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Why Startup Manufacturers Should Delegate Out Their Logistics

Manufacturing companies of all sizes can benefit by seeking expert help with their logistics function, but few more so than startups. It makes sense that, early on, a startup will try to do as much as possible to be self-reliant and save money, but some outsourcing decisions are a near certainty in providing benefits. Shipping is at the top of that list, with qualified partners like digital brokers and managed transportation services providers able to fill that gap.

The advantages that come from leveraging external logistics services include instant access to people and tools that provide specialized expertise, greater buying power, and advanced technology. A startup going it alone takes years or decades to create such a network. This is time most startups don’t have when getting products to market, and growing the business cost-efficiently are the priorities right now.

Startups need to move fast, but poorly made decisions about the supply chain can make or break the business. There are big risks to making the wrong logistics servicing decisions, too.

Here are three areas where manufacturing startups can benefit and should consider first as ways to take full advantage of logistics solutions.

Logistics Experience

Hiring external experts is the fastest way to overcome a lack of in-house transportation experience. Startups often don’t know what they don’t know about their supply chain needs. The learning curve is steep, and bringing in an external partner can instantly provide the expertise and knowledge the operation needs. Even companies with a shipping expert or two on staff may be unable to manage the full shipping workload, and hiring a company with deep industry experience can help provide additional team depth without expanding headcount.

Knowing the most cost-effective ways to move materials and products isn’t simple. Knowing what shipping modes to use (e.g., Is full truckload or LTL better for a given order?) can have large cost and service implications. These are easy decisions when an experienced partner with the proper technology is involved.

Knowledge about your product’s handling requirements and the nuances of where your shipments are going (e.g., certain consignees and retailers can be very particular) is important to avoid additional delivery fees, like accessorials and detention, and delays.

Lastly, having logistics experts with years of experience consulting and implementing changes for companies of all sizes and industries makes true logistics optimization attainable even for startup companies. Whether it’s network optimization or mode, load, and route planning, established logistics experts have the know-how and tools to create a more efficient logistics operation.

Buying Power

Cost-efficient shipping requires larger volumes of freight that most startups don’t have. In other words, being small means a lack of buying power. The cost of transportation is primarily a function of size and distance, but the volume of shipments is equally important to carriers when offering a shipping rate. By partnering with a managed transportation services provider, manufacturers can take advantage of the provider’s collective freight volume and lower rates.

Speaking of rates and lacking industry experience, how can a startup even know a reasonable freight rate? An experienced logistics partner has deep market knowledge and always has a grasp on the current rates based on market data.

Many manufacturing startups underestimate how cyclical and dynamic shipping rates can be. Few are prepared for freight rate market fluctuations or what to do when truckload capacity dries up. These are market conditions logistics providers are built to navigate and smooth over for their customers. By partnering with an external service, manufacturers add a layer of protection from market volatility that can cause sudden increases in freight spend.

Logistics Technology

Technology is table stakes (not a luxury) for every supply chain today. However, it’s also complicated and expensive for a company to implement independently. Technology is not just about performing better in the day-to-day by automating tasks like carrier selection and paperwork, it’s about enabling scale and the effective use of data to improve the logistics operation over time.

Logistics and supply chain technology also connect other parts of the business, such as finance, inventory management, and sourcing. Qualified managed transportation partners often offer technology that is better quality than a small company has access to on its own or has the bandwidth or budget to implement.

Lastly, do not underestimate how much logistics technology plays a role in customer service. Transportation management systems and tracking capabilities enable supply chain visibility into the status of shipments and improve delivery performance and customer service.

Quick Tips: Six Things to Look For

The benefits of looking externally for logistics help only happen when a company finds the right services provider or digital broker partner (they are not all created equal). Here is a list of what to look for to start your search.

  1.     Do they have experience with products and delivering to consignees like yours?
  2.     Do they have a track record of supporting startups of comparable size as you?
  3.     Are they offering an agreement incentivizing continual cost and service performance improvements?
  4.     Can they provide strong and relevant case studies and references?
  5.     Have they proven an ability to scale and grow as their customers’ businesses grow?
  6.     Do they offer best-in-class logistics technology that works with your existing systems?

Prioritize and Execute

There are too many priorities for a manufacturing startup to do everything well, so it needs to focus on things core to the business and its strengths. Because shipping is seldom on that list, digital brokers and managed transportation services providers are often leveraged by well-run companies at this early stage.

A partner like Loadsmart can fill the knowledge, experience, and technology gaps related to logistics every startup has.

For a free logistics assessment of your shipping needs and ideas for improving your entire operations, contact Loadsmart.

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