What is Logistics Process Outsourcing?
In today’s dynamic business landscape, streamlining operations and maximising efficiency are paramount. One strategy that has gained significant traction is “Outsourcing’ in logistics. This practice involves entrusting specific segments of a company’s logistics process to external partners. From distribution and warehousing to transportation and customer support, outsourcing logistics operations can bring forth a myriad of advantages for businesses.
Further, logistics outsourcing refers to the practice of a business contracting with a third party to handle certain aspects of its supply chain management. These companies, commonly referred to as third-party logistics (3PLs), are capable of managing inventories, fulfilling orders, shipping, freight forwarding, and even reverse logistics. Due to the complexity of supply chains, the rising cost of technology and physical assets, and the shortage of talent, more companies are outsourcing their logistics. Daily operations can be made more efficient by outsourcing, freeing up employees to concentrate on customer satisfaction and key company tasks. Your company may then prosper as a result.
The Logistics Service Outsourcing shall includes as hereunder:
- Distribution and warehousing
- Warehouse management
- Transportation
- Reverse Logistics
Benefits of Logistics Outsourcing
Economy of Cost and saving time
The possibility of large cost reductions is one of the main forces behind logistics outsourcing.By collaborating with specialized logistics providers who have economies of scale and experience, businesses can reduce their operating costs.
Prioritize your core competencies.
Companies are able to focus their attention and resources on their core capabilities by outsourcing logistics processes. Non-core operations like order fulfillment, transportation, and warehousing are delegated to professionals in those domains. This makes it possible for businesses to focus on their strong points, such marketing, customer service, and product development. Better overall performance, innovation, and a competitive advantage in the market are the outcomes.
Obtaining Access to Specialized Technology
Businesses that outsource their logistics operations have access to state-of-the-art equipment, software, and solutions that are made expressly to optimize different areas of the supply chain. Due to the emphasis they put on supply chain-related services, logistics providers are usually well-versed in the most recent advancements in the field and have access to cutting-edge resources like RFID technology, cloud logistics, warehouse management systems, and other technologies. Using a logistics provider can benefit your supply chain by utilizing these technologies.
The ability to scale
Businesses can quickly adapt their outsourcing solution to meet evolving business needs since it is adaptable. In times of high demand or sudden expansion, logistics partners are able to quickly expand their operations to meet the need.
Risk Mitigation
A company's operations and reputation may suffer significantly as a result of supply chain disruptions. Process outsourcing for logistics might lessen these dangers. Professional logistics companies are prepared to tackle unanticipated obstacles including market swings, natural disasters, and interruptions in the supply chain.
Expanding the companies reach
Although a single company might not have the transportation resources to reach every corner of the country, logistics partners usually do. By outsourcing your logistics process, you can gain access to the local and metropolitan markets where your logistics partners operate.
Types of Logistics Outsourcing
- Outbound logistics services – Services classified as outbound logistics are those that transport your shipment from the warehouse or shop floor to the point of consumption.
- Full Truckload Services - When a business offers a full truckload service, one truck is utilized to deliver a certain shipment, and the contents of the truck are kept in the truck from the point of pickup to the point of delivery.
- Partial truckload (PTL) Service - PTL services are used when a consignment just needs a part of the truck's capacity. A delivery vehicle will be shared by several companies since the remaining capacity is used to transport cargo from another business.
The 3PLs involved in LPO’s
Warehousing and distribution
For small enterprises in particular, warehousing and distribution can be among the most costly and intricate logistical processes. The amount of room you need varies depending on the season and the economy, but most leases demand you to pay for the same amount of space all year long, which means you wind up paying for extra space. In addition, you're in charge of utilities, insurance, and equipment storage. Given these expenses, it is not surprising that 63.5% of shippers outsource their warehouse operations to third-party logistics (3PL) providers, according to a Statista global study of logistics professionals. You just pay for the area you use when using outsourced logistics, and you split the cost of personnel, utilities, and even equipment. Additionally, you can store your goods in multiple locations closer to the consumer, which speeds up product shipping. Your orders will be swiftly and effectively stored, picked, and packed by a reputable 3PL for delivery and warehousing.
Transportation management
An integral component of your company, transportation management has a direct impact on client satisfaction and, consequently, the expansion of your enterprise. You want to find an economical solution, but you also need your items to arrive on schedule and undamaged. Your freight logistics may become more complex the larger your company is, as well as the more items and locations you have. That's where hiring a 3PL to handle your logistics might be helpful.Management of transportation 3PLs have knowledge of freight carriers, modes, laws, and more because they have access to freight brokers and freight agents. They have their own fleet or have partnered with carrier networks to establish their own infrastructure. They might have more negotiating power and be able to secure advantageous contract pricing on your behalf if they collaborate with carrier networks.
Supplementary services
Although the most popular outsourced logistics are simple warehousing and shipping, other services are increasingly becoming more and more popular. One such field is the management of warehousing. A warehouse management 3PL may offer product monitoring, inventory management, and analysis and reporting that can uncover new efficiencies in addition to just storing and transporting items.Additional services include customer and fulfillment assistance, which could involve handling warranty administration, processing and packing orders, and fielding customer service calls. Reverse logistics, or the handling of consumer returns, are becoming more and more outsourced.
