Logistics outsourcing in supply chain management is one of the most important decisions a business can make to improve its supply chain management. By finding the right third-party logistics provider (3PL), businesses can outsource all or part of their logistics operations, saving them time and money. This guide will discuss the benefits of logistics outsourcing, how to find the right 3PL provider, and when businesses should consider outsourcing their logistics capabilities.
What Is Logistics Outsourcing?
Logistics outsourcing in supply chain management involves contracting a company’s logistics functions to a third-party logistics provider. The 3PL provider will then manage these functions on behalf of the company. By outsourcing these logistics tasks, businesses can free up time and money to focus on their core competencies. In other words, your business can use the 3PLs or 4PLs resources and expertise to its advantage. The benefits of outsourcing logistics can be significant, and businesses should carefully consider whether or not outsourcing is the right decision for them.
Add More Value To Your Supply Chain By Improving Your Logistics
Value addition is important in supply chain management because it ensures that the customer receives goods or services of the highest quality at the lowest possible cost. In other words, value addition makes sure that businesses can offer their customers the best possible products and services at the most competitive prices.
There are many ways to add value to a business’s supply chain. One way is by ensuring efficient and effective logistics operations. Logistics outsourcing in supply chain management is one way to achieve this goal. Logistics outsourcing can provide a number of significant advantages, including the following:
Reduced Labor and Operational Costs
Logistics outsourcing can help businesses reduce their costs in many ways. First, it allows businesses to take advantage of the economies of scale that 3PLs enjoy due to their large size. This means that businesses can benefit from lower pricing on transportation and warehousing services. Additionally, 3PLs often have more efficient processes than businesses, reducing labor and inventory costs.
Improved Operational Efficiency
By outsourcing their logistics operations, businesses can take advantage of the expertise and experience that 3PLs have in this area. This can improve efficiency in terms of order processing, shipping, and inventory management.
Enhanced Ability To Adapt To Changing Demands
When a business’s logistics operations are outsourced to a 3PL, it can free up resources within the business that can be used elsewhere. This increased capacity can be used to support growth or to improve the company’s overall performance. Third-party logistics is expected to provide a wide range of vehicles your company can use without investing in trucks and light commercial vehicles.
(Outside Metro Manila)
| Base Price
|32 to 40 x 7.8 x 7.8 ft
12000kg to 28000kg
|6w Fwd Truck
|18 x 6 x 7 ft
|10 to 14 x 6 x 6 ft
2000kg to 4000kg
|10 to 21 x 6 ft x open
2000kg and 7000kg
|8 x 4.5 x 4.5 ft
|5 x 5 ft x open
|5.5 x 3.8 x 3.8 ft
|5 x 3.2 x 2.8 ft
|3.5 x 2 x 2.5 ft
Lower Workload And Better Use Of Workforce
Businesses often find it difficult to recruit and retain qualified staff for their logistics operations. By outsourcing these functions to a 3PL, businesses can relieve themselves of this burden and focus on their core competencies.
Greater Focus on Core Competencies
By outsourcing their logistics operations, businesses can focus on their core competencies and leave the logistics tasks to experts in this field. This can lead to improved performance in terms of innovation and customer service.
Outsourcing provides scalability for a business’s logistics operations as it grows or changes its needs over time. A 3PL can easily adapt to these changes without modifying the business’s infrastructure or processes.
Actionable Data From 3PL’s Reports
A 3PL can provide greater visibility into a company’s supply chain processes, which can help them better manage risks and improve performance.
When to Do Logistics Outsourcing in Supply Chain Management?
Logistics outsourcing can be a great way for businesses to improve their supply chain management. However, it is not always the right decision for every company. There are a few factors businesses should consider when deciding whether or not to outsource their logistics:
The size and complexity of your operations
Outsourcing your logistics can be a great way to reduce the complexity of your supply chain. If you are operating a complex or large-scale operation, it may be helpful to outsource certain aspects of your logistics to a 3PL provider. This will help you manage your supply chain more effectively and optimize your resources.
