With increasing pressure to reduce costs, understand new regulations, and deliver products faster, there’s no doubt there are a lot of issues shippers have to deal with in the management and execution of today’s supply chain. Today’s shippers need relief as well as flexibility more than ever and many are now asking themselves, “To outsource or not to outsource; that is the question.”
A big part of the reason more shippers are considering outsourcing may be that today’s 3PL relationship is changing. It is becoming less transactional and seen more as a partnership or extension of the company. What used to be regarded as a third-party outsider can now be an integral part of an organization’s supply chain strategy. Smart shippers are realizing that 3PLs can provide strategic oversight that not only delivers cost reductions and more efficient processes but also becomes a relationship vital to their long-term strategy.
So why outsource? What benefits could be realized? Here are 3 benefits to think about.
1) Cost reductions – According to the Capgemini 2015 Third-Party Logistics study, the average fixed logistics cost reduction reported by shippers who use a 3PL was 15%. 3PLs are becoming more proactive in finding ways to help shippers reduce costs. If companies can reduce their assets, they can turn fixed costs into variable costs which leads to a reduction of capital used. 3PLs can often realize economies of scale that allow them to execute logistics operations at lower costs than the shipper could realize.
2) Focus on core responsibilities – Let’s face it. We can’t do it all as much as we would like to think we can and how much is your time worth? Outsourcing to a 3PL releases functions that are not part of your core responsibilities. Shippers can tap into 3PLs to increase their workforce as needed, especially given today’s ongoing talent-gap issues found in the supply chain industry. If you’re productive with your outsourcing, it should simplify your workload and contribute to faster execution of tasks.
3) Improved service levels – With today’s increased demands from customers, this is a key focus and concern for many companies. Retaining the services of a 3PL can lead to improved service levels or quality simply due to the fact that they have the experience, equipment, and know-how. If you have challenges with the speed of delivery, accuracy of orders, flow of real-time information to customers, or number of product touch points, an experienced 3PL may be able to help you develop a better strategy. Perhaps it is time to look at your relationship with your 3PL as more than a transactional, short-term solution and focus on the long-term benefits it can provide.
The 3PL industry is continuously evolving and growing – presenting tremendous opportunity for shippers.
Speed and Market Choice are Key Factors
Over the past few years, shippers have encountered new standards of velocity, market choice and cost for their products. The consumer, who is everyone’s end user, is demanding more variety and greater availability at the lowest possible cost – further increasing complexity and intensifying pressure on supply chains. This has created what some in the industry are referring to as “supply chain impatience.” In order to meet continually-changing consumer demands and expectations in an increasingly competitive market, shippers need a fast, efficient supply chain. As a result, velocity, visibility, predictability and control are more important than ever.
Technology and Industry Expertise Combine
Transportation management technology has evolved, and there are many enhancements to its functionality that are delivering greater efficiency and visibility throughout the supply chain, offering a much higher return on investment for many shippers. Today, that technology is much more ubiquitous and more readily accessible.
However, what is critical is the deeper, understanding of the businesses and the key processes that are necessary for supply chain excellence within the specific verticals in which a shipper resides. This experience, as well as the strength and depth of the 3PL’s network, is what enables the ultimate value delivery that shippers are trying to derive from a technology investment. Shippers should find a partner that has a demonstrable ability to deliver and execute throughout the entire supply chain, creating both enhanced velocity and a high level of service to customers.
Understanding and executing upon on-time delivery is a given nowadays. 3PLs are being asked by shippers to create better metrics to provide both added understanding and a deeper perspective as to what’s occurring inside their business both yesterday and in real-time. Status updates that are more timely and proactive are becoming essential in the supply chain: the standards keep getting greater, and so should we.
True Partnership to Drive Operational Excellence
Is a great transportation management system automatically going to “fix” your entire network? No. You need the right strategy and processes behind it. If you’re looking for technology to incorporate into your transportation operations, you should first take the opportunity to benchmark your entire network. Then, and only then, can you determine what technology solution, or if outsourcing to a 3PL, is best for your business. From an operations and carrier relations standpoint, it’s critical to find the right technology that includes data management and real-time status that will enable you to use all parts of your network.
For shippers, a 3PL should not just be prescribing a technology for your transportation network, but must truly have the ability to offer the operational expertise and ideas for continual improvement necessary to drive supply chain excellence. Transportation optimization is more than moving freight at the lowest cost or finding a short-term performance boost; it’s about continuous improvement delivered through smart, data-driven planning and efficient execution. If you do choose to outsource your transportation management, your 3PL should be a true partner, allowing you to step “behind the curtain” and see exactly what is going on in your supply chain network.
