Third party logistics service providers generally fall into two categories: Non Asset Based and Asset Based. 3PLs in each category might offer you the same service, but whether or not they own their own assets can seriously impact your customer experience. Learn why asset ownership might be overrated:
(RTD Logistics is a non asset based company, so I’m a bit impartial on the subject)
Less Is More
People often have more faith in the company that owns their assets, which can include means of transportation, warehouses, inventory and the like. Buyers tend to think that ownership means they can trust the company’s financial stability.
However, others say that companies who own fewer assets are strategically adding value to their core competencies. Non asset based providers outsource capabilities to other companies so they can concentrate their capital on primary functions. For RTD Logistics, that means delivering exceptional dynamic supply chain solutions and courier services.
It’s easy to assume a company is prosperous when they have fancy assets like company vehicles, flagship stores or real estate. Companies were buying like crazy during the boom of big industry because people believed that owning more represented wealth or status. But today, when it comes to business, maybe we should be looking beyond the facade of ownership.
Tangible vs. Intangible Assets
We’re seeing more and more 3PLs outsource tangible assets like warehouses, means of transportation, inventory, labor. etc. Outsourcing such functions frees up capital to be used on intangible assets like technology, expertise and customer loyalty.
3PLs use the model’s scalability and flexibility to incorporate expertise into supply chain management. Intangible assets, like field experts, lend themselves to a higher quality of supply chain management. Tangible assets, like a collection of fork lifts, don’t necessarily enhance the intellect of a provider’s logistic strategy.
Buyers expect flexibility and proficiency in their supply chain. Possessing intangible assets is proving to be more valuable as long term customer-provider relationships improve. This improvement suggests that 3PLs with strong core competencies have more to offer their customers than physical assets.
Why Non Asset Based 3Pls?
Asset heavy providers are limited to the capabilities and availability of their physical assets. Without this constriction, non-asset 3PLs are able to accommodate individual supply chain needs. The keyword here is “flexibility.”
- Costs: Non asset 3PLs don’t have fixed pricing on the costs to access physical assets. In order to promote their value, providers ensure that service costs that are passed along to you are as low as possible. Meaning, hidden fees and added costs won’t surprise you at settlement.
- Agency: Non asset based 3PLs are your advocate. They’re able to negotiate prices by shopping for services within their network on your behalf. Within their supplier network, providers acquire buying power. This gives the 3PL agency in business decisions.
- Expertise: 3PLs who invest capital in intangible assets, like technology and a skilled labor pool, are optimizing supply chain management with expertise. Investments in training and skilled labor are pertinent in creating custom logistics strategies. Optimal logistics services help our customers to trust us with their supply chain.
- Visibility: When non asset based 3PLs outsource operations, the quality of customer experience is contingent on transparency. A customer should expect to be kept in the loop with complete visibility in the chain of custody. 3PLs reap no benefit when there are hidden fees or claims swept under the rug. It is in the best interest of providers to monitor inefficiencies and audits, including billing, because customer service is their most precious resource.
- Added value: Non asset based flexibility allows supply chain management to adapt to your in-house functions. Rather than adjusting your plans to fit a 3PL that may be limited by their commitment to costs, location, etc., non asset based providers have pliable resources that work within and enhance your supply chain operations. This optimizes your supply functions and allows you to focus on core competencies, which ultimately adds value.
- Technology: Investing in software customization allows providers to accommodate case by case. Industry standard solutions are automated and optimized so having the means to develop integrations and software customizations has to be a provider’s core competency. This intangible ownership is not overrated.
Should you use a non asset based provider?
Only you can know that.
Companies that outsource secondary competencies can offer flexibility and customization in their services. The constriction of hard costs and physical assets don’t always compliment the customer-centric 3PL model.
But, as always, the quality of a 3PL’s collective supplier network and their level of expertise will likely indicate the quality of service you’ll experience.
Any time you’re choosing a logistics provider, it’s important that you trust in them and their competencies, whether they own their assets or not.