110 million packages a day. That’s FedEx’s prediction for the domestic package market in 2022. Before the coronavirus pandemic, the company didn’t believe volume would rise to that level until 2026.
The major contributor to that growth? eCommerce, to the tune of 86%.
Of course, all this demand means more logistics, including freight for inventory and supplies. To handle these moving parts—and optimize operations—companies are looking to managed transportation services.
Under that umbrella, Logistics as a Service (LaaS) has emerged as a newer solution on the market. eCommerce companies may primarily leverage LaaS solutions around delivery and return flow for finished goods. However, some companies are using LaaS to manage their entire transportation network, including freight operations, production facilities, warehouses, and retail distribution.
In this article, we’ll take a closer look at LaaS solutions, including what they are and how they can benefit your bottom line. Ultimately, you’ll discover where these solutions can add value to your business—and whether they’re right for your operation.
What Is Logistics as a Service (LaaS)?
First, let’s get clear on what Logistics as a Service (LaaS) actually means.
The phrase “as a service” has become a buzzword in and of itself, one that can sometimes cause confusion.
__ as a service (_aaS): Indicates a category of offerings that usually involves service delivery through cloud computing or remote access. It also generally requires an ongoing subscription.
One popular example you’re likely familiar with: Microsoft Office 365 is a software as a service (SaaS) solution in which you access Office applications through the Internet for a subscription fee.
Logistics as a service (LaaS) falls along these same lines.
LaaS solutions offer organizations a way to manage their logistics through a cloud-based platform, sometimes with the assistance of remote logistics experts. LaaS falls under the overall umbrella of managed transportation services. The exact services provided can be customized, based on an organization’s needs.
To give you a clearer picture, we’ll offer a few examples of how businesses might implement LaaS solutions:
Rather than purchasing, deploying, and customizing a transportation management system (TMS) in-house, an organization may contract with a LaaS provider to use their cloud-based TMS.
This TMS can centralize things like order flow, inventory, stocking, and shipping in a single platform. These cloud-based TMS platforms often feature performance-focused dashboards or AI analytics to help organizations optimize their operations.
This type of solution can be especially appealing to smaller companies who don’t feel ready to invest in an on-premises TMS. Additionally, organizations without the in-house expertise to set up, customize, and maintain a TMS can benefit significantly from a cloud-based solution. Instead of hiring an employee to develop and maintain the system, they can leverage the software provider’s team to assist with these operations, paying for customization as needed.
An organization can also take this scenario one step further. In addition to leveraging the provider’s cloud-based TMS, they can also contract with the provider’s remote logistics professionals to actually manage their logistics and transportation activities.
In other words, rather than using an internal team to handle your organization’s logistics, you can simply outsource them. LaaS providers have logistics professionals on staff, ready to manage freight movement, inventory and warehousing activities, customer shipments, reverse logistics, and more.
These experts will look at the dashboards and key performance indicators (KPIs) generated by the TMS. Based on that data, they’ll make recommendations to streamline operations, uncover efficiencies, and deliver a better customer experience.
The main advantage? If you don’t have logistics pros on staff, LaaS providers can offer you an instant infusion of expertise. Generally, these remote logistics team members are truly experts in their field who spend their entire job focused on what’s going on in shipping, logistics, and freight—and how to flex, based on current market conditions. Additionally, this solution is easily scalable, based on your needs. Think of it as renting an expert, rather than hiring one to work within your organization.
The results? Many companies report significant cost savings after using managed transportation services, LaaS included. The following numbers from ARC Advisory Group studies paint the picture:
2%–10% cost savings
According to an ARC report on LaaS return on investment, companies who invested in a LaaS solution estimated a 2–10% savings in freight costs.
12% rise in costs without managed transportation provider
When it comes to managed transportation overall, companies also reported similar cost savings. In an ARC survey, respondents were asked, “If you were to stop working with your managed service provider and went back to doing things the way you used to before this relationship, how much would your freight costs be raised or lowered in the following year?”
The most popular answer made it clear that this investment paid dividends: Freight costs would rise by 12% or more without managed transportation services.
Finally, LaaS providers may also be asset-based. In addition to providing a cloud-based TMS and managing logistics, some LaaS providers may even perform the transportation services themselves.
