Third-party PO management can bring supply chain stability

Third-party PO management can bring supply chain stability

It’s no secret that international shipping rates have grown more unpredictable. An oversupply or undersupply of vessels or planes can cause rates to change drastically, and sailings and flights can be unexpectedly canceled as carriers adjust supply to maintain profitability. As a result, shippers can struggle to consistently obtain space when they need it most.

However, the effects of significant pricing swings can be mitigated if shippers have sufficient freight volume to command dedicated space allocations at competitive rates. With modern logistics software, cargo owners can manage orders further up the supply chain and employ more efficient processes in moving products to market. Those with a high level of interconnectivity with trading partners can administer every purchase order (PO) digitally and with global visibility to freight.

But what happens if a small or medium shipper does not have the necessary volume or global technology? In these cases, many businesses work with a solutions provider to help manage both their POs and keep cargo flowing between suppliers, themselves, and customers. These providers have the scale, volume, and expertise to help companies efficiently secure the rates and capacity they need.

Combining international consolidation with worldwide shipment visibility between and across continents, third-party vendor management programs are increasingly popular options for companies engaged in international trade. Working with a third party to assist in PO management enables these companies to focus on core competencies while remaining in the loop on the status of supplier contracts.

Moreover, PO management services can be combined with transportation, logistics, warehousing, consolidation, and customs services. With businesses, suppliers, and the solutions provider integrated onto the same technology platform, shippers can gain greater visibility into overall inventory levels, maintain lower transportation costs, and help ensure on-time deliveries.

Having a single point of contact between a company and its vendors can also increase flexibility, visibility, and control in logistics operations. As POs are placed, the provider calculates the dates for cargo to be picked up and delivered, continuing to verify that information as delivery dates approach. Meanwhile, the company can monitor their shipments through a unified worldwide platform that provides real-time visibility to current order status, shipment status, and exceptions down to the item level. In addition, these platforms allow for rerouting of freight in transit to account for increased demand or last-minute supply chain outages.

Cargo consolidation can bring considerable cost savings, particularly if less-than-containerload (LCL) freight and 20-foot ocean containers can be consolidated into full container load (FCL) shipments for better capacity utilization. When working through a third-party solutions provider, global shippers can also save on customs entries, terminal charges, deliveries, and handling fees as multiple shipments are consolidated into a single shipment.

Global vendor management program providers can also offer increased security by accepting a shipper’s containers for unloading, consolidation, and reloading; picking up containers at the air or ocean port and bringing them back to their own facilities for faster, more secure customs clearance; nationalizing products for importers at their own bonded facilities; and sealing containers to minimize theft risk.

Further, a single point of contact and control helps build more consistency. Customs entries are processed uniformly, and fixed weekly schedules with known transit expectations make it easier to track orders. Companies then spend less time communicating with vendors and still have the complete information they need to run their business.

Shippers considering working with a third-party solutions provider should keep in mind that the international regulatory environment remains extremely complex. Countries require compliance with their own specific sets of customs rules, governmental regulations, value-added tax (VAT), duty rate calculations, and payment schemes. Even simple mistakes, such as an incorrect spelling on a declaration, can result in fines, penalties, or even cargo seizure. Cargo owners should ensure their logistics providers have local experts in markets where they conduct business to help manage freight and resolve any problems in real time.

Additionally, shippers should know their risk exposure. Limitations of liability, terms and conditions, and cargo insurance options vary by mode of transport, service type, and country. A single solutions provider can help standardize these, where possible, so shippers understand their risk exposure and are prepared to manage costs associated with cargo damage or loss. Working with a logistics provider that has in-house risk management professionals can help to uncover potential liabilities within a given supply chain, and the best providers will understand your specific business needs and translate them into actionable solutions.

With several models to choose from, external vendor management programs offer expanded choices and improved insights in today’s complicated international shipping environment. Each model has unique strengths in managing information and communication from purchase order inception to final delivery, but amid ongoing uncertainty, they can help make worldwide logistics processes more efficient and cost effective for companies of all sizes.

Tammy Birlew is vice president of the Americas at third-party logistics provider C.H. Robinson.