What can third-party logistics support do for a metal fabricator?

This truck driver might be smiling because he knows when he gets to his next pickup at a steel service center that the paperwork is ready to go, which will help put him on the road again. These types of relationships are fostered by 3PL providers to keep drivers motivated and customers satisfied. Halbergman/Getty Images

The metal fabricating industry is dominated by individuals that have a belief in doing things themselves. They couldn’t find a contract partner to build their end products, so they started their own metal manufacturing company. They couldn’t find a supplier of high-quality parts, so they brought production in-house. These people are the ultimate DIYers.

But as metal fabricating companies grow, their maverick leaders might have to take into account new perspectives. Trying to do it all might not be the right approach.

For example, does a company specializing in structural steel or heavy-duty fabrications really need the additional responsibility of staying on top of shipping of its goods? There are logistical issues that come with each large delivery. The company also has to compete for the talent of truck drivers, which are some of the hardest positions to fill in the U.S. economy. These additional responsibilities outside of metal fabricating can be a drain on company resources.

Third-party logistics (3PL) providers can help fabricating companies with their transportation and logistics requirements. They can step in and study a company’s transportation situation, such as business goals, shortcomings, budgets, current shipping strategies, and key operational details, and then prepare a plan that keeps deliveries on time while also providing opportunities for cost savings and increasing visibility into the transportation process.

To explore this type of outsourced arrangement, The FABRICATOR spoke with David Branson, vice president, TA Services’ managed transportation operations, and Nicklaus Watford, operations manager, TA Services, about what 3PL service providers can do for their customers and a recent project with one of the larger metals distributors in the U.S. TA Services worked with the service center over several months and ultimately delivered new workflows and a transportation management system that was integrated into its ERP systems. The 3PL provider also worked closely with the service center as new processes were introduced and training took place to bring the company’s sales and operations teams up to speed.

An edited version of the conversation with Branson and Watford follows.

The FABRICATOR: What can a 3PL provider do to help out metal fabricating companies and metal processors with their transportation requirements?

David Branson: Actually, our recent work with a large service center is a great example to show what we can do. I was part of the sales and implementation of that one. In the past, we won some business with the company on our brokerage side of the business. They were at a point where they were trying to figure out whether they wanted to continue to insource their transportation efforts and invest in some of the tools and resources to do that or were they ready to outsource their transportation to a 3PL provider.

We helped them through a couple of years, offering consultation, and then they decided that they were going to get a subscription to a web-based TMS [transportation management system] and manage it in-house as they looked to better manage their freight and centralize decision-making for all of their locations.

Ultimately, however, that was not successful for them. Some of it had to do with them not having the in-house transportation expertise and understanding the entire business process and how technology can be used to help manage that. So we kind of stepped in to help fill in those gaps in a proposal for them to outsource the transportation management function to us.

The customer’s objectives were to improve the customer experience and centralize communication and decision-making. They had multiple regional service centers, and each one of those service centers was siloed in their decision-making and their carrier solution. When we stepped in, we were able to take some of the bias out of the decision-making and provide overall oversight of the transportation and logistics, relying on technology, carrier solution, and our team’s capabilities. That ultimately helped to free up some of the company’s resources at the service centers to help process steel and service their customers better.

What we did was take out some of those things, such as figuring out the best way to ship, dealing with carriers, doing track and trace of shipments, and handling freight-on-pay, which weren’t part of their core offering. We helped them improve their customer experience, centralize the communication, and put in a top tier TMS, which helped them to control their process. Our team of experts and our back-office team basically put them in a better position where we could help them to manage transportation and logistics and give them the data to then measure how they were doing.

FAB: This service center customer is a large company with multiple locations. Is that a typical customer for these sorts of outsourced services?

Branson: When we’re looking at more of a managed transportation scenario, we’re telling our business development team that our wheelhouse is in the $5 million to $40 million range.

FAB: With the amount of consolidation that has taken place on the manufacturing and distribution side of the metals business, do you run into situations where potential customers are dealing with siloed decision-making related to an inability to merge cultures from what was once separate organizations?

Branson: Yes, absolutely. You work on these projects where companies have grown by acquisition, and they have all of these locations with different business processes, but they don’t have the controls in place for people to help manage transportation and logistics across the entire company. Some of these companies’ culture is about providing the business unit with the autonomy to make their own strategic decisions, so understanding their culture helps us tailor our approach. We have another case now, that’s more of a LTL (less-than-truckload) service offering, and we have to engage with the corporate level, as well as the business unit leaders, to explain why we're coming in and what we can achieve by working together.

With any of these situations, we see the change-management piece as being critical to how we can explain the values that we’re bringing and then how we’re going to do it. So a lot of that is “How are we going to eat the elephant?” In some cases, it’s as simple as just coming up with a phased implementation according to business unit or region. We must find out what makes sense for our customer’s business and gain alignment at all levels to best roll out the program.

FAB: The project with the service center client lasted several months before it was fully launched. How long does it take to roll out an outsourced transportation and logistics program?

Branson: It depends on the customer. In the case of this service center, we had to go in and dedicate time to understanding their business processes. We had to figure out what the best way for us to engage with them was, realizing that it likely would be more of a walk than run approach. Understanding what level of control our customer wants to keep or transition is key to our flexible service offering.

