Over the last decade, outsourcing logistics has become a strong and continuing trend among manufacturers and sales organisations. In following that trend, some companies have had considerable success, while others have entered an expensive cycle of transition from one service provider to another, perhaps even to end up bringing logistics back in-house.
If you’re considering the possibility of outsourcing logistics to a third-party provider, it’s not a path to be lightly trod. There are a number of questions you should ask before committing to the decision.
By answering these questions, you will at least know if you have a strong case for outsourcing. If so, go ahead and make your plans. If not … well, you should probably think a little further about the risks of outsourcing logistics and whether or not the time is right to do so.
The Key Questions to Ask Before Outsourcing Logistics
If you decide to outsource logistics, you must be sure you’re doing so for the right reasons. Outsourcing is not always the way to improved logistics services. Much depends upon the performance of your in-house operation and the ability to leverage it for competitive advantage.
Are you better off serving yourself, or having a third-party take care of logistics services on your behalf? The following four questions will help you search for enlightenment.
1. Will outsourcing logistics services save you time and money?
The answer to this question is likely to be “yes”, but that doesn’t mean it should be taken as a foregone conclusion. The key to making savings by outsourcing logistics is to find the provider that’s best matched to the unique needs of your supply chain.
Remember too, that it’s not just your current needs that matter, but your expectations as to how they might change over the next few years.
2. Will outsourcing logistics make your business more flexible?
Some companies choose to outsource logistics as a way to increase flexibility. After all, with another company handling your warehousing and transportation, you can scale your logistics operation up or down without the complications of an internal workforce to think about.
However again, the advantages of flexibility will depend upon the third-party’s capabilities and capacity, especially if business growth is on the future agenda.
3. Will outsourcing logistics improve your core operations?
What are your core operations? If your business is centred on sales and/or manufacturing, you might want to outsource logistics in order to remove supply chain distractions and concentrate more effectively on those core activities.
If your company has spent years building a great customer service reputation though, you might stand to lose more than you gain by entrusting distribution services to a third-party.
4. Will outsourcing logistics reduce supply chain risk?
It’s true that third-party logistics providers can shoulder a lot of your supply chain burden, helping to protect your company from liabilities and uncertainty.
It’s important to remember though, that to some extent, handing off your logistics activity to a service provider introduces new risks, which you must be confident in being able to manage.
This is especially important with regard to the satisfaction of your end customers. There is little benefit to improved supply reliability for instance, if you are losing customers because of poor service from your 3PL. You need to be sure your outsourcing decision will reduce net risk, and not just exchange one set of potential problems for another.
Make the Right Decision About Outsourcing Logistics
I am in no way suggesting that outsourcing logistics is a bad idea … far from it. A great number of enterprises have chosen the outsourcing path, and transformed their businesses for the better. It’s just vital to know what you plan to gain from outsourcing and to be sure it’s the right long-term solution.
By asking the right questions, you stand the best chance of making the right outsourcing decision. From there, it’s a matter of finding the right 3PL partner.
The answers to many outsourcing questions can be found in my book Logistics Outsourcing Secrets, written in the easy-to-read style of a business novel. If you’d like to expand your knowledge of the logistics outsourcing environment, and be entertained at the same time, go to Outsourcing Logistics Secrets product page and download your copy today.
Email or +61 417 417 30