management. Cost reduction strategies and key performance indicators (KPIs) can be integral components of the managed transportation framework. By aligning transportation strategies with overarching business goals, organizations can not only cut down on transportation costs but also enhance overall operational efficiency.

Managed transportation services bring logistics teams unparalleled efficiency improvements by streamlining processes and minimizing disruptions. By leveraging real-time shipment tracking, businesses gain granular insights into the movement of goods throughout the supply chain. Together with KPIs, this visibility enables businesses to make data-driven decisions, identify bottlenecks, and proactively address potential issues: in other words, businesses can drive performance improvements.

Efficient transportation management is a result of the seamless integration of various components. By adopting managed transportation services, businesses can optimize route planning, reduce transit times, and mitigate the risk of delays, all contributing to heightened efficiency.

Core components of managed transportation

Managed transportation services require that service providers take over transportation activities on behalf of their client—but how? These key elements of managed transportation help ensure that service is smooth and seamless.

Transportation management systems (TMS)

At the nucleus of managed transportation lies the transportation management system (TMS), a sophisticated entity designed to revolutionize the way businesses oversee and optimize their transportation processes. The TMS not only acts as a central hub for managing shipments but also encompasses features that span route planning, optimization, and fleet management solutions.

The integration of TMS with other logistics technologies, including warehouse management systems (WMS), creates a unified ecosystem where information flows seamlessly, facilitating synchronized decision-making from the C-suite to the distribution center.

Read our guide to Transportation Management Systems (TMS) to learn more.

Route optimization

Route optimization is crucial in managed transportation services. Using real-time capacity and traffic data, route optimization algorithms enable companies to reduce costs, improve efficiency, enhance customer service, and minimize carbon emissions and fuel waste.

Route optimization platforms help managed transportation services partners ensure that shipments are being moved as efficiently as possible, without deadhead. Meeting delivery deadlines consistently builds customer trust and loyalty, leading to higher satisfaction levels and repeat business for shippers using managed services.

Carrier management

Well-managed carrier relationships are part of a streamlined and responsive supply chain. Trust and partnership with carriers can be bolstered when carrier management is handled by the managed service provider. These providers have more bandwidth for contact with carriers and can offer more responsive and immediate communication.

Plus, effective carrier management involves ensuring that carriers meet all regulatory requirements and comply with safety standards. By carefully selecting and monitoring carriers, companies can mitigate risks associated with non-compliance or safety incidents.

Risk management

With dedicated compliance and risk management teams, managed services partners help shippers manage risk and create resiliency amid dynamic and unpredictable conditions. Service providers can liaise with all stakeholders and review historical and seasonal challenges to create a proactive contingency plan for unforeseen events.

Freight audit and payment services

By delving into the significance of freight audit and payment, businesses gain not only cost transparency but also enhanced control over their supply chain finances. And through robust compliance and risk management strategies, businesses can mitigate potential issues and foster a secure and controlled transportation environment. Because they have experience handling the complexities of freight shipping, including regulations, carrier contracts, and industry best practices, a managed services provider is an ideal choice for businesses looking to stay on top of audits and payments. And, dedicated internal staff can execute these processes with industry-specific context and expertise.

Strategic partnership

Managed logistics service providers establish strategic partnerships with their clients by offering comprehensive solutions that go beyond basic transportation services. Working closely with clients to understand their supply chain requirements, business objectives, and challenges, LSPs can create tailored strategic plans that fuel business growth and transportation efficiency.

Using tools like mode and route optimization, data and predictive analytics, and continuous improvement assessments, LSPs work to continually adapt transportation strategy as business goals evolve and market conditions shift. With dedicated internal analysts and strategists, these LSPs don’t just create and execute transportation plans: they serve as a close partner in driving the whole business forward, creating trust, collaboration, and mutual success.

Implementing managed transportation in your business

In the dynamic landscape of modern business, the implementation of managed transportation services has become a strategic imperative for companies seeking to enhance efficiency and optimize their supply chain operations. This transformative process requires a comprehensive evaluation of your transportation needs and aligning these with your overarching business goals.

