#Outsourcing should be a Strategic Decision, but not a Strategy

Madrid, August 18, 2017.- Managing change in a freight transport or logistics company requires professionals, talent and experience. We live in a time of remarkable uncertainties, unexpected changes in circumstances, urgent adaptations of systems solutions, and sometimes we lose sight of the basics of success. One of them is logistical outsourcing. We want to remember today the most outstanding advantages of outsourcing processes and systems in transport and logistics companies. An analysis performed by Logistics Bureau:

mercedes-future-truck-2025-055-1

Logistics Outsourcing Trends and Statistics
What are the basic statistics and trends in the outsourcing industry?. Depending on which statistics you look at, it’s not unreasonable to consider that more than 75% of companies now outsource warehousing and transport. In fact as at 2017, 90% of Fortune 500 companies in the United States alone are working with third-party logistics providers, according to a recently released report from Armstrong & Associates. Of course some companies may try outsourcing for a period of time and then decide, for various reasons, to move those services back in-house. However, for many shippers—especially those exploiting the ecommerce explosion—outsourcing has become the only sensible logistics solution. Key mergers taking place over the last five years have included Exel with DHL, BAX with Schenker, and DSV with UTi, while XPO has expanded massively after acquiring French logistics giant Norbert Dentressangle and the US-based Con-way group.

flota-wallenborn

Are there other motivations, besides cost, for companies to outsource “non-core” activities?. Yes and, perhaps surprisingly, cost savings should not necessarily be the primary factor in a logistics outsourcing decision. In fact, it’s relatively rare for a company to enjoy lower supply chain costs for some time after partnering with a 3PL.
However, there are a number of other very compelling reasons to outsource a logistics operation. Take the example of running a warehouse efficiently. This takes considerable time and resources, not to mention special technologies and investments in mobile equipment, racking systems and so on. This kind of complexity can be difficult for companies to manage in addition to their truly strategic activities—the ones that they really want to compete in. A company specialising in sales or in manufacturing, for example, doesn’t necessarily want the bother of managing warehousing and transport.
Other reasons to outsource include:

  • To achieve customer service improvements.
  • To gain access to global capability.
  • To increase flexibility.
  • To benefit from economies of scale.

And perhaps the most common reason of all today (especially for small and medium-sized enterprises) is to tap into advanced logistics technology which many 3PLs now offer to improve visibility, aid process-efficiency, and meet customer demands for real-time information. Outsourcing should be a Strategic Decision, but not a Strategy. The decision to outsource logistics is not one to take lightly, especially for larger companies that currently have an in-house warehousing/distribution operation. There are pitfalls for the unwary, and shippers have been known to make mistakes and regret the decision to outsource. The biggest mistake of all is to consider logistics outsourcing as a strategy in itself. At the same time, commitment to a strategic, rather than transactional relationship with a 3PL will be more likely to yield the desired results.

Interior-Mercedes-Future-Track-2025

Settling on the choice to outsource chose inventory network capacities and procedures to a Third Party Logistics (3PL) organization can challenge yet compensating to the association. Production network capacities have developed progressively complex with globalization, innovation, and rivalry progressing at a fast pace. With a 3PL contract – you issue merchandise to a bearer or receipts into a distribution center, you issue requests to ship or convey to particular agents, and you expect impeccable execution and stock equalizations:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s