From the time immemorial people move from one place to another building settlements and civilizations; along the process, logistics as a practice developed collaterally. Historians date back the origin of logistic services to ancient Roman empire. Special military officers named as ‘logistikas’ took care of supply and allocation of resources. It is only after the 2nd world war that the logistics moved from warfare to business. Now it is everywhere. Investopedia, the world’s leading financial content on the website defines logistics as ‘the overall process of managing how resources are acquired, stored, and transported to their destination. Logistics management involves identifying prospective distributors and suppliers and determining their effectiveness and accessibility.’
According to a reliable source, logistics market is growing at the rate of 12. 68 Billion USD by 2023. Yet there are so many challenges faced by the key players in the industry, which can be solved by involving a 3rd party service provider. But before outsourcing know what tasks are to be entrusted to the outside agency. Mostly, these agencies put forward the list of tasks they can perform. Some of the common logistical tasks which can be outsourced are inventory management, labelling, auditing services, order and payment processing and preventative maintenance initiatives.
Here are the Top Reasons to Outsource Logistics Services:
#1 Simplifying the Process
A trusted partner can convert the complex logistics process and simplify them. Meanwhile, your in-house employees can concentrate more on core business tasks and save time. Even though there is a definite logistics management in place or have a checklist, you can find fault in a tighter delivery loop. The tasks like order processing, inventory control, warehousing, transportation, logistical packaging can now all be outsourced to an efficient agency.
One of the most difficult tasks in logistics would be to run the warehousing and transport. Outsourcing every nuance concerning these two units can help in increasing flexibility, accessibility to global capability and to improve customer services.
#2 Great Accountability
Logistic outsourcing companies can bring in accountability and transparency into the business. Reduction of number of touch points is something that is truly motivating logistic industry to outsource the tasks. The entire system gets well managed, work accounts taken care of perfectly and a worriless performance management is assured by the agencies. As there is a clarity in every move, greater accountability is facilitated naturally.
#3 Global Opportunities
The third-party logistic companies open a strengthening relationship with industry key players, and they can negotiate on lower fuel charges too. Indeed, fuel charges are expensive part of the shipment. If a logistic company gets a subsidized fuel price, nothing like it. The actual impact of the fuel cost increase will affect average length of the haul, average load and capacity utilization. Such kind of tensions can totally be avoided on a single decision. That is to outsource your logistics tasks to an outside agency.
If the outsourcing company is in the market for a considerable number of years, they know various ways in which to reduce the financial burden. They would also have a strong network that helps entering a new global domain in a much easier way. Companies cannot run warehouses in a different country due to legal issues, but an outside agency can help in quickly expanding all the opportunities.
#4 Access to logistic tech software
If you are one among the mushrooming logistics companies, it won’t be easy for you to afford all the cutting-edge technologies and find the experts who can handle them effectively. These technologies make corporate supply chain be a powerhouse of innovation. Globally trusted logistic software is an asset in various parallels in logistics; export shipment, import processes, warehousing, yard managing, transloading, trucking, etc.
It would be a quick solution for large logistics houses to rely on outsourcing company as they have all the assets and software resources under one roof. Unlike a decade ago, it is now possible to automate the processes with the help of the technologies. But this requires data exchange and integration in every step of the work flow.
#5 Reduced Freight Cost
Robust networking capabilities of the best service providers in the industry help them to have best freight deals. The first and foremost thing that they do is to match a company’s freight with that of the other shippers going to the same place/continent. The second step they do is to brainstorm on how to consolidate loads. Consolidating loads and full load shipment can save almost 25% of the overall cost compared to the LTL shipments. LTL is less than truckload shipping.
# 6 Improved Customer Service
The external agencies assure steady and predictable transportation, which is indeed challenging for logistics companies due to high wage demand by the drivers. Steady services attract the best shipping partners and any day they will be convinced by agencies with years of experience that a small logistics company trying to negotiate with them. Also, the demands of the customers can be met without a delay even in a contingency period as outside agencies pooling in resources from various places. This comes with experience and dealing with easy to difficult logistics dealings. Choosing the right logistics outsourcing company matters when it comes to serving the customer in a better way and operating more profitably.
# 7 Inhouse benefits
Relying on an external provider result in gaining better perspective, control and focus on the core business. Getting to know a 3rd party opinion about the challenges, opportunities, threats and strengths help logistics services to see what is going to happen in the future and take better informed decisions. The experts would also help in assessing options such as truckload vs. less-than-truckload vs. parcel carriers, etc.
Real time visibility and sophisticated reporting capabilities would bring best practices within the organisations. Everything gets streamlined resulting in better use of the resources, reduced operational costs and minimized business risks.
Outsourcing concept in logistics and transportation is not a new trend, it dates to 1980s and 1990s. But the challenge is to find the right service provider that would support the logistics company from liabilities and uncertainty.