According to a survey from the Harvard Business School, outsourcing key components of business operations has increased in recent years. Almost half of respondents to that survey said they preferred outsourcing to hiring new, full-time employees. Only 1 in 4 felt that hiring new employees was preferable to outsourcing.
Why Is Outsourcing So Attractive to Business?
Outsourcing offers several key advantages for business, including the following:
- Focus on core competencies: 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.
- Cost savings and reduced overhead: 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.
- Seasonal flexibility: 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.
- Business continuity: businesses which experience sudden increased turnover can outsource key operations for limited periods of time. For example, if a chief marketing officer leaves without warning and takes several of his supporting staff with him, the company can outsource marketing operations until suitable replacements have been found.
Logistics Management Outsourcing
Outsourcing has become increasingly popular among shippers and manufacturers in recent years. Their core strength is in making products, as well as on 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 management was dominant in outsourcing demand, accounting for almost 25% of all 3PL demand. Warehouse management accounted for almost 20% of demand.
What Are the Major Benefits of Outsourcing Logistics Management?
Outsourcing logistics management has several key benefits for shippers, including the following 4:
1. Enhanced Productivity
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.
2. Improved Outcomes
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.
3. Continual Improvement
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.
4. State-of-the-art Technology
Best practice for shippers is the use of a transportation management system (TMS), which simplifies supply chain functions and reduces 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.
If your company is struggling with transportation management and experiencing increasing costs, it might be time to consider outsourcing. To learn more about the ways our logistics, transportation and intelligence services can help your company reduce costs and increase efficiency, contact us today.