As noted above, outsourced logistics management commonly takes two forms, through partnerships with3PLs and 4PLs. Both 3PLs and 4PLs give shippers the opportunity to benefit from the expert logistics staff, transformative technology, and proven processes that 3PLs and 4PLs offer. Let’s take a closer look at these benefits.
Outsourcing offers several key advantages for business, including the following:
An increasing number of companies are outsourcing costly, labor-intensive operations which are not part of their core competencies. Among the most frequently outsourced operations are customer support, accounting, data entry, and research and development.
Outsourcing can reduce full-time employee costs, such as those for healthcare and retirement contributions. It can also cut overhead—for example, a growing business might not have sufficient office space in its current location—outsourcing activities like customer support and data entry solves that problem. Additionally, freight audits can ensure cost-effectiveness and quality in outsourced operations.
Outsourcing is ideal for companies which experience cyclical demands. For example, an accounting firm might need additional help during tax season; outsourcing part of this function can get the job done without taking on more permanent employees.
Outsourcing has become increasingly popular among shippers and manufacturers in recent years. Their core strength is in making products, as well as in procurement and streamlining production. Outsourcing allows these companies to fulfill orders more efficiently through third-party logistics (3PL) providers.
A recent report from Armstrong & Associates highlighted the extent of growth in outsourced logistics management. It found, for example, that third-party logistics grew by almost 5% from 2010 to 2013. The lion’s share of that growth was in 4 industries: industrial, healthcare, technological and food and groceries. Domestic transportation services management was dominant in outsourcing demand, accounting for almost 25% of all demand for 3PL services. Warehouse management accounted for almost 20% of demand. Ecommerce continues to spur strong growth in transportation and warehousing services.
There are numerous benefits of logistics outsourcing, here are the top four that many shippers seek:
Transportation management is extremely complex and labor intensive, requiring working with multiple vendors, customers, suppliers, carriers and administrators. Outsourcing transportation management frees up shippers to focus more intensely of core, revenue-generating activities, like procurement or building more collaborative relationships with suppliers. This leads to enhanced productivity and a stronger bottom line.
Third-party logistics providers are experts at what they do, and they have access to the latest and most effective transportation technology. They are trained to identify problems with your transportation footprint and provide effective solutions for transportation accounting and freight claims, among other areas. Said differently, when you hire professionals, you get professional results.
Many shippers have neither the time nor the interest in chasing down complex business intelligence data, but building, accessing and analyzing that data is critical for continual improvement. When you outsource logistics management to a 3PL, you’ll be provided with key reports and custom analysis to enhance operations. With a clearer picture of which areas are functioning efficiently and which need improvement, you’ll have a leg up on your competition.
Best practice for shippers is the use of a transportation management system (TMS), which simplifies supply chain functions and reduces logistics costs. This is especially true as more companies turn to multiple sales channels and distribution methods. Incorporating this technology is critical to remaining competitive—outsourcing to a 3PL which provides access to transportation management system technology solves this problem.
For all its benefits and advantages, there are some challenges and limitations of outsourced logistics solutions that shippers should consider.
Outsourcing some or all of your logistics functions to a 3PL partner or 4PL is a strategic decision driven by your specific supply chain needs and overall business goals. Here are some common scenarios thatoften spur companies to consider an outsourced logistics partnership.
Ready to move forward in selecting a logistics partner? Here are some key steps and criteria to consider:
If your company is struggling with supply chain disruptions, transportation management and experiencing increasing costs, it might be time to consider outsourcing. Outsourcing logistics management offers numerous advantages, from cost savings and increased flexibility to enhanced productivity and access to advanced logistics technology. By leveraging the expertise of 3PL and 4PL providers, you can streamline your supply chain, focus on your core business, and adapt more effectively to market changes. However, choosing the right logistics partner requires careful consideration of your unique needs, objectives, and the potential challenges involved. Ultimately, a strategic approach to outsourcing logistics services can unlock significant value, help you meet customer expectations, and drive sustainable growth in an increasingly competitive landscape. To learn more about how Sheer Logistics can help you achieve your supply chain goals, pleasecontact us today.
Whether you need full logistics management, carrier sourcing, or help with any part of the logistics process, Sheer Logistics delivers industry experts and cutting-edge technology that deliver bottom-line results.
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