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Industry -Aug 8, 2022

Outsource Logistics: Advantages and How to Do It

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The shipping industry continues to evolve in today's business climate. Emerging from this evolution is the growing trend for outsource logistics and increasingly utilizing spot freight.


This article will explain why outsourcing logistics is becoming more valuable in today's saturated shipping climate. With increasing costs practically daily, it becomes crucial for a logistics company to be attentive to overhead and focus on cutting costs whenever possible. Therefore, one of the main reasons for a company to outsource logistics is to delegate some of the company's functions.


Delegating functions that are not your specialties to companies specializing in those specific tasks can have many positive effects. You should realize an improvement in company operations and, more importantly, customer satisfaction. As a side benefit, a more efficient company due to outsourced logistics always has the possibility of reduced operational costs.


What is outsourced logistics?


Outsourced logistics involves a company engaging with a third-party logistic (3PL) company to provide certain supply chain functions. These outsource logistics may include storing, shipping, inventory management, and technology processes. The terms often used are "outsource logistics" and "third party logistics," interchangeable in meaning.


Some standard company processes for outsourcing logistics are:

1. Information technology: The perfect application for outsourcing since it is common for a company to lack specialized technology employees familiar with your industry.

2. Delivery scheduling: Outsourcing to third-party specialized logistics providers scheduling can provide flexibility when working with your customers.

3. Modes of transportation: Outsource logistics to provide more inclusive delivery modes for disparate shipping and delivery modes.

4. Customer costs: Outsourcing logistics often frees some company resources allowing to develop more delivery options and have better management of shipping-related fees.


Advantages of outsourcing logistics operations


Outsouring logistics is increasingly found in almost 70% of domestic transportation companies.

There ae many advantages to utilizing outsource logistics including:

1. Increased flexibility - Outsourced logistics can quickly satisfy any additional space are personnel requirements due to rapid growth.

2. Indirect cost reduction - Outsourcing logistics can reduce many direct costs to the 3PL company to provide any additional systems or associated technologies, warehouse space, or employees.

3. Expanding into new markets - Exploiting the specific expertise and resources an outsourcing logistics can help develop new markets, such as a Free Trade Zone, that may require resources not available within your company.

4. Improving performance - Improve and enhance company operations by outsourcing due to the 3PL partner having the experience and resources available to expand to new geographical areas.

5. Strengthening core business - Outsourcing logistics will free up resources and time for operations management to concentrate on core business and develop new ideas for business expansion.


What to look for when outsourcing your logistics


When outsourcing logistics, it is important to select the 3PL that is correct for your company. These are some suggestions for exploring to make sure you are selecting the correct provider:

3PL Customer Service

Ensure you work with a reputable logistics provider that focuses on customer service. Often word of mouth may be effective or reading online reviews. However, it is also essential to visit with the providers' references to validate their focus on customer service.

Reliability and speed of outsource logistics service

The adage "Time is Money" is very accurate in the logistics industry. In this increasingly impatient world, it is crucial the 3PL can provide the necessary services to enhance the speed of delivery. Cutting time for services rendered will significantly affect customer satisfaction.

Outsourcing capacity

When selecting an outsourced logistics company, it is crucial to understand the capacity of the 3PL to provide the necessary services. Will the 3PL provider have the ability to fulfill your requirements and keep your clients happy? Make sure the selected provider has the resources to ramp up quickly and meet the company's anticipated growth.


What logistics services are outsourced the most?


Some of the most requested outsourced logistics services ranked in order are:

1. Customs clearance/brokerage: 60%

2. Port services: 56%

3. Auditing freight bill and payments: 47%

4. Freight forwarding: 45%

5. Import/export documentation: 40%

6. In-transit merging and shipment consolidation: 34%

6. Tracking of shipments and event tracking: 33%

7. Freight brokerage: 33%

8. Management of security

9. Management of inbound traffic control: 20%

10. E-online purchasing and e-online logistics: 18%


Logistics outsourcing examples


Outsourcing logistics can affect many areas of a companies operations and some excellent examples of outsourced logistics are:

  • Enhancing IT Management and Required In-house Technology Infastructure

  • Managing Warehouse Space Requirements

  • Offloading of Logistics Requirements to Focus on Core Business

  • Logistics Provider Managing Operations for Improved Service

  • Less Company Risk and Liabilities with Reduced Company Administrative Responsibility

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