Assessing your needs and goals

Before implementing transportation services, businesses must assess their transportation needs and set clear objectives. Evaluate your current approaches across workflows, paying attention to oft-neglected areas such as inventory management, distribution network design, and customer service. Is your transportation strategy aligned with business goals? If not, set this foundation now so that you begin your partnership on a strong foundation, or enlist the help of your managed services partner to do so. A partner with an experienced consulting and strategy team can help you realign strategy and engage in process improvement as they take over your shipping operations.

Consider also what technology your partner might be able to provide that could help you better understand your transportation needs. For instance, companies that leverage advanced supply chain analytics can make more informed decisions, enhancing their ability to align transportation strategies with overarching business objectives.

Selecting the right managed transportation provider

Choosing the right managed transportation provider is a critical step in this transformative journey. LSP, freight brokerage, and 3PL providers play pivotal, but different roles in delivering efficient transportation solutions.

Freight brokerages are the least involved type of partner, specializing in connecting shippers with carriers. Logistics service providers, or LSPs, include both 3PL and 4PL partners. While 3PL providers take over order fulfilment, including warehousing, packing, and shipment, 4PL providers are end-to-end partners that manage the entire supply chain.

First and foremost, seek a provider that understands the needs of your industry. This context and understanding will form the foundation of your trust, as your partner will be able to give you the most helpful advice for a given situation. Also look for cutting-edge technology to streamline operations, and exemplary customer service to ensure a seamless collaboration.

Transitioning to a managed transportation model

Once the right managed transportation provider is selected, the transition to a managed transportation model requires a systematic approach. This involves integrating supply chain processes, managing change effectively, and providing adequate training and support. Common challenges associated with the transition include data cleaning and validation, redundant processes and workflows, and internal alignment.

To address these challenges, invest in supply chain integration, change management, and comprehensive training and support. Effective change management strategies are crucial to overcoming resistance to change within the organization, ensuring a seamless flow of information between all stakeholders. When the implementation goes smoothly, a cohesive and efficient transportation system follows.

Advanced strategies in managed transportation

Sustainable transportation practices:

Sustainability is a growing priority in the logistics industry, as heralded by the growth of green logistics. Managed transportation services can contribute to sustainable practices by incorporating eco-friendly practices, such as utilizing electric vehicles, optimizing delivery routes to minimize fuel consumption, and implementing packaging strategies to reduce waste. These principles don’t just matter to the earth: the long-term advantages extend beyond environmental stewardship to cost savings and enhanced brand reputation.

Leveraging data and analytics:

Data and analytics play a pivotal role in driving decision-making within transportation services. Supply chain analytics provides invaluable insights into the performance of transportation processes, enabling companies to identify bottlenecks, optimize routes, and enhance overall efficiency. KPIs serve as benchmarks for success, allowing businesses to measure and improve their transportation operations continually. And real-time tracking and visibility, facilitated by advanced technologies, empower organizations to make data-driven decisions, ensuring timely and transparent transportation processes.

Innovations in managed transportation technology

Innovation continues to accelerate, and logistics is no exception. New technologies like artificial intelligence (AI), the internet of things (IoT), and blockchain offer unprecedented functionalities to shippers.

For instance, AI-powered logistics now has a variety of use cases, including streamlining logistics operations, optimizing route planning, and predicting maintenance needs. IoT enhances real-time tracking, providing granular visibility into the movement of goods. And blockchain for supply chain ensures transparency and security in supply chain transactions, mitigating risks associated with compliance.

The future of managed transportation

Managed transportation services have become a pivotal tool for businesses seeking to optimize their logistics operations. By understanding the core components, benefits, and advanced strategies, companies can harness the power of transportation services for sustainable growth.

As the logistics industry continues to evolve, embracing transportation services will be imperative for businesses aiming to stay competitive. The strategic value of transportation services, coupled with the adoption of innovative technologies, will shape the future of logistics, driving efficiency, sustainability, and overall business growth.

At Uber Freight, we understand that choosing the ideal partner to outsource your logistics is a consequential choice for your business. Taking the time to thoroughly explore your options and prepare your company for change will ultimately help you improve service and reduce costs for the long term. Interested in outsourcing your transportation operations in 2024? Our teams have the resources and guidance you need: connect with an Uber Freight expert today.