A logical approach: a few operational best practices and systems solutions can help logistics service providers find success in managed transportation services.

Editor's note: The following piece was excerpted from a presentation to officials at the International Association of Refrigerated Warehouses annual convention. It also is based on a paper to be published by the Council of Logistics Management. Although addressed to a cold storage audience,

It would seem that entry into managed transportation services in this time of constrained capacity and service reliability issues might be folly, yet many third-party cold storage logistics service providers (LSPs) are examining ways to offer just this service.

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Here, there are two implementation approaches--evolutionary and outsourced.

The evolutionary approach builds organically. This does not necessarily imply the building of a dedicated fleet, but instead the building of processes, systems and infrastructure to become a transportation manager without owning assets. (Dedicated fleets should be established only when they are the most economical alternative--when large numbers of repetitive short-haul roundtrips or continuous moves are a network characteristic.) A cold storage LSP can start by establishing a managed transportation brokerage operation within a central command center and operate with staff and systems only.

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The outsourced approach has the LSP contracting with another LSP to provide transportation services. (In essence, the contracting LSP becomes a fourth-party logistics provider--a manager of other third-party logistics services). The key issue becomes determining what value is created by sub-contracting and what margins can be obtained.

These are difficult times in transportation. By now, everyone is well aware of the causes of, and impacts from, what we have come to call "transportation's perfect storm." Three converging storm systems--carrier capacity reductions resulting from economic issues, excessive dwell time at facilities, and driver shortages; further capacity reductions resulting from government regulations (e.g., Hours of Service); and the demand on the part of customers for smaller, frequent shipments--are placing unprecedented pressure on the transportation managers, whether "insourced" or outsourced. It is much more difficult to obtain coverage.