Outsourced Fleet Management: Leveraging Modern Technology for LSP Efficiency

In today's fast-paced logistics landscape, effective outsourced fleet management is crucial for maintaining a competitive edge. Third-party logistics providers (3PLs) must outsource to reduce costs and adapt more dynamically to demand. Using external carriers has become a necessity for any company that wants to grow and develop in a highly volatile environment. For instance, recent findings show that spot markets are more economical than owning fleets in the current European market. Q1 2024 spot rate index fell by 8.2 points YOY, making it a cost-effective choice for LSPs. These insights highlight the potential cost savings of outsourcing fleet management, especially in an unstable market with high operating costs like growing cost of drivers. 

However, this outsourcing strategy is not without its challenges. 3PLs often face difficulties when outsourcing operations, such as ensuring proper documentation, continuous price negotiations, complex routing assignments, maintaining consistent service quality, and handling billing intricacies. Digital tools offer innovative solutions to these common issues, enhancing efficiency and compliance.

How can digital tools help solve these issues that arise from the LSP outsourcing strategy? In this article, we explore five key areas where digital tools can make a significant difference, providing practical insights and solutions for optimising outsourced fleet operations.

5 Key Areas of Outsourced Fleet Management where Digital Tools Can Make a Difference

From onboarding to job completion, LSPs run into common issues when outsourcing fleets and Innovative tools can address these areas. Ontruck specialises in scaling up external fleets quickly, and we’ve seen first-hand how such tools can make this possible.

1. Carriers onboarding into the LSP network

Compliance is a key consideration when working with outsourced fleets. Partner carriers should have necessary and valid documentation, such as insurance certificates, driver qualifications, vehicle maintenance records, and safety compliance certificates. Keeping these documents current and reliable helps maintain high standards and avoid legal and operational problems.

Despite best efforts, however, onboarding vendors manually is far from ideal. According to 58% of compliance teams, measuring vendor responsiveness poses the greatest challenge. 

In the case of LSPs, while larger organisations usually keep relevant documents on hand and have established systems for maintaining compliance, the process of collecting and reviewing documentation working with smaller players becomes a shared responsibility between the LSP and the carrier. This is the common situation, as the European road freight transport market is very fragmented, with the top five companies occupying 7.27%.

Outsourced fleet management teams often have to chase after their vendors. They need to stay on top of communication, manual reviews, and long workflows that may not always result in timely outcomes. This inefficiency can impede a possible collaboration or lead to compliance risks.

A better solution: streamlining onboarding with intelligent documentation verification

LSPs must implement a rigorous process for collecting, reviewing, and storing documentation, tracking validity dates, and ensuring carriers update expired documents promptly. These are the two key technologies that can facilitate this work:

1. Automatic machine learning powered scanning capabilities: to cut down on time and effort spent on lengthy onboarding, companies can employ AI-powered digital tools with machine learning algorithms, image processing, and computer vision technologies. 
2. Alerts system: systematic scanning allows these tools to automate documentation verification and detect non-compliant documents. When an outdated or wrong document is detected, alerts can be sent to the team by email or through their own TMS. As a result, the fleet management teams are freed from repetitive tasks, only stepping in when needed.

2. Freight offers and price negotiation

When working with third-party carrier freights, cheap isn't always better. Logistics providers need to balance cost efficiency with service quality. Effective negotiation is crucial in this process, especially when managing multiple conversations simultaneously as a means to explore the best options and obtain the best results.

For instance, when Ontruck Transport Services began outsourcing fleet management, we noticed our dispatch team was spending up to 15 hours daily on tasks related to vetting suppliers and negotiating prices. A seemingly straightforward task turned out to be highly resource-intensive. 

A better solution: automating freight bidding

Having a reliable system that allows LSPs to be in the driver’s seat can reduce inefficiency. Providing carriers with an automated freight bidding platform makes it easy for them to accept, reject, or negotiate jobs. 

It’s not, however, a one-size-fits-all solution. Tools’ configuration is required to match an organisation's industry, carrier segment, and purchasing strategy. For instance, the choice between transparent and non-transparent bidding systems can impact the way bids are managed and accepted, depending on the specific needs and strategies of the business. Additionally, vendors may use mobile phone-based bidding to make use of drivers' existing habits, while others may use temporary website links to ease the transition to new apps for carriers.

Additional Reading: a guide to implementing freight bidding in your LSP, including strategies for establishing negotiations.

