As 2010 matures here at RateLinx, we are currently finding ourselves in an interesting business atmosphere, and analysis is in order to understand exactly why we are growing much, much faster than the current marketplace should allow. As anyone knows that works with us, we rely heavily on analysis in our business model. It came down to a question we asked ourselves as 2009 wound down – why are we growing so much faster than we planned?

According to our prospects, clients, and especially carriers, it is becoming clear that there is an ongoing “flight process” for U.S. shippers from utilizing third-party logistics companies (3PL’s), and companies are looking for a 3PL alternative. While some group RateLinx in this “3PL category” (which is unfortunate since we are NOT a 3PL), the common theme that is materializing is that companies that utilize 3PL’s are figuring out that once they made their commitment to a 3PL, they gave up a business asset – their own carrier rates (along with carrier choices, control, leverage, relationships, etc.). Make no mistake, these companies no longer have rates with carriers. Their 3PL does. The moment they signed the agreement, it was over. Companies are realizing that they are paying too much to “borrow” these discounts, custom rate bases, etc., plain and simple. It looks like that party may be ending soon, and carriers and shippers alike are becoming wiser.

Third-party logistics (3PL) companies offer a wide variety of services – from warehousing, to consolidation services, customs brokerage, cargo management, distribution services, etc. Companies that utilize 3PL’s obviously have specific needs, and 3PL’s may offer these companies needed services and these companies will contract with the 3PL’s because they feel that they a) are not as well-suited to handle on their own, or b) they were told/sold by the 3PL that it makes financial sense to outsource these services, or both.

Utilizing a 3PL specifically for warehousing services can make a lot of sense right now, especially with the current commercial / industrial real estate market in the U.S., and the general availability of space. However, we are finding from both less-than-truckload carriers and shippers alike that companies outsourcing their freight to a third party in order to enjoy better rates – especially LTL rates – is becoming a business practice that is starting to wane. There are a number of reasons for this.

A fair amount of 3PL’s closed their doors in late 2008 and 2009. While many simply went out of business, there was also a bit of consolidation in the industry as well. Apparently, a new crop of 3PL’s are starting to emerge, according to many LTL carriers – with the same old business model – and they are getting nowhere with the carriers. The fact is that LTL carriers are finding it harder to offer “volume discounts” to 3PL’s, and their appetite for doing so is starting to wane as well. Current market conditions in the LTL industry, with carriers losing millions of dollars and/or teetering toward financial disaster and bankruptcy, is dictating that this is beginning to negatively impact most 3PL’s financial model(s). 3PL’s, in order to increase their profit margins, have few choices… they have to raise their customers’ rates, and/or decrease their costs – their rates with their stable of carriers. Carriers are starting to resist.  And, if a major carrier or two in the industry should exit the marketplace for whatever reason, excess capacity will vanish and the carriers will begin to shed “bad” pricing immediately. First on the chopping block? Third-party logistics company rates.

We have nothing against 3PL’s. Just like everything else, some are better than others (although we have yet to find one with technology that is even remotely close to RateLinx’ technology). We specialize in helping companies unwind from their current 3PL mess in an easy, clear, economical fashion. Our clients are often surprised how easy our process is.

Our industry has discovered in the last few years that the RateLinx offering is unlike no other company’s in the transportation arena, and our growth is indicative that it makes sense for both shippers and carriers alike. It is no secret how we do what we do – except that nobody on the planet can do it but us. Will that change? Who knows, but right now we are enjoying our success and are truly humbled by the companies that employ us. We are blessed to have many carriers bringing us new potential clients – for which we are very grateful – and that is why we strive to never, ever lose a RateLinx client.

Logistics Software