Anyone involved in the transportation or logistics industry has almost certainly encountered the term “logistics business process outsourcing” at least once in conversations where “efficiency” and “cost savings” are frequently mentioned but nobody bothers to find out what exactly happens inside the business processes.
Here’s a straight-to-the-point explanation of what happens.
A logistics BPO business assumes responsibility for certain back-end processes that a freight broker, trucking firm, or 3PL would normally perform within their organization. They do not drive the trucks; they do not make dispatch decisions; but they do manage all processes required to enable these functions – from data entry to billing and communications – taking up countless hours every day.
The Work That Doesn't Move Freight but Has to Get Done
This is something that only comes into perspective when one is in the middle of it – a lot of logistics activities are not related to physical transport.
Consider a small freight brokerage company. On any particular day, their back office staff are doing everything from confirming loads, requesting proof of delivery, feeding the data into the TMS system, verifying the insurance certification of carriers, dealing with invoice disputes, and answering inquiries by carriers regarding payments.
None of the above activities physically transports anything. If they get delayed or messed up, it will have consequences like untimely invoicing, dissatisfied carriers, and billing issues that can take weeks to resolve.
This is precisely what logistics BPO services address.
What Specifically Gets Outsourced
The specific list can vary depending on the firm, however, the main tasks transferred to the logistics business process outsourcing usually include:
- Freight billing and invoicing: Preparing invoices, calculating freight billings, resolving any issues with rates, and pursuing any payments past due. Freight billing mistakes happen quite often and result in significant costs – having a specialized team devoted to solving only this issue lowers the risks of making mistakes and expedites the process of collecting bills.
- Documentation handling for proof-of-delivery: Collecting documentation from carriers, verifying it against shipping documentation, and filing the documentation. The task is repetitive in nature and can easily be outsourced.
- Carrier onboarding and compliance: Creating carrier accounts in the system, obtaining W-9 form, verifying their insurance certificate and FMCSA authority. Every 3PL firm and broker require this process, which takes lots of time and isn’t worth senior employees’ attention.
- Managing load boards: Placing loads, answering carrier questions, and dealing with coverage on open lanes. If you are working with high volumes, then alone this is enough reason to outsource.
- Data Entry and Transportation Management System: Data entry and creation of reports for an updated transportation management system. This job may seem boring but is vital for business operations.
- Customer service and carrier support: Dealing with incoming queries via phone and email and providing status updates on shipments. Outsourcing this function means you get additional coverage hours without hiring extra staff.
Why Freight Companies Are Actually Doing This
Cost savings is certainly one of them, but it’s not the main point. What is more important is that you redirect attention from administrative tasks to strategic activities.
Your in-house staff will have more time to establish contacts with carriers, develop new routes, and find solutions for complicated shipping issues.
Another benefit of working with a logistics BPO company is that they can easily adapt to changes in freight volume. In some cases, it may be hard for an in-house team to cope with the growing load and to hire new staff members.
This issue becomes especially acute for brokerages and 3PLs operating in fast-growing markets.
What to Look for in a Logistics BPO Partner
Not all BPOs have prior experience with freight. This consideration is more important than anyone could ever realize when deciding among different options.
If you find yourself working with a group of individuals who understand TMS systems, have prior knowledge of MC numbers, have implemented FMCSA compliance in the past, and have experience with freight billing, then the learning process will be accelerated, and mistakes will be kept to a minimum.
The learning curve for an experienced group is measured in weeks. The learning curve for a general BPO may take months.
Incinque Business Solutions: Logistics BPO That Knows Freight
In our business, at Incinque Business Solutions, logistics support services have never been a new addition to our portfolio. Rather, these are a set of services that are designed to address the practical issues that come with being in the logistics business. This includes freight billing, POD management, carrier onboarding, and load board assistance – among other things – all done by us as an extension of your company, not as a third-party you must manage.