After spending some time with them, we decided that we weren’t going to go forward with a full-blown integration between systems out of the gate, particularly as we were still learning their business. So we initially rolled out our customer portal, which was a quicker way of getting them up and going. They gained the technology, carrier solution, and our people executing the process. But as it related to shipping, entering data, and determining what was a load, they kept control.

That was the first phase, and we ran that for six months. In the background, we had another project going on, which was having their operational business leaders, their project manager, and their IT resources talking together and helping to define their own ideal business process. That took a lot of discovery.

Once those business processes were confirmed and everyone determined the best way to make it work, then it was time to unleash the IT folks to do the setup and testing and get everything connected. That’s when their ERP and our TMS were linked together.

So now they’re sending us shipments. We’re determining how to plan it, and what’s the best way to consolidate it, get the carrier, and get it booked. Then we send them back the best answer: Here’s the carrier, here’s the cost, and here’s how you have to ship it.

So they actually ship it. The system sends back a notification that the shipment went out. The updated item information, ship date, and references are provided back to the TMS. If there were any updates to costs, we automatically send that back to them. We send carrier tracking updates as well. This helped them achieve full visibility to their orders and account for the accurate freight cost for each order.

That was the final product that we got to. It’s simple in concept, but it took time to get there because, for them, that was the right approach to learn about their business first and understand their processes.

FAB: What’s the biggest challenge in a project like this?

Branson: It’s having all the support you need to make it work and keeping the communication open until the timing is right. With our service center customer, the company leadership wanted to give it another shot before they took the next step of outsourcing. They had tried doing it internally, but they weren’t getting the end-customer experience they wanted. They also weren’t getting what they needed from a cost standpoint with managing their freight.

So they took the next step of trying to bring on a basic TMS that could help them with the carrier tendering, but they still did not get the end results that they wanted. The challenge there was that they might not have had the expertise internally to develop a carrier strategy and best leverage that technology to get results.

Company leadership recognized that they didn’t have the right combination of people, processes, and technology and were OK with giving up control of their transportation. We took over, and we control all of that for them now.

That didn’t come easy, especially when you’ve got different locations. The different locations want to keep that control. Fortunately, their leadership understood that they could reallocate some of their resources to do what they do best and by giving up some of that control, we could then provide more value and savings.

FAB: Can you provide an overview of what occurred when the service center was able to have its ERP system connected to the MercuryGate TMS?

Branson: The TMS that customer originally had a subscription to didn’t have any connectivity back to their ERP. So once we figured out the business processes, which is the biggest key there, we then were able to exchange information that allows everyone to do their jobs to the best of their abilities. For example, now they send us their shipments. We then give them the plan. That’s consolidating shipments together onto a load, maybe creating a multi-stop load, whatever it is. We get them a carrier, get a rate, and send it back to them. Basically, they sent us a question and now they have the best answer back.

They also started getting updated cost information. Now if there’s an adjustment in the weight, say they didn’t ship as much as originally planned, the rate can be adjusted and sent to them. That’s important because I believe they invoice their customer as soon as freight is shipped. So that gives them a much more reliable understanding of costs.

We also do a lot of quoting for them. We go through updating their system with either market or actual rates on lanes that they’re quoting. Their sales team then can see the real-time rates and lanes that are available. This allows them to better factor in the freight charges into their overall quote to their customer and ultimately win more business.

FAB: Do companies react positively to having that visibility and access to real-time changes in the market?

Branson: Yes, absolutely. We’re also able to track carriers and get updates on when shipments are getting to their destinations. They can access our customer portal, where they can log in and see this information. In the case of our service center customer, this is outbound shipments, but in other inbound service offerings, I also see a lot of value on knowing when freight is arriving, specifically in today’s market conditions. Companies simply like to know when something is going to hit their dock.

FAB: What do you see as being one of the secrets to making these types of relationships work?

Branson: We get hired to bring the savings, technology, process excellence, and continuous improvement to the shipper’s logistics network. We work with our potential customer to have them be a part of the discovery and solution process, so ultimately we mutually agree on the value we propose.

But first, we spend a lot of time investing and learning about our customers. For us, that means phone calls with workstream owners, shipment data analysis, and on-site visits. We’ve been to many service centers, and we just got back from a Chicago service center in October.

Nicklaus Watford: These visits really give us the opportunity to share some knowledge with customers. We get a lot of questions, such as “Why do drivers do what they do?” or “Why was this driver mad because he’s just sitting here?” With us being in the transportation market every day, we can provide some insight about these drivers. This is a driver-friendly market right now. We have to try to be a shipper of choice. That means keeping the drivers happy. When a driver gets there, he wants to get the load and get out quickly because that’s how they make money. Maybe some of these people at the service centers that were hired several years ago don’t think having the driver wait there is that big of a deal. Well, it’s not that way anymore.

Being able to share that type of information goes a long way, especially from an operations side of things. It’s good for the customer to know that if the paperwork is ready when the driver shows up, it’s good for everyone.

The education works for us as well. The more that we can put our eyes on processes and learn about them, like how coils are organized coming off a slitter, the more we can relay specific information to the carrier and set the expectation for them. We can tell them what the pickup is going to involve and ultimately set the driver up for success.