With all the recent disruptions, outsourcing can help companies to manage the increased levels of volatility in their supply chain. 3PLs have greater access to resources that can be shared across operations which can be invaluable especially as there is currently a shortage of both labour and warehouses. There is also an increased demand for automation in supply chains and logistics operations to keep them competitive and partly to cover for the shortage of people. In-house warehousing can be a significant expense and risk particularly if not managed well. It is generally inflexible, leading to the expense and double handling associated with additional offsite storage.
However, it is critical for the strategic and operational requirements of the operation being outsourced to be discussed in detail and documented to allow the 3PL to prepare a robust proposal and price that reflects the operation and culture and maintains the customer service levels. A detailed invitation to tender and a contract with a detailed operational and IT specification should avoid any on-going volatility and poor operations challenges.
5 Reasons for Outsourcing
1. Reducing Costs
3PL’s work with carriers on behalf of multiple customers and therefore are often able to negotiate better rates than individual shippers, due to their collective volume and order frequency.
In-house warehousing can turn into a significant operational expense for manufacturers. A 3PL can provide its customers with all the operational and technological advantages to optimize its supply chain and lower the costs and risks.
2. Enhanced customer experience
Customers have become used to next or same-day delivery as standard. A 3PL provider can assist with this as they have efficient and established distribution networks. Outsourcing to a 3PL means you have a partner rooted in efficiency, so you can expect to improve performance at multiple levels such as fewer customer complaints, improved order accuracy, lower inventory levels and greater availability rates.
As technology is evolving so fast it is a challenge to assess and implement the most effective options. Partnering with a 3PL gives you access to up to date expertise and updated technologies as well as built-in IT systems maintenance without the internal capital investment.
3. Expertise
Logistics is complex but engaging with experts can improve the way an organisation’s logistics operation functions, leaving it free to focus on other areas of its business. Starting the road to outsourcing a logistics function can be helped by using independent consultancy services to describe your detailed operation and knock your data into shape so the invitation to tender is meaningful and should ensure relevant answers. Running many invitations to tender means the right questions of the 3PLs can be asked.
4. Risk Mitigation
Unlike the core operations of your business, logistics is often seen as only a necessary cost centre to achieving the delivery of your orders. Whilst you understand the competencies required in your core areas, those needed for Logistics and Supply Chain Management are often unknown. This is where the risks to the Company start to arise. Working with a 3PL should provide these competencies and mitigate your risks. You also eliminate the need to invest capital in warehouse space, technology, and transportation. Not only can you meet requirements with fewer fixed assets, 3PLs can take tasks like order management, billing and staffing off your hands so you can focus on more profitable core competencies. By integrating your strengths with those of a 3PL, you can boost efficiency and profitability.
When unexpected disruptions or problems arise, 3PL providers are responsible for finding alternatives and solutions.
5. Cross Border
Most 3PLs offer expertise around international logistics in addition to UK logistics, which is ideal for those looking to expand into a new territory or markets without the risk of investing heavily in local warehousing space or staff. 3PLs would manage the duties, customs and documentation involved with cross-border trade.
An outsourced 3PL logistics solution gives businesses the freedom to focus on their core operations while ensuring a strong supply chain system.
Bisham Consulting has extensive experience in outsourcing – have a look at our service page or contact us on 01628 487000 for help or an informal chat