How can you rely on a partner who doesn’t have the same vested interest in the business you do? It’s not easy to let go but the benefits can be tremendous. A word of caution though, full transparency of your business metrics is required when dealing with your third party logistics (3PL) provider of choice. Bad or missing data during the request for proposal phase will result in a shaky partnership that most likely will not work for either party.

The benefits of outsourcing are real and within reach of any organization. For example, many companies’ supply chains have developed over long periods of time which may have included acquisitions and divestitures. When this expansion happens it’s unlikely your distribution centres (DCs) are ideally located to best meet your business needs. A centre of gravity analysis — looking at all your sourcing and customer locations to determine the optimal location for your DC’s — can yield real benefits to your business. You then can choose an outsource partner that can provide ideal location(s).

Another benefit I’ve seen has been the freeing up of cash. In a hot real estate market, many companies will opt to move their operations out of their DC so the property can be sold for a healthy profit. Moving to a 3PL avoids the need to replace the old facility and can provide an infusion of much needed operating capital.
Keeping up with the Jones’

“The benefits of outsourcing are real and within reach of any organization.”

As innovation and technology are developed and adopted by supply chain practitioners, it eventually becomes the expected norm in the industry. A benefit I believe is sometimes underrated.  For example, most food companies today can trace every case shipped from a DC to the end customer. Not so long ago this wasn’t the norm but to do so now requires sophisticated warehouse management systems (WMS). A stand alone WMS can cost seven-figures! Entering into a 3PL arrangement with the right partner gives ready access to all the technological advances out there.

Service can make or break a company and if you choose your 3PL based on the lowest price you very well may end up with severe service issues. If you choose a partner whose core business is logistics and they do it very well, you will enjoy improved service levels. For example, if your business resides in a multi-tenant facility the 3PL can balance workload by moving staff from one business to another, especially if your business has significant demand spikes.

Finally, the main impetus supply chain managers choose to outsource is to reduce their cost to serve. When you enter into the right relationship with clearly articulated expectations between partners — you will save money. If you don’t have in-house expertise to help in the initial discussions, hire a consultant. Remember, you will reap what you sow!