Shipping Companies Outsourcing Non-core Capabilities to Focus on Their Core Expertise
November 22, 2022
A recent survey by Deloitte reveals that 59 percent of shipping companies are in the process of acquiring new core capabilities, while a similar share (60 percent) of carriers are looking to outsource their non-core capabilities. According to the study, these processes could complement each other, with shippers outsourcing support functions while building or expanding their core capabilities.
Core capabilities include processes such as order fulfilment, warehouse management, transportation scheduling, safety, workforce and demand planning, and portfolio planning. Currently, the majority of shippers are looking to add new capabilities so that their services and operations align with an increasingly competitive environment. New players are quick to enter the market, including hyperscalers, megaretailers, and vehicle manufacturers, all competing for a share of the huge profits at stake.
Backoffice operations are the most vulnerable to disruptions and change, and shippers are increasingly considering outsourcing support capabilities such as data processing and data entry, freight rate auditing, digitization, and support for documentation.
Divesting such non-core functions facilitates supply chain management and streamlines shipping processes, enabling carriers to focus more closely on areas of differentiated and critical expertise. Moreover, third-party logistics providers have the know-how, manpower, and systems to handle large volumes of documentation at a much lower cost than shippers. They can audit all bills to identify irrelevant data that can result in errors and inaccurate billing. Typically, lengthy procedures and frequent changes in freight rates lead to billing errors. Outsourcing auditing, including cross-checking of documentation and post-auditing, enables shippers to rectify errors in billing. Additionally, third-party providers aid shippers with data collection, including receipts, bills, shipping documents, purchase orders, bills of lading, and driver logs. The list of back-office services that 3PL providers offer also includes the following:
- Order entry
- Support for expediting orders
- Carrier selection
- Load tendering
- Freight booking administration
- Orders fallout support
- Customer file administration
- Cargo claims management
- Tracing and tracking of orders
- Departure and arrival notification
- Emergency road and driver accident assistance
- Customer advisory
Third-party logistics providers not only offer a range of back-office services but are always upgraded on the latest technology and resources to assist carriers in an effective and cost-efficient way. With time, software, systems, and technology become outdated, and carriers need to update and upgrade equipment which can cost a lot of money. Building partnerships with 3PL providers reduces the amount of investment in technology, infrastructure, and facilities. Third-party providers also have their own transportation management systems that enable them to keep scorecards on performance, analyze shipping patterns, prepare reports on freight, and more. Additionally, reputable European logistics providers have the capabilities to manage insurance certificates and carrier contracts better than shipping companies.
While there are multiple benefits of outsourcing back-office operations, there are a number of factors to take into account. These include data security, flexibility in working hours, and expertise in your particular sector, to name a few.