Importer/Exporters vs Freight Forwarders/3PL - Levelling the Playing Field
Too often, importers and exporters are dependent on their NVOCC, Freight Forwarder or 3PL to provide them with visibility into their global supply chains.
July 20, 2020
Too often - make that almost always - importers and exporters (BCOs - Beneficial Cargo Owners) are dependent on their NVOCC, Freight Forwarder or 3PL (3PL) to provide them with visibility into their global supply chains. Too often they are dependent on their 3PL for reports and analytics that provide the meaningful information they need to really improve their global supply chain execution. Too often the information they get from their 3PLs is very basic, not really actionable, incomplete or inaccurate.
The cost of this dependency on the BCO is steep in terms of operational effectiveness, information and decision support, lost value opportunities, and overall supply chain control. The services the 3PL provides are important, even essential, to effectively execute global supply chain activity. However, they gain their leverage in the relationship because they control the valuable information which is critical to the BCO in running its international transportation. And, they exploit this advantage to optimize their returns.
The greatest impediment to the BCO liberating themselves from the 3PL is the failure to understand that the traditional, and very long-standing relationship can be rebalanced. With new TMS technology the playing field, which has been so heavily tilted in favor of the 3PL, is at least leveled and possibly tilted in the direction of the BCO
Up until now, the 3PL provides the services and controls the information around the global PO-to-Receipt and SO-to-Cash processes. With the control of supply chain information, they are the gatekeepers to the product/SKU visibility and associated cost elements. When we talk about global supply chain visibility we are referring to:
the physical position of a product/SKU through its transportation life-cycle,
all the cost elements associated with moving the product/SKU from origin to destination,
the implications to inventory status,
the impact on finance,
the ability to share and collaborate with internal associates and external partners, and
independent performance metrics and analytics for management decision support.
With control of the global supply chain information, they have exceptional leverage and “stickiness” with respect to the BCO.For all but a few very large and dominant companies, this is the BCO reality - dependency on the 3PL for their own critical global supply chain information. To make matters worse, most companies have a multi-freight forwarder environment which multiplies the dependency problem.
Controlling Information levels the Playing Field
Global transportation is a high stakes game and the odds have been, and continue to be, stacked in favor of the freight forwarder/3PL because BCOs haven’t been able to capture and control most of their global supply chain data. The cost of dependency is huge.With direct unfiltered access the their global supply chain information, the BCO has the visibility to proactively manage all the actors across their network and dramatically reduce their dependence on the 3PL or freight forwarder. The table below highlights some of the value opportunities for the BCO when they have control of their supply chain information.
Not all savings opportunities apply to any specific BCO. However, many of these savings or value opportunities are achievable.
3 capabilities for the BCO, importer/exporter to liberate itself from their freight forwarders/3PLs, and take control of their supply chain.
Today it is relatively easy for almost any BCO, importer/exporter to gain independence from their 3PL or Freight Forwarder. There are solutions, like 3rdwave, that provide very powerful integrated international transportation solutions at very affordable prices for almost any size company. To control the global supply chain and liberate yourself from your service provider you need:
Access to timely and accurate supply chain data. Data is crucial to every action and activity across the supply chain. The negative impact of incomplete, latent, and/or inaccurate data on management decision support, operations, and finance is profound.
The ability to digitize, replicate, and visualize the physical end-to-end supply chain. Visualizing a product/SKU across the supply chain over time is totally dependent on access to timely data and the ability to convert the data into actionable and meaningful information.
Business Analytics and Reporting - Contextualized presentation of supply chain information from the perspective of the user. And lastly, the information in and of itself is limited in value if it is not presented in a manner that the user needs to support their specific task and activity. The same data, with respect to the position of a product/SKU across the supply chain over time, requires different perspectives for transportation, sales, purchasing, inventory control, trade compliance, finance, managers, and the C suite.
Without the ability to execute these basic components the BCO remains at the mercy of the service provider at a significant and punitive cost. The good thing is there are solutions that are available, affordable, cloud-based, and require virtually no IT resources.