What Is Managed Logistics?

Can you give us a high-level overview of what Managed Logistics does?
Jennifer: Managed Logistics is best described as when a shipper chooses to outsource all or part of transportation and logistics management. Typically, that means they no longer hire and keep a transportation organization. They give that responsibility over to us to manage on their behalf.

On a typical outsource, shippers want J.B. Hunt to manage both truckload and LTL (less-than-truckload). They want a provider to come in and bring a technology solution to the table, which we do through J.B. Hunt 360°^®. We then support that with data and own the actual day-to-day execution of all things logistics and transportation.

Why is trust such an important part of Managed Logistics?
Jennifer: Seldom do we have an opportunity where you’re going to go from $0 in management today to $500 million tomorrow. It takes time to build that, and it takes our organization time to ramp up just the same.

As we engage with our customer base, we deliver value over time through various ways. But typically, in the front-end of a setup, it’s through technology, it’s understanding [the customer’s] business. We do some significant, in-depth discovery calls where we learn everything there is to learn about how their freight moves today, what their customers expect and also the technology they currently use to provide or to manage transportation and logistics.

How do customers typically come into the Managed Logistics space?
Jennifer: About half the opportunities we see, they’re already outsourced to another provider. Others, they’re coming in for the first time. It’s usually those [companies] that are a little less mature that we see most often. And sometimes that’s a midsize shipper that’s got growth underway, where they’re looking for an outsource [because] they realize it’s more than they want to do.

And then there’s the third option, which is they decide that building this widget is what they’re really good at, and transportation logistics management is not what they’re good at. Sometimes they discover that over the course of building a business from the ground up.

What about customers who begin using one J.B. Hunt service and expand into Managed Logistics, which covers multiple modes and services?
Jennifer: This happens every day. We might sell into Intermodal or Dedicated Contract Services^®, let’s say. And then through our discovery process and after understanding their supply chain better, we realize they want someone to take on [more of their freight]. The signals are there. The conversation is driving in that direction, where they want someone to do more than what we currently do in one mode.

Those opportunities are usually a little stickier, too, because you don’t have to build credibility from the beginning. They’ve already used J.B. Hunt in some way, and we can build on that work that’s already started.

Managed Logistics uses resources from different J.B. Hunt business units, including brokerage. Can you explain how you use third-party carriers?
Jennifer: Usually, shippers don’t want 100 carriers bumping their dock, and these customers especially. They want a limited few, especially if you’re working with a shipper that’s got high-value freight. The objective is to build dense routing guides through carrier sourcing that requires something completely different than typical brokerage. We have some of those in our book of business today where we use a limited number of providers and that’s by design and often involves multiple modes.

We try to use the same carriers and repeat because they learn the facility requirements, they learn the business and they build their networks around these shipper locations. They also then learn customer delivery on the other end, which is important to a lot of these shippers.

What type of customer benefits most from Managed Logistics?
Jennifer: For just a typical outsource, think about a shipper who maybe doesn’t own brick and mortar, maybe that’s outsourced to a third party. Maybe they’re just getting into having to manage transportation. Picture shippers who have a $5 - $25 million transportation spend. They’re figuring out how to do this. Well, we know how to do it.

And then if you think about our J.B. Hunt 360° platform, they don’t have to buy a TMS (transportation management system). They don’t have to stand up that technology on their own. And then by using that technology with that shipper, we often then handle the communication with their third-party warehouse providers as to what freight needs to move and how it needs to be loaded.

A lot of the load plan work that we do, we create that for them. That’s work they would have had to hire people to do, and they would have had to buy the technology that we provide and then integrate the two. We do that for them as our off-the-shelf solution, if you will.

How does technology create value in Managed Logistics?
Jennifer: For that mid-sized shipper that has not invested in TMS technology yet, our J.B. Hunt 360° platform is extremely sufficient, and they like the capability and visibility that it provides. They also like that they do not have to carry this cost or the people that these off-the-shelf TMS systems require.

On the flip side, integration [with a customer’s existing TMS technology] is actually one of our preferred methods. It’s more expensive and more complex, but for those large shippers (>$25M), you may have a scenario where you integrate across 10+ of our products and then have maybe five EDI (electronic data interchange) sets that run back into an ERP (enterprise resource planning software). So not only do you have integration happening in the transportation management systems world coming into our platform, we also typically have an ERP integration where we are consuming orders.

In our world, we consume orders and create shipments and loads. The shipments and loads then execute in J.B. Hunt’s business units. We really build that out and write it back into their systems through those integrations.

How is our Managed Logistics team using technology to add value for our customers?
Jennifer: One of the things that’s really come online in our area is our consolidation product. It drives efficiency in our process by building our customers’ shipments based on when their end customers need their freight delivered. This product is our optimization engine.

On the back end, then, we start to catalog every time we move the freight in a different mode and save them money, and then share that back in our quarterly business review or CVD (Customer Value Delivery^®) process on basic cost reduction. So they’re pretty wowed by that.

Speaking of cost reduction, can you give us an example of one way we reduce costs when a customer outsources their logistics to us?
Jennifer: Most of our cost savings are really in that soft-cost bucket, where we’re eliminating empty miles and choosing the best mode. That’s typically where our value proposition really stands up. If you moved 500 loads last year, and through optimization, we moved 400 this year, there’s obviously going to be cost savings there, regardless of what happened in the market or with price.

What makes J.B. Hunt different?
Jennifer: If you look at every other provider out there that sells Managed Logistics services, seldom do they have asset and asset-like capacity behind that [service]. We compete with a lot of pure 4PLs. They don’t have a company they’re sitting next to that can run 50 drivers in tonight if intermodal is falling behind, or truckload is falling behind, and bring capacity to the table.

If you look at the service portfolio that we offer, we do almost everything. We say yes to some things and then figure it out as we go, within reason. We’re not signing up for things that are unattainable, but we are signing up for things that we think are doable.