Logistics outsourcing is defined as engaging a logistic service provider to carry out and manage your company’s logistics requirements. The logistic service provider offers a broad number of service activities including customised service. Engagement with a logistics service provider is often long-term and strategic in nature. The service provider will take care of your end-to-end logistics requirements