Challenges of outsourcing logistics
While there are plenty of benefits to outsourcing your logistics, you may also run into challenges. Some potential obstacles include the following:
Strategic congruence
It might be difficult to get all of the organizations participating in your operations to align behind the same plan. Always be sure to maintain open lines of communication and be explicit about your expectations, including specific KPIs, from each supplier as well as your strategic direction. Ensure that you are not conducting business in silos by treating your 3PLs as partners.
Insufficient adaptability
Not all third-party logistics providers (3PLs) offer the agility and flexibility you may need, particularly if you operate in silos. A third-party logistics (3PL) provider becomes an extension of your own firm when you delegate a large chunk of your logistics to them. Verify that they can react to shifting consumer and market demands with ease and speed.
Software compatibility
A common reason why companies look to logistics outsourcing is that a 3PL offers cutting-edge technologies that they wish to use. However, outsourcing can become more of a bother than you anticipated if this product is difficult to integrate into your current IT stack. Ensure that there is good system integration and internal team buy-in before making a commitment. With Flock Freight, you can expedite operations by seamlessly integrating via API or EDI with your transportation management system (TMS) or booking online in a matter of minutes using the Flock platform.
When should you outsource logistics?
It's not necessary to outsource your logistics, even though many companies do. So, how can you determine whether you should use this service? Consider whether any of the following describes your company:
- You're restructuring your company, entering a new market, wanting to grow swiftly without going over budget, your costs are going up, and your customer service is getting worse.
- Your internal staff is working on projects outside of their areas of expertise; you're having problems finding the proper candidates; you should be concentrating more on your primary business requirements.
How much should you outsource?
The wise company management consultant Peter Drucker once advised, "Outsource the rest and do what you do best." To reduce expenses and increase efficiency, you should outsource as much as necessary of your logistics, but not more. In fact, outsourcing too much or to the incorrect 3PL might make you less efficient and spend more money.Consider these inquiries to determine the appropriate level of outsourcing:
- Which are your main lines of business? Anything that is not part of these essential functions might be worth outsourcing.
- Specifically, what do you hope to achieve through outsourcing? Consider how outsourcing certain aspects of logistics might help your company's KPIs.
- Which positions are you finding most difficult to fill? It can be helpful to identify which workers or departments require the greatest assistance when deciding what to outsource.
Optimizing your shipping operations
Regarding logistics outsourcing, there is an alternative that avoids the possible drawbacks of collaborating with a full-service 3PL. A novel approach to managing your freight operations at scale is being pioneered by Flock Freight. You keep control over your freight logistics and can handle it more effectively with Flock Freight. With our website, you can quickly reserve the ideal mode for your load, from TL and LTL to shared truckload alternatives that deliver your goods on schedule and within your budget, all without leaving the terminal. Using a versatile and user-friendly interface, begin controlling your freight logistics operations. Come explore with us how we can help you find the transportation options you require, all while enhancing customer happiness and your bottom line by joining the Flock.
How SKMC Global can help you?
Our team at SKMC Global engages in Logistics Process Outsourcing (LPO), wherein it assumes multiple roles and responsibilities to oversee and enhance a company's supply chain and logistics operations. Here's how we get involved:
Strategic Planning and Management:
We support the creation and application of logistics plans that meet the objectives of the business and the demands of the marketplace. to increase efficiency, save costs, and improve service levels by optimizing the supply chain network.
Transportation Management:
Handle your connections with carriers and choose the best solutions for moving your products. to arrange and streamline delivery routes in order to reduce expenses and delivery times.
Warehousing and Inventory Management:
To run and oversee warehouse operations, including handling, inventory control, and storage. putting in place inventory control systems to monitor stock levels, control reordering, and lessen instances of stockouts or overstock.
Order Fulfillment:
Order processing includes product selection, packaging, and client shipping. In order to handle returns, exchanges, and repairs, our staff expands and oversees reverse logistics procedures.
Technology Integration:
By putting into practice and overseeing technological solutions like tracking systems, warehouse management systems, and transportation management systems (TMS), our tech team will enhance the offerings of your business.
Compliance and Documentation:
to guarantee adherence to regional, governmental, and global statutes, encompassing legislation pertaining to customs and commerce. to take care of creating and maintaining the required paperwork, including invoices, bills of lading, and customs declarations.
Customer Service:
We tackle the most challenging and active portion of the LPO by offering customer help for logistics-related problems, such as order tracking and answering questions about deliveries. We will keep doing this until customer service levels improve and any service-related issues are resolved. Additionally, we track and evaluate logistical performance indicators like inventory correctness, cost effectiveness, and delivery timeliness. In order to support the client in making wise decisions and streamlining logistical operations, we regularly provide data and insights.
Risk Management:
We detect and evaluate risks in the logistics process, such as problems with transportation and supply chain disruptions, by creating and putting into practice plans to reduce risks and guarantee business continuity.
Cost Management:
We monitor logistics budgets and make sure that operations are economical. We also assess logistics costs and pinpoint areas for cost-cutting and efficiency gains.
Continuous Improvement:
In order to increase effectiveness, decrease waste, and boost overall performance, we constantly continuously evaluate and refine our logistical procedures. To remain competitive and handle changing logistics difficulties, adopt new ideas and, if necessary, innovative solutions and best practices.
Your organization may focus on its core competencies while increasing supply chain operations' efficiency and cutting costs by outsourcing logistics tasks to SKMC Global, which offers specialized knowledge, cutting-edge technology, and streamlined operations.