While many companies today understand why they need to outsource logistics services, what appears to be less clear to them is when they should outsource. According to experts, the best time to outsource is when you realize that you are spending a lot of time, money and energy on an activity which is not necessarily your core competency. In this article, we tell you the other signs that the time is nigh for outsourcing logistic services. These tell-tale signs are explained below.
Sign#1: You have delivery date issues
If you realize that your company is struggling to consistently meet targeted timelines for product launches that are time-sensitive, this is a clear indication that the facility capacity as well as internal staffing are unable to keep abreast with customer demand. This is an indicator that your company requires the help of a 3PL.
Sign#2: Fixed logistics and overhead costs are too expensive
In case you come to the realization that these expenses are becoming too much for the company to bear, the best idea might be to outsource logistics services. By outsourcing logistics services, your company will realize instant savings as a result of merging warehouse operations with the facility that a 3PL operates. With this, fixed costs can be changed to a variable expense. This offers flexibility in response to market dynamics.
Sign#3: Inability to develop cost and compliance goals
If your company cannot develop formal policies, cost and compliance goals, supplier compliance programs and internal revenues, it would be in the best interest of the company to enlist the services of an appropriate 3PL to offer the requisite skill sets that your company is badly lacking. This will ensure that the company can meet the above obligations without much hassle.
Sign#4: Production facilities are down
Another indicator that it is time to bring onboard an experienced logistics services provider is when you realize that your production facilities tend to be down long for spells and that logistics operations cannot sufficiently meet after-hour delivery requirements and expedited services, it is clearly indicative that you have little choice other than to pay extra costs by outsourcing the logistics process. This will avoid your company having to pay large amounts of overhead for a logistic operation that is not only inflexible but also ineffective.
Sign#5: Custom compliance readiness
Following the implementation of Customs Modernization Act, audits and compliance assessments have become used more widely as a tool for maximizing compliance as well as providing uniformity. Therefore, in order to be compliant, your company needs to outsource logistics services.
Advantages of outsourcing logistics services
When a company outsources logistics services, there are several benefits that it will get as a result. These can be divided into corporate benefits, operational benefits and information benefits
- Corporate Benefits
- Companies can divest non-core operations without needing to divest control
- It offers a company a strategic working relationship with a firm whose main activity is logistics
- Improves return on assets and cash flow
- It adds value to marketing and manufacturing operations
- Outsourcing logistics services gives companies the flexibility that they need to quickly respond to the ever changing market trends and not have to suffer from significant disruptions to distribution operations.
- Operational Benefits
- It reduces labor risks
- Allows a company the flexibility it needs in order to increase throughput during peak periods
- Offers economies of scales since it shares resources with others
- International companies have local presence
- Gains in productivity through the use of technology
- Complex picking tasks are managed more efficiently as a result of using technology
- Information Benefits
- It is easy to capture and report operational KPIs (Key Performance Indicators)
- There is timely as well as accurate data reporting due to the real time integration of the distribution system
- It is easy to identify total logistics costs
- Activity-based benchmarking
Ultimately, after an in-depth scrutiny of a company’s entire logistics system, it is the view of most experts that outsourcing logistics functions may be the best thing for them. In this global economy in which there no benchmark for logistics services success, it is important that companies carefully analyze their exclusive requirements and then determine the best logistics solutions that can enable them to attain their unique distribution needs.
While cost is important, the success of a logistics process is ultimately client satisfaction. This is the only way that a company can achieve market share growth and customer focus.