When it comes to the business of supply chain management, opinions on 3rd party logistics are of two sorts. The naysayers to 3rd party logistics, argue that outsourcing all, or part of your supply chain needs takes away a business’ control. How could you possibly manage your inventory effectively if you don’t even have unfettered access to it? Why would you put the fate of your business in the hands of another? Well in order to set the record straight, here are 5 reasons it’s logical to use 3rd party logistics.
1.) Industry Expertise
Unless you graduated with a degree in supply chain management, or have years of industry insight, chances are you are going to hit the brick wall that is the logistics learning-curve. If you thought you needed surgery, would you just grab a scalpel and try it yourself? NO! You’d go to a doctor like any normal person. So why would you try it with your business? 3rd party logistics companies specialize in all things supply chain related. Often they have decades of industry experience, and the ability to analyze your business needs more accurately than your “Web MD self-diagnosis.” Let the professionals worry about the supply chain details, you have bigger fish to fry.
2.) Saves Time & Money
As a business owner you probably have a never ending to-do list of tasks to accomplish. All the more reason to use a 3rd party logistics company. They save businesses the time it would take to not only learn the intricacies of the supply chain process, but to continually manage their supply chains as well. This time savings allows businesses to focus their time more productively, which will hopefully translate into monetary gains. The efficiency with which logistics company’s operate also save businesses money by eliminating unnecessary mistakes. Another money saving aspect of working with a 3rd party logistics company is volume discounts. Due to the amount of business done by logistics companies, small businesses can take advantage of discounted shipping rates and cheaper materials pricing which would otherwise be unavailable.
3.) Ability to Scale & Flexibility
This is a HUGE advantage to using 3rd party logistics companies. They are able to work with businesses and accommodate their ever changing needs. This can be a big asset to companies who experience demand fluctuations or seasonal variability. Labor, warehousing, and transportation services can all be scaled to meet the current demand. As your business grows, your logistics company can grow with you to help support you at whatever stage of the game you are at.
4.) Reduced Risk
3rd party logistics services help to reduce the risk incurred by companies on many fronts. The most glaringly obvious would be the reduced risk of capital investment. You no longer have to build the warehouse, fill it with workers and equipment, develop the technologies, and relationships for your supply chain to move effortlessly. Logistics companies also reduce risk for businesses by leveraging their experience and focus. Businesses can reduce their risk of making mistakes by allowing the professionals to take care of the inventory management, order processing, and shipping duties.
5.) All the Value-Added Services
In the pursuit to remain competitive, 3rd party logistics companies have been adding additional services for years. Common value-added services that businesses can take advantage of, are the powerful analytics available to clients from their logistics provider, real-time inventory management programs, shipping updates, forecasting tools, and customized packaging options. Companies can use this information to better plan, regulate, and execute their business objectives. Often these services would be otherwise unavailable to smaller companies due to the cost of development and implementation.
The list could go on, and on as to the reasons it does or does not make sense to use 3rd party logistics. What are some of yours?