Many companies start with relatively small-scale warehousing and transport operations and naturally handle their logistics internally. But there comes a time when working with an outsourced logistics partner becomes an option. This may be due to increased complexity, rapid sales growth or to incorporate new distribution channels.
Working with a logistics specialist can improve performance and makes it easier to react to market developments. In terms of efficiency, the advantages are reduced costs, reduced inventory, shortened lead-time and a better use of resources. Longer term effectiveness is reflected in customer service improvement, market share expansion and higher revenue.
Finding the capital investment required to develop an internal logistics organisation and infrastructure is often a challenge. It may be more sensible to manage more of this function as a variable cost.
Mastering the growing complexity of logistics operations and the associated technology may not necessarily be the mission of a manufacturer or retail network alone. Is it time to look at working with a logistics specialist?
WHAT ARE THE KEY BENEFITS OF USING A 3PL?
Focus on core business activities
With an outsourced supply chain, companies can focus on their core business activities and develop new ideas, new products and expand into new sectors. Outsourcing to a trusted partner with in-depth knowledge and experience in carrying out logistics operations can free up considerable time and resources.
Increase productivity and performance
Using a specialist operator can significantly increase productivity and performance, for example by outsourcing back-office tasks associated with logistics operations. Logisticians can handle stock management, invoices, delivery schedules and returns using fully transparent systems interfacing with the company’s own systems. It ensures no loss of control while improving efficiency and reducing costs. Pooling infrastructure and systems across several customers with similar profiles and operating in the same sector can aslo represent an improvement.
Specialist logisticians have expertise in measuring performance, knowing which areas to focus on and how to best introduce improvements. Clear controls will improve operational efficiency and avoid unforeseen expenditures. They can also implement proven automation solutions.
Supply chain logistics are complex. 3PL organisations are experts and can not only take over operations but also pass on their knowledge so that the client company can improve and streamline their own internal processes.
A third-party logistics partner offers key advantages in terms of flexibility. They can scale space, labour, and transportation according to current inventory. They can also ease the transition between seasonal periods and adjust for industry fluctuation. For example, additional staff can be transferred temporarily from one activity to the other or sometimes from one site to another during peak periods.
Businesses can adjust their requirements rapidly to take account of their actual needs. And 3PLs can use their expertise to improve forecasting, helping to optimise inventory levels and reduce holding costs. Client companies can also expand into additional distribution channels, moving perhaps from a purely B2B model to an omnichannel model incorporating B2C customers too.
Technological advances in logistics are continual and a 3PL can bring advantages such as real-time tracking and visibility of goods. The best service providers propose integration with their clients’ WMS and ERP. This is another way to spend less time worrying about logistics and more time focusing on other areas of the business.
Using a 3PL can eliminate the need to invest in warehouse space, new technological solutions, transport costs, safety measures and salaries dedicated to logistics. By outsourcing logistics, variable costs such as labour can be more flexibly managed, to absorb peaks in activity for example.
TAKING THE FIRST STEP TO OUTSOURCING LOGISTICS
CEOs, CFOs and COOs need to regularly evaluate their supply chain organization. They should look at what competitors are doing and try to understand why they started working with a 3PL. A first step can be to clearly define the need and expectations for the scope to be outsourced. Companies considering outsourcing can then request and review proposals from third-party logistics providers. It can give them the potential benefits of outsourcing logistics and understand how the relationship with the 3PL would work. You need help choosing the right 3PL provider ? Check out our article on what to take into account when choosing a provider !
In doing so they can start to understand the concrete advantages offered by 3PL providers. They can also estimate the true value of their expertise, quality service and the use of latest technologies. They will surely bring significant operational improvements. To discover what those improvements may be requires some changes but these have proved to be a positive evolution for many and can be taken step-by-step to gradually broaden the scope or limit it when required.