All major sports across the globe share one thing in common: their biggest stars don’t negotiate for themselves. Athletes are busy perfecting their craft and preparing themselves to create the best product they can, whether that means setting a world record or securing a victory on the field. This strategy is no different for the majority of shippers in the supply chain industry today.
In the modern, ultra-competitive marketplace, businesses must spend their valuable time focused on their core competencies and ensuring their products and services are not falling behind or becoming outdated. This is where strategic outsourcing can help.
Today, negotiating itself is an industry on the rise. The rapidly growing global economy is becoming increasingly connected, and companies need contracts and agreements more than ever to work efficiently and drive cooperation and progress. Third-party negotiators, or 3PNs, aren’t going anywhere, and will continue to grow as an integral part of the supply chain industry.
Before negotiating on your own, here are three benefits, and also a potential caveat, to consider when utilizing a 3PN:
The obvious advantage of a company outsourcing is saving a vital resource: time. Enlisting outside services will naturally save time for current employees so they can get more done. In the case of carrier negotiations, they frequently involve numerous back-and-forth, sifting through 20- to 30-page documents, exchanging large amounts of data between multiple parties, and time-consuming analyses. Simply put, most shippers do not have the bandwidth to handle these negotiations properly, and it could be costing their bottom line dearly.
For most shippers, negotiating new agreements takes place every two to three years, while the carriers, on the other hand, are negotiating agreements every single day. This discrepancy in expertise between carriers and shippers tips the balance heavily in the carrier’s favor. All behavior is purposeful, and there’s a reason carriers try to keep 3PNs out of the negotiations. For 3PNs, negotiating is what they do, day in and day out. It is not a part-time skill or an afterthought; negotiating is the core competency for these businesses and it’s where they excel. Carriers do not want 3PNs involved in negotiations so much so that they will attempt to cite non-disclosure agreements or other extraneous reasons to block their involvement. This excuse falls flat, though, as companies frequently hire outside council for their legal matters. Why would hiring consultants to negotiate be any different? A shipper’s data belongs to them, as does the choice of who they work with to best utilize that data.
Finally, 3PNs can bring the latest technological resources to bear, investing in or creating a logistics platform that most shippers do not have the time or capital to harness themselves. A 3PN’s technology suite has the ability to quickly and comprehensively re-rate complex proposals and find savings or losses down to the penny level, with no manual analysis needed. This can level the playing field with the carriers at the negotiating table and even give shippers the ability to identify and leverage opportunities with regional carriers as well. The technology 3PNs have access to can highlight the key areas of a company’s supply chain in which certain adjustments can create the most favorable impact for their bottom line.
The Caveat: Cost
While those are a few of the benefits of partnering with a 3PN, there is one potential caveat to consider: price. The down side for businesses looking to outsource services is oftentimes the cost, as most outside companies are paid for their service. The upfront costs of partnering with a 3PN must be weighed against the potential savings, and it is for this reason that most shippers specifically seek out 3PNs that operate under a gain-share model with no upfront cost. No matter the pricing structure, the relationship must make sense for both sides.
Professional athletes around the world spend countless hours honing their skills, and businesses today are no different, focusing on and practicing what their company does best. Shippers need to weigh the associated costs against the time, expertise, and technology that 3PNs bring to the table, but keep in mind that this particular partnership could end up making the difference between becoming an All-Star or becoming a bust.