After defining the strategy, the bidding system takes over. It facilitates communication between external carriers and LSP teams. With insights into the health of their carrier network, LSPs can increase acceptance rates and fleet teams can focus on advanced negotiation techniques. We've seen an average 40% increase in win rate and a 50% reduction in cost-to-serve.

3. Routing and journey proposal

Efficient route planning is at the core of timely and cost-effective logistics operations. Understanding factors, such as traffic, warehouse requirements, and road conditions are key to predicting the best route to take.

Rigid systems, such as static routing, can’t accommodate sudden changes, leading to inefficiencies and delays that impact overall logistics performance. It’s difficult for operations managers to have a clear picture of the entire network topology. This traditional approach requires a detailed understanding of the number of vehicles, orders, and other logistics information in advance. As routes become more complex, it becomes harder to track and adapt to the changes.

A better solution: shifting to dynamic routing

Advanced routing software can analyse unpredictable factors in real time, optimising routes accordingly. As new orders come in, the dynamic routing algorithm factors in additional details, such as vehicle location, warehouse opening hours, and traffic. This continuous adaptation optimises routes and makes them responsive to changing conditions.

Smart capabilities like hot routing—which continuously searches for the best routing options—further streamline outsourced fleet management. A proactive approach to route planning improves efficiency and enhances the reliability of outsourced fleet operations. When LSPs combine hot routing with automated freight matching, they can identify profitable routes, boost acceptance rates, and lower cancellation rates by up to 1.2%.

4. Control Tower Activity and Incidents Management

Effective control tower activity and incident management contribute to a high level of service in logistics. In-house fleets benefit from GPS tracking and trained drivers to keep these processes in hand. However, 3PLs face significant challenges in replicating this efficiency with external vendors, primarily because they’re not required to invest in new tools and devices in order to accommodate their clients’ existing processes.

A better solution: providing a seamless platform for monitoring and responding to fleet incidents

Logistics service providers should develop a streamlined process to make adoption seamless. One way to do this is to provide a platform, such as an app, to connect with vendors. The app can be downloadable by using the preexisting gadgets available to them and comes with relevant features, such as integrated tracking, chat, incidents management options, and POD upload.

If software development isn’t an option, there’s a quick fix to collect the most critical information and feed it into their transport management system (TMS). 3PLs can share links to drivers for easy location tracking. These links can be shared via instant messaging apps such as WhatsApp, to share locations and receive information from drivers.

These modern approaches can help LSPs ensure better compliance and response times with their outsourced fleets. Doing so can reduce the incident ratio by 25% and customer service interactions by 50%

5. Billing & POD Checks

When subcontracting fleet management, generating invoices and recording financial transactions for completed shipments is a common pain point for logistics service providers. A bulk of this work revolves around ensuring the accuracy of billing information and verifying the Proof of Delivery (POD) to prevent payment disputes and delays. 

LSPs need an efficient way to send delivery notes to external carriers while ensuring that these documents are accurate and reliable.

A better solution: digitalising billing systems 

Digital billing systems can automate invoicing and integrate POD checks, making the process faster and more reliable. Features, such as real-time data capture and automatic error checking, computer vision, and machine learning algorithms can save LSPs time and reduce errors. It ensures greater accuracy and efficiency for LSPs in their financial transactions.  

Managing Outsourced Fleets Can Be a Smooth Ride with Next-Gen Fleet Technology

Operating without owning assets or relying on a flexible fleet model tends to be more cost-effective in the long run. However, LSPs need to leverage technology to improve efficiency, streamline operations, and manage external carriers more efficiently. 

Ontruck AI Tech’s suite of innovative tech solutions can help companies simplify outsourcing by integrating advanced artificial intelligence into their fleet management system and processes. Contact us to schedule a demo and learn how our tools can benefit your business.

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References:

• Intelligence, T. (2024, May 14). European Road Freight Rate Benchmark Q1 2024. Transport Intelligence. https://ti-insight.com/briefs/european-road-freight-rate-benchmark-q1-2024-both-spot-and-contracts-rates-indexes-fall/ 
• Key Trends and forces Shaping risk and Compliance Management in 2021: Report. (2021, January 20). ACA Group. https://www.acaglobal.com/insights/key-trends-and-forces-shaping-risk-and-compliance-management-2021-report 
• ‍Ltd, R. a. M. (n.d.). Europe Road Freight Transport - Market share Analysis, industry trends & Statistics, growth Forecasts 2016 - 2029. Research and Markets Ltd 2024. https://www.researchandmarkets.com/reports/5725509/europe-road-freight-transport-market-share