'Logistics insourcing' leverages tech to cut shipper costs

'Logistics insourcing' leverages tech to cut shipper costs

Some companies want to retain as much control over their supply chain as possible.
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Relying on cloud-based technology and two new partnerships, a start-up logistics company hopes to help US shippers build and retain in-house supply chain expertise rather than outsource. 

Haversack Logistics claims to be not a third-party logistics provider (3PL) but a “first-party” logistics provider, a term and concept that will be new to many shippers. “We are the anti-3PL,” says Chris Nadeau, president of Haversack Logistics. He is not talking about managed transportation either. “We want our clients to manage their logistics to gain competitive advantage. We don’t garner control.”

Nadeau sees an underserved market: shippers that want to either keep logistics functions in-house, rather than outsourcing them, or to bring those functions back under their roof. Many shippers outsource responsibility for transportation and logistics execution to 3PLs and lose control over those functions and talent. Nadeau wants to offer them a different choice.

“With us, the shipper controls all aspects of their business, and we go with their decisions,” the former US Army officer and trucking executive said. “They’re going to make the best decision for their organization every time, as long as they have the ability to do that.” Haversack identifies potential supply chain savings, and is only paid if those savings are realized, he said.

The company, which launched services March 1, claims to have saved its initial clients 22 to 52 percent, lowering less-than-truckload (LTL), parcel, and truckload costs through proactive analysis and “micro audits.” Haversack starts with an assessment of transportation and warehousing volumes and costs and looks for opportunities to improve sourcing, route, and load optimization.

Once a shipper client approves Haversack’s suggested plan, a specific instance of Haversack's "in-the-cloud" software platform is configured for that shipper. Pricing and routing data is confirmed, carrier integrations are verified, key production indicators are set, and the shipper’s transportation team is trained and coached on operating features and business analytics.

Haversack makes money solely through the savings generated for the customer. “We are an invested partner in improving their profit and loss statement, so if the operational execution of our plan doesn't generate projected savings, we don't earn our fees,” Nadeau said. “Our clients see every day how cost per mile or hundredweight goes down. They have complete visibility.”

Haversack is not an “Uber for Trucking” company, but it is one of the new crop of startups that are building new business models on the back of the latest cloud-based technology and real-time data communications via application programming interfaces. Those technologies, closely tied to the expansion of mobile computing, are creating opportunities for innovation.

“The whole concept of how customers interact is fundamentally changing, and it’s all being driven by the iPhone and Amazon,” Michael Seneski, director of corporate strategy at Ford Motor Company, said at a recent conference on supply chain automation organized by project44. Nadeau believes similar change is possible in how shippers interact with their partners.

He launched Haversack after five years in the LTL industry with Con-way Freight and XPO Logistics and a career as a combat engineer with the US Army, most recently serving as brigade command sergeant major, responsible for operations at the 2nd Brigade, 1st Cavalry Division. Logistics was key to that job. “I went from moving tanks to moving brown boxes,” Nadeau said.

He said the latest technology makes it possible for shippers, large and small, that formerly had to outsource logistics to gain greater efficiency and savings to bring those functions back in-house. For many shippers, exercising direct control over execution-level functions is likely to become more important as supply chain fulfillment becomes faster and more demanding.

“Yesterday’s solution will become today’s problem, if you don’t constantly look at it and audit yourself,” Nadeau said in an interview. The need for more experienced transportation and logistics managers will lead to “insourcing,” he said. In many cases, “If you gave a shipper the best technology and expert advice, they can run the supply chain themselves.”

Haversack may be the “anti-3PL,” but it is not against working with other logistics service providers on behalf of its clients. The goal is not necessarily the “disintermediation” often associated with “digitalization” but an expanded set of options for shippers. “Transparency is key,” Nadeau said. “Shippers have to see where they’re spending, what’s trending.”

To provide that transparency, the Davidson, North Carolina-based company partnered with transportation management software developer MercuryGate and logistics application programming interface provider project44. Haversack is one of the first companies to resell MercuryGate’s TMS software, he said, offering a “private label” version of the TMS.

Partnering with project44 gives Haversack access to a network of application programming interfaces (APIs) for the real-time exchange of pricing information, shipment status, electronic documents, and other data. The APIs connect to the MercuryGate TMS system. The result, Nadeau said, will be “immediate connection” to a broad array of multimodal transportation providers.

There is plenty of room for 3PLs and “1PLs” to grow, with large and small shippers. “We come across a lot of shippers that have no technology at all in-house, but rely on carrier websites,” Nadeau said. “Then there are big companies that aren’t taking full advantage of the technology they have. And there are a lot of legacy systems out there that haven’t been updated.”

Convincing business with long-established practices to look at logistics in a new way is not easy. “There’s a learning curve you’ve got to start with,” he acknowledged. But as truck and intermodal pricing pressure intensifies and capacity tightens, more shippers will be looking for new options and routes to supply chain savings.

“If you’ve got the right tools and position yourself correctly you’re going to be successful,” Nadeau said.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @wbcassidy_joc.