Is logistics outsourcing a good idea?

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Everybody understands the benefits of outsourcing logistics processes to a third-party logistics provider (3PL). It is becoming increasingly difficult for business organisations to control all their warehousing, transportation and administrative tasks that come with shipping and managing inventory. That’s why they are turning to 3PLs that help them with cost reductions and overall management of supply chain. However, they must be careful to ensure they do not overstep their bounds before/during/after selecting a 3PL.

Before we go forward to answer the question ‘Why?’ we must understand what services one needs to outsource. It includes inventory management, auditing services, package processing, labelling , tracking, and order & payment processing.

Once you have made the decision to outsource, you should look to a 3PL as a new employee and not just a service provider. That’s why you need to consider four key points of 3PL practices before making a final decision.

1.       3PLs aren’t designed for short-term benefits: Even the best 3PLs in the world cannot help an organisation which is financially bankrupt or does not have any customers. There is no guarantee that outsourcing will be successful, but it will definitely not be successful if one is looking for short-term gains. One needs to understand that the benefits of a 3PL are seen in the long-term. One may not save money in the first few weeks, or maybe months, but the savings will start to roll in later.

2.       3PLs want a mutual beneficial business strategy: One must understand that outsourcing is not a business strategy, it is only a small portion of a business strategy. The key to making this work is aligning the business strategy with the long-term strategy of the 3PL.

3.       There are many different types of 3PL services: They come in all shapes and sizes. All 3PLs must be given an equal opportunity to work with the company. One must look at the whole picture, and select a 3PL that goes beyond what a company actually needs. In addition, partnering with a 3PL offering one-stop solutions is a bonus. Simply put, one should be able to complete all outsourcing requirements with one 3PL that can connect with others if needed.

4.       3PLs are fruitless without collaboration: A 3PL can provide a company with plenty of metrics, but the company needs to let the 3PL know the problem if the employees are not happy with a specific process. Therefore, the company is more important part of the supply chain’s chain of command. As a result, the company should collaborate on both sides of the bridge (employees and 3PLs) to ensure that everybody gains out of their business relationship.

Outsourcing is a great opportunity for a company, however not all of them are ready for the expansion and capability granted by outsourcing. But a company should prepare itself for outsourcing by understanding where it stands and stays realistic in its expectations when outsourcing logistics.


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