I interviewed George Abernathy who discussed The Merit Of Third-Party Logistics Services Versus Brokerage Services.
It’s nice to speak with you today, George, and today we’re looking forward to hearing your views on the topic of the merit of
third-party logistics services versus brokerage services. Can you start by providing a brief background of yourself?
Sure, and thank you, Dustin, for having me and letting me address this interesting topic. I am the president and chief commercial officer of Transplace. Transplace is a company based in Frisco, Texas, in the Dallas-Fort Worth Metroplex. Transplace provides third-party logistics, brokerage, intermodal, and import-export logistics and transportation services to and from North America. My background: I’ve been at Transplace in sales and operations roles for about 10 years, and I have previous management experience here in the U.S. at JB Hunt, a North American commercial transport. And on the technology side, I’ve worked with Sabre, Logistics.com, Clicklogistics and NTE, all within the transportation marketplace.
Thank you. Can you talk about what the merit of third-party logistics services versus brokerage services is?
They both have their place, Dustin, within a shipper’s network; a shipper being defined as a manufacturer, a retailer, or a distributor of goods. The third-party logistics services and brokerage services both have their presence as intermediaries between the manufacturer and the provider of transportation. Depending on the type of network, the size of the network, the geographic scope of the network that the shipper is dealing with, both third-party logistics services and brokerage services have merit.
And why is this important?
The service providers should be chosen wisely. I’ll give you a couple of examples to describe why both third-party logistics services and brokerage services can be utilized to suit the needs of those shippers. A third-party logistics provider has as its primary objective to move 100 percent of a shipper’s freight. That shipper has decided to become part of a community of shippers, part of a community that drives more scale, drives scale beyond what the shipper can do individually, and provides the opportunity for the third-party logistics provider to accomplish collaborative transportation to do things with the shipments from one of the shippers that may compliment another shipper. That third-party logistics provider is thinking strategically, is providing strategic services, and moving 100 percent of the freight.
The people that are servicing the shipper in that third-party logistics relationship need to be trained, human capital development has to be invested in in those strategic areas to be able to provide the services necessary. That’s because they’re moving 100 percent of the shipper’s freight. The brokerage services are different; the brokerage services are going to be handling a portion of a shipper’s freight, and they may be doing so under contracted rates, or they may be providing service to that shipper within the spot market. Most shippers should consider utilizing one or two brokers within their network, whether they’re using a third-party logistics provider or not.
Some shippers may decide to go it on their own and not become a part of a 3PL network, a 3PL community of shippers and that’s fine. Third-party logistics and brokerage services serve purposes for a shipper whether that shipper is utilizing a 3PL or not, and the brokerage services will provide a nonasset flexibility to cover freight for them and potentially some of those timeframes where contracted rates may or may not be able to fulfill their needs, that may be during particular peak seasons, other parts of seasonality. As described, both third-party logistics services and brokerage services can be utilized within one shipper’s network at the same time.
My last question is: How should third-party logistics services be utilized, and where have you seen good results?
Third-party logistics services are oftentimes utilized in assets. You’ll see it in warehousing where a particular shipper requires that their goods be stored or be manipulated within the transportation network through cross-docking or otherwise. Third parties have had, historically, a significant role within the assets of warehousing or brick-and-mortar, as it’s described. Where third-party logistics has really become a significant portion of the supply chain within the past 10 to 15 years is within the transportation outsourcing, where the transportation networks of a provider like Transplace have grown to scale where that scale can be leveraged and can be utilized to drive savings that an individual shipper cannot.
For example, Transplace has approximately $2 billion worth of freight under management, another $1 billion or so running through our system, so we have the ability to collaborate across that $3 billion worth of freight to find efficiencies, to find that collaborative value that approximately 10 or 15 years ago, there really weren’t third-party logistics providers that had that scale nor did they have the technology capabilities that a transportation-management system, a TMS, like Transplace, can be delivered via the Internet—softwares of service delivery capability that allows there to be widespread utilization by a user base on both sides of that third-party relationships, whether it be the shipper themselves, our employees, or the carriers, the transportation providers within that. The good results have come and what our customer advisory boards demonstrate is that there are tangible metrics data-based results that, on an annual basis, can drive down costs for a shipper on their transportation network that they would be unable to do on their own.
Thank you for sharing today.
My pleasure. Thank you, Dustin!
About George Abernathy
President at Dallas/Fort Worth Area
Logistics and Supply Chain