Schneider Logistics is one such service provider. In addition to their cloud-based TMS, Schneider offers managed logistics services and, as a multimodal carrier, also has the capacity to move freight via its fleet.
A new partnership between FedEx and Microsoft offers another example of an asset-based LaaS solution. The companies announced a new solution that integrates Microsoft’s Dynamics 365 Intelligent Order Management platform with existing eCommerce platforms and FedEx’s data network. This new partnership is aimed at connecting brands with cost-effective shipping solutions that create optimal customer experiences.
The collaboration promises eCommerce companies:
- Faster, more cost-effective shipping and delivery via the FedEx network.
- The frequent delivery status tracking and updates customers have come to expect.
- Easy, low-friction returns that leverage printerless QR codes which can be processed at 60,000 locations nationwide.
- Data insights to help improve and streamline operations.
The solution is projected to launch to U.S. customers in the second half of 2022.
Now that we’ve covered the features you can expect from a LaaS solution, let’s take a deeper dive into the benefits it can offer your business.
LaaS: Bottom-Line Benefits for Businesses
Although every operation is different, LaaS solutions can add value in several different areas, including:
Reducing Costs & Increasing Efficiencies
We touched on this earlier, but it’s worth another mention. If your organization doesn’t have a logistics or supply chain expert in house, LaaS solutions offer you the chance to access that expertise. You’ll have the opportunity to work side-by-side with an experienced professional whose entire job revolves around uncovering new efficiencies, adapting to changing market conditions, and reducing costs.
That, in and of itself, can be worth the entire investment.
Optimizing Fulfillment & Customer Experience
If you’re a newer company, efficiencies may not be top of mind. (Yet!) Instead, you might simply need to establish a standard, predictable, and scalable logistics flow, one that not only meets but exceeds your customers’ expectations.
Hiring a LaaS provider can help you get on track in this arena quickly, without driving your costs sky-high. A remote logistics expert can help you create a plan that takes into account your costs, inventory flow, order flow, customer profile, and more in order to get your logistics running smoothly.
Additionally, many LaaS providers deliver critical functionality that impacts customer experience, right from the start. For example, some LaaS solutions can offer things like real-time delivery status updates and convenient, low-touch return options that lead to happy customers and repeat purchases.
Scaling as Needed
One of the biggest advantages of choosing an LaaS solution is its ability to scale to your needs. When you manage all of your operations in house, you’ll have to invest in assets like warehouse space, employees, software platforms, and more as you grow. Instead, with a LaaS provider, you’ll get a solution that can grow along with you.
Of course, every LaaS provider offers different pricing models, so you’ll need to review them carefully. However, if there’s appeal in a solution that scales as needed, look for the flexibility in pricing that will support this possibility.
Accessing the Benefits of Existing Relationships
As we mentioned earlier, some LaaS providers are asset-based, meaning that they have fleets to move your freight quickly, if needed. Even non-asset based LaaS providers can offer some advantages in this arena, since they often have existing relationships with carriers, 3PLs, and freight forwarders.
Ask your LaaS what kind of carrier relationships they have, and what benefits that might have for you. In some cases, it may mean priority scheduling or even discounts for higher shipping volumes.
Freeing Owners to Focus on Their Strengths
Did you get into business to become a logistics expert? Unless you’re a LaaS provider yourself, the answer is probably not. By investing in a LaaS solution, you’ll be turning over a very specialized role to a dedicated expert.
This can free you up to focus on what you do best within your business. That might mean spotting new products your customers will love. It might mean forming new relationships that lead to deals down the line. Or, it might mean scaling your operations to grow your revenue and your customer base.
The bottom line: When you leave the logistics to the pros, you’ll allow yourself to focus on the areas where you can have the most impact.
Logistics as a Service (LaaS): Here to Stay
In the face of growing orders and higher package volume, it’s understandable why many companies look to managed transportation solutions (LaaS included!) to assist with this critical aspect of their operations.
However, every business has different needs—and LaaS might not be right for every organization. By understanding how LaaS works, as well as its potential benefits, you can make the right decision to help your organization optimize its logistics, control costs, and keep customer satisfaction levels high.
Investigating solutions to optimize your logistics? Our experts would be happy to help you evaluate your options for managing your inventory and logistics. Simply schedule a complimentary consultation to get started.
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