A Complete Guide To Outsourced Logistics

Outsourced Logistics

Outsourcing logistics means hiring a third party to manage your logistics operations. Today we will take a detailed look at how outsourced logistics work. Every business needs to build its competitive advantage by adopting efficient supply chain solutions. Many manufacturers prefer third-party logistics as it is a more convenient and efficient option.

Why Do Manufacturers Choose Outsourced Logistics?

Here are a few reasons why manufacturers prefer 3PL providers.

Unpredictability In The Trucking Industry:

The freight market is highly unpredictable. When outsourcing your logistics to an experienced provider, you gain their expertise and knowledge. They also put you within their network of connections.

Budget Handling:

You don’t want an out-of-control budget that will lead to financial losses you won’t be able to recover from. So, a 3PL offers his specialized management services for your freight so you can take advantage of their predictable freight budget. They also expose you to new financial opportunities that will lead you to success.

Reputation Protection:

Your services make up your reputation in the market. This reputation depends on your ability to complete an order efficiently and within a designated time. As an outsourced logistics provider has a reliable carrier network, this will translate into a better service from your business. As a result, you will have a good market reputation.

Avoid Excessive Liabilities:

Contract negotiations with multiple carriers and complying with government regulations is quite challenging. This also exposes your business to excessive liabilities. So, to stay on top of the game, you can work with a 3PL. They will give you an added risk management assurance.

Transport Management Systems (TMS):

To run optimized logistics operations, you need a TMS. This system, however, requires a lot of time and skill to implement. When you outsource your logistics operation, you also gain access to their flexible and secure TMS. In this way, you can earn a competitive advantage.

Potential Disadvantages To Outsourcing Logistics: 

You can lose control of your operations if the service is not managed appropriately. If both parties do not maintain proper communication, your operation can be affected. If you outsource your logistics to a poor manager, you may have to face supply chain disruptions, high costs, and lowered service levels.

When Should You Outsource?

Outsourcing is a good idea if:

  • Your logistics costs are increasing, and service levels are declining. 
  • You’re expanding your operation and need to scale quickly.
  • You are entering a new business area.
  • You cannot manage your logistics or have difficulty retaining logistics staff. 

FAQs

Q1- Which logistics activities are most commonly outsourced to 3PL providers and why?

As per 2021 data, the most frequently outsourced form of logistics was domestic transportation accounting for 83%, warehousing 66%, brokerage 46%, and international transportation 63%. 

Q2- What are the types of 3pls that shippers use for outsourced logistics?

There are four types of 3PLs:

  • Dedicated Contract Carriage supplies shippers with tractors, drivers, and fleet management. 
  • Domestic Transportation Management
  • International Transportation Management
  • Value-Added Warehousing and Distribution

Conclusion:

Outsourcing your logistics operation can take your business operation to the next level. You can efficiently control costs and service failures to enhance your customer satisfaction rates. You benefit from their advanced management technologies and industry expertise.

Also Read: How To Ship Frozen Food And Avoid Spoilage In 2022?