In the future will companies choose to take many of the logistics functions that they currently outsource to 3PLs back in house? William Walker, head of sales and marketing at Berkshire-based Walker Logistics, gives some reasons why they shouldn’t
I recently attended a conference at which one of the speakers delivered an interesting (although, at times, somewhat bewildering!) presentation on the hypothesis that companies across all industry sectors will, in the future, choose to take many of the logistics functions that they currently outsource to 3PLs back in house.
Of course, the supply chain landscape is constantly shifting and it is probably safe to assume that the services logistics companies provide their customers with in five years time will be different to those offered today as the 3PL’s client relationship keeps on evolving.
But, with new logistics challenges being thrown up all the time – not least by the public’s growing enthusiasm to shop with the click of a button – my view is that most businesses will continue to opt for the outsourced option.
That’s because 3PLs have the resources and experience to help both well-established names and growing brands achieve their maximum potential.
However, for any senior executives reading this who may be contemplating taking part or all of their company’s logistics function in-house, here are some reasons why you shouldn’t.
Outsourcing to a 3PL usually means that most, if not all, costs are based on transactional processes rather than fixed rates. In other words, instead of having to pay for your own warehouse building and the staff and machinery required to run it – which can’t be scaled up or down quickly or simply – using a 3PL means you have access to flexible levels of storage space and human resources as and when you need them.
So, if your business is seasonal or experiences spikes in demand, you have no need to worry; by communicating with your 3PL partner the necessary space and resource will be created immediately.
All businesses want to grow but a sudden upsurge in new orders can damage your reputation if you’re not able to meet the demand because you can’t hold enough stock or orders are late.
Not to be confused with ‘flexibility’, scalability refers to a 3PL’s ability to help a client cope with the implications that periods of sustained growth – or decline – have on its business.
As companies expand or shrink they may be faced with a need to upgrade or downsize facilities and systems and both scenarios can require significant financial investment. If, for example, your business is expanding you will obviously need to look for a bigger warehouse. But how big? Nobody wants to change warehouse every couple of years, so it’s got to be a building that meets your needs now and in the future.
Or perhaps your ERP system has become out-dated and you need to replace it with technology that can handle more functions. But which supplier do you choose and what additional functionality will best fit your changing business model?
A lot of these issues are resolved by outsourcing to a pro-active 3PL, who should always be able to provide sufficient storage space by taking a ‘rubber wall’ approach to its client’s warehousing needs – as well as offering robust, all-encompassing IT systems.
- Complete Supply Chain
Senior managers often don’t consider just how many suppliers or parts of the business are intertwined with the logistics functionality within their organisation and, as a result, communication across departments can become disjointed.
Everyone – manufacturers, shipping agents, the warehouse, the customer service team etc etc – has a role to play in ensuring supply chain efficiency but break downs in communication frequently undermine the best-laid plans.
However, a 3PL with the ability to offer complete supply chain management will liaise with manufacturers about upcoming orders and, even if it’s not handling the freight personally, will be in touch with the relevant people to monitor and schedule this through to receipt into the warehouse.
A 3PL will also take care of other aspects, such as customer service queries, and feed information to the right point within your company.
- Cost saving
Quite simply, by outsourcing to a 3PL a company’s logistics costs are likely to be far lower than if the job was undertaken in-house. Choosing to store goods in a ‘shared user’ warehouse, for instance, can be particularly cost-effective as the store’s overheads are split between various users and these companies will also usually benefit from the lower transit rates that a 3PL – with its bigger spending power – can offer.
- The chance to focus
One area that is often overlooked when it comes to deciding whether to control the logistics function in-house or outsource it to a 3PL is the time taken to manage the supply chain element of a business.
There will always be logistics-related issues and focus points that divert attention from any firm’s core activity and by outsourcing these ‘problems’ to a 3PL you remain free to carry on designing better products, selling more items, increasing brand image or doing whatever it is that drives your business’s success.
It is hard to quantify the time that outsourcing logistics ‘gives back’ or apply any hard figures to support to the ways this benefits a company’s performance, but I think it is one of the most important benefits that outsourcing can bring to any company.
Editor’s Notes: About Walker Logistics Ltd
Walker Logistics was established in 1999 to offer a comprehensive range of bespoke services. With modern, multi-client facilities located close to Junction 14 of the M4 motorway and additional sites located in Swindon, Reading and Newbury, the company offers over 200,000 square feet of ambient temperature high quality warehousing & storage facilities.