The need for specialized expertise
You may consider outsourcing your logistics if you do not have the in-house expertise. A 3PL provider will have the knowledge and experience necessary to manage your supply chain effectively. A great example is how it plays a vital role in the agricultural supply chain nowadays. They can also offer specialized services that may be difficult or expensive for you to replicate in-house.
The need for economies of scale
The need for economies of scale It is important to operate at scale to maximize efficiency and reduce costs. By outsourcing your logistics, you can take advantage of the economies of scale offered by a 3PL provider. This will help you save time and money on transportation, warehousing, and inventory management.
The need for flexibility
One of the benefits of outsourcing your logistics is the flexibility it offers. A 3PL provider can adapt quickly to changing market conditions and needs while maintaining control over strategic aspects of your supply chain. This flexibility can be essential in times of rapid growth or unexpected changes in demand.
When Not to Do Logistics Outsourcing in Supply Chain Management?
There are also some cases where businesses should not outsource their logistics operations. Here are a few situations when outsourcing may not be the best option:
When you need direct control over your supply chain
Outsourcing may not be your best solution if you need direct control over all aspects of your supply chain. In this case, it may be better to keep everything in-house.
When you need specialized or custom-made solutions
If you require customized or specially tailored solutions, a 3PL provider may be unable to help you. In this instance, it may make more sense to keep things in-house. However, there are capable 3PLs in the market that can cater to your customized needs and create a customized SOP for your supply chain.
Transportify is one of the leading 3PLs in the Philippines that arrange a customized SOP and service for your supply chain needs. Whether you need a particular type of truck or want documentation services at every drop-off, Transportify can help.
When you are undergoing rapid change
If your business is going through a period of rapid change, likely, you will not have the time or resources necessary to manage an outsourced logistics operation effectively. In this case, it is best to wait until things stabilize before considering outsourcing.
Things You Should Do In Finding The Right 3PL
Once a business has decided to outsource its logistics, there are a few steps it needs to take to find the right 3PL provider.
Evaluate your needs
Before you can start searching for a 3PL provider, you must first evaluate your needs. What parts of your logistics operations would you like to outsource? What are your priorities? What are your constraints?
Create a Request for Proposal (RFP) document. This document will outline the specific logistics functions that the company wants the 3PL provider to manage, as well as the requirements and expectations of the company.
Research 3PL providers
Once you have a good idea of what you’re looking for, it’s time to start researching 3PL providers. There are many 3PLs, so it’s important to research and find one that fits your needs.
After you’ve narrowed down your list of potential 3PL providers, it’s time to get quotes from them. This will give you a good idea of what each provider charges and how they compare in terms of price and services.
Send the RFP to several potential 3PL providers and evaluate their proposals. It’s important to compare not only the pricing of the proposals but also the quality of service and capabilities of each provider.
Share your information and consult with Transportify about your logistics and delivery requirements.
Make a decision
Once you’ve compared quotes and found a 3PL provider that fits your needs, it’s time to decide. Read the contract carefully and ask any questions before signing up. After selecting a 3PL provider, the company should work with the chosen provider to create a detailed plan specifying exactly how the logistics operations will be managed. This plan should be updated regularly to ensure that it continues to meet the company’s needs.
Frequently Asked Questions:
What is logistics outsourcing in supply chain management?
🚚 Logistics outsourcing involves hiring a third-party logistics provider to handle part or all of your company’s supply chain. This might include transportation and storage to more sophisticated operations like inventory management and order fulfillment. There are many reasons why companies choose to outsource their logistics, but the most common reason is to improve efficiency and save money.
What should businesses do before logistics outsourcing in supply chain management?
🚚 Before a business decides to outsource its logistics capabilities, they need to understand the needs and what type of outsourcing would be the best fit for them. They also need to research the different third-party logistics providers in the market to find the one that would be the best fit for their company. Every business is different and will have different needs at different times. However, generally speaking, businesses should outsource their logistics when they do not have the internal resources or expertise to handle it themselves.