Logistics is increasingly becoming a key differentiator when it comes to servicing customers and, reflecting this, supply chains are an area of rapid technological development. These two factors combined make it increasingly difficult for some companies to deploy the investment, and retain the skill, needed to remain at the front of the field when it comes to their logistics operations. In this article we look at five reasons why a company might consider partnering with a 3PL.
(1) Flexibility and Scalability
As your business grows and evolves, your logistics requirements may fluctuate reflecting expected seasonal demands, but also potentially unexpected changes in the market. These fluctuations may, at their simplest level, lead to changes in required staffing levels. However, they could also lead to more major change requirements in terms of your logistics network – changes to warehouse size, warehouse location, fleet profiles, modal selection etc.
A 3PL will typically have a large asset footprint with networks of warehouses and large vehicle fleets that can be utilised to absorb changes in their client contract requirements. These assets are there, fully commissioned and ready. Consequently, changes in your logistics requirement can be implemented rapidly with minimal business disruption to you and your customers.
It’s important to ask yourself how likely it is that your business profile will change and how rapidly your inhouse logistics operations could react to that change. Furthermore, would you have the skills inhouse to redesign your logistics solution?
(2) Talent Recruitment and Retention
Supply chain management and logistics are increasingly becoming life-long professions, supported by a host of academic and professional institutes. Technological developments in the supply chain, such as robotics and AI, are attracting larger numbers of students to study supply chain and logistics at both an undergraduate and post graduate level.
3PLs position themselves to attract this upcoming talent. Their graduate training programmes specifically focus on supply chain planning or logistics operations management. They invest in career progression training schemes and their structures provide for functionally focused career progression. In short, 3PLs can be a much more attractive proposition for supply chain talent than other industry specific companies.
Naturally, you want the most capable and dedicated logistics professionals managing your supply chain and you want their training to keep them at the forefront of the rapidly changing approaches to logistics. Consequently, you should make an honest comparison of the career and development opportunities that your company can offer logistics personnel when compared to a 3PL. Which of you can recruit and retain the best team?
(3) Information Technology
Gone are the days of paper pick lists and proof of delivery dockets. 3PLs are increasingly investing in the development of integrated order management and logistics delivery systems. Their aim is to make the customer transaction process seamless and fully traceable, from receipt of the order to final delivery.
The purchase, configuration, maintenance and continued development of these systems requires significant expertise, time and money. However, it’s something that a 3PL can afford to invest in as these systems are deployed across their entire customer network, making the cost to the individual customer contracts negligible.
When it comes to Information Technology in your logistics operations, it’s important to determine if your company is able to invest in best-in-class order management and logistics delivery systems. You may not use them now, but as the benefits of big data analytics and real-time data capture grow it may certainly be an area you want to invest in.
(4) Global Reach
One of the biggest issues for any company with international trade is how to set up and manage the logistics network in new territories. There is huge potential risk, when entering new territories, in trying to deal with managing a logistics network where regulations, laws, geographies and culture may be dramatically different to the domestic territory.
In this situation, it makes perfect sense to outsource the logistics operation to a 3PL who has an in-country presence. Not only will that 3PL have the assets, people and local knowledge required, but they are also likely to have ongoing relationships with local authorities and government bodies that may be key to ensuring your logistics operation meets the local standards required.
In these situations, the 3PL can bring further value by taking some of the administrative burden associated with exporting goods to, and delivering within, non-domestic territories. This may include licensing, import/export paperwork checking and document retention in accordance with the country’s regulations.
(5) Cost and Service Performance
Many companies first consider outsourcing their logistics operations based on cost. However, there should be a word of caution on this front. On a simple like-for-like basis, a 3PL will be more expensive than your inhouse operation. If the plan is just to migrate what you currently do into a 3PL, then you will simply be exposed to the same or similar costs plus the 3PL management fee.
However, a good 3PL is very unlikely to simply replicate what you currently do. They’re conscious of the value they need to add to justify or negate the additional management fee costs. Consequently, they will seek to redesign your operation to develop a solution that can remove some of the current costs and/or improve the service capability. It’s not uncommon for a 3PL to walk away from a customer opportunity if they don’t think they can design further value or cost reductions into a customer’s operation.
On this basis, any 3PL solution you engage should, through the design efforts of the 3PL, either be on a demonstrably lower cost base or be geared towards improved service at a similar price.
Our consulting team are experts in outsourcing logistics and we work with many clients to control and manage the full logistics tender process. If you want to discuss your logistics outsourcing requirements contact one of our team today on 0121 517 0008 or email [email protected]