If you’re engaged in the world of freight transportation, you’ve likely encountered or been part of discussions involving Third-Party Logistics companies (3PL companies. In this blog post, we aim to revisit the concept and significance of 3PLs in today’s business landscape and what we can expect from this business model in the future.

 

 

Third-Party Logistics (3PL)

As we’ve previously discussed, Third-Party Logistics companies specialize in outsourcing various logistics services, such as transportation, warehousing, packaging, and order fulfillment solutions. Their primary goal is to offer swift and effective solutions to streamline supply chain processes. By partnering with a 3PL, businesses can concentrate on their core operations, leveraging their strengths.

One of the crucial advantages of engaging a 3PL is accessing their extensive expertise. Whether you’re a Shipper or Freight Forwarder, investing in a 3PL is the right choice to ensure that logistical aspects outside your own expertise are handled competently. This approach is often better than allocating resources toward developing extensive in-house supply chain capabilities.

After the COVID-19 pandemic, the reliability of 3PLs has become even more evident, given the substantial workload they have handled. The freight transportation industry has recognized the significance of effective data management, visibility, and analytics, which are now key considerations when partnering with 3PL companies. As a result, 3PLs are increasingly investing in technology, with a specific focus on:

 

• Percentage of supply chain services offering real-time data
• Percentage of the supply chain that can be remotely controlled
• IoT (Internet of Things) devices
• Migrated to the cloud

 

Third-Party Logistics companies have become the first option for providing crucial tech-related functions in the supply chain.

 

And, what’s next?

Due to the increasing reliance on technology and the technological capabilities gap between Shippers, Freight Forwarders, and Third-Party Logistics companies, the question arises as to whether it is worth it to continue entrusting specific elements of the supply chain to 3PLs or if it is more valuable to adopt a model that offers a comprehensive solution to the entire supply chain. This approach is known as the 4PL model.

 

Fourth-Party Logistics (4PL)

4PLs extend beyond the boundaries of 3PLs by offering an extensive range of capabilities supported by technology. They possess the ability to comprehensively operate all facets of the supply chain, enabling customers to access a multitude of logistics service providers. Certain 4PL companies go even further by assisting customers in the planning and execution of their entire supply chain. A key foundation of this model relies on the establishment of trust between clients and suppliers, as trust deepens within the relationship, clients grant 4PLs a greater degree of control over their freight. This concept, known as Freight Under Management (FUM), is essential to the functioning of the 4PL model, as higher FUM correlates with the major success of the model.

 

FUM has experienced an 11% increase from 2019 to 2022, and this upward trend is expected to continue over time. Transitioning from the 3PL to the 4PL model appears to be an attractive idea. However, it’s important to note that 75% of the FUM is currently managed by the top 10 4PLs in the industry, while the remaining 25% is divided among various emerging companies. While the concept seems appealing, it is undoubtedly a challenging effort, because success lies not only in persuading customers to entrust their freight management but also in generating revenue by handling a more complex process.

 

What to aim for?

The Third-Party Logistics companies model continues to play a crucial role in the supply chain process, developing a streamlined workflow is essential to stay competitive and up-to-date. Therefore it is crucial to recognize the tangible opportunity at hand, 3PLs need to continue investing in building extensive networks rich in tech-enabled processes to enhance their capabilities, fostering a vital culture of innovation, cross-selling, and collaboration.

 

At Cargo Care Services we have a top-notch team that excel in Cargo Insurance, Warehousing, Packaging, and Freight Inspections, we are ready to handle key operations within your supply chain.

 

 

Contact us to learn more.

 

Cargo insurance is unique compared to other insurance policies. This is because ocean, air, and ground shipments are under a set of laws that limit the liability of carriers.

So how do you better protect your merchandise when it is in transit? Here are some things you should know about cargo insurance and why it’s convenient to add this insurance to your shipments.

1. Accidents occur.

Products shipping is more reliable and more efficient than ever, but there are still numerous reasons goods could be damaged in transit. Investing in cargo insurance can protect you and your business when damage arises.

2. Damaged goods are the shipper or consignee’s obligation.

International shipping laws favor the carrier, limiting carrier liability helps promote trade between nations. So, it is your responsibility what happens to cargo, you can be covered by a cargo insurance policy and when you prepare to ship, make sure your products are packed as securely as possible to minimize the risk of any damage.

3. Purchasing in CIF terms does not mean that you are totally covered.

If you allow the shipper to cover the insurance, they are only required to meet the minimum coverage. Usually, coverage is only from port-to-port. Also, when filing claims you are dealing with a foreign company, and it can be very time-consuming. That´s why acquiring your own Cargo insurance is a piece of mind for you.

 

3. The underwriting process is fluid.

Many insurance policies are subject to strict underwriting mechanisms, but cargo insurance (depending on the commodities) lacks rigid guidelines on what’s required. Our cargo insurance policies are all-risk coverage and can be tailored to your particular risks.

 

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4. Make sure you understand your policy.

A common misunderstanding when hiring an all-risk insurance policy is to assume that the policy will automatically cover any accident involving your merchandise. This is not necessarily the case. Instead, most all-risk policies state a specific set of situations they do not cover, so be aware of that.

5. You must communicate the nature of your goods.

If you are seeking coverage, you must disclose, commodity, conveyance, merchandise value, and any other material facts that could influence the underwriter in their assessment of the risk. After you provide this information, the insurance company’s decision to accept or decline coverage. The insurance company may also agree to provide coverage but at a higher insurance premium.

6. With Cargo Insurance you take the control

Cargo insurance gives you greater peace of mind because you will know some important aspects as:

• If there was a claim, would it be filed overseas or in your place?
• How much money you will receive back? Is there any deductible?
• Will a claim be paid in your currency?

 

The ins and outs of cargo insurance can be overwhelming. That’s why you can count on companies like CARGO CARE SERVICES who are able to advise you on the best cargo insurance policy for your shipments and support you in the claim process. CONTACT A CARGO INSURANCE EXPERT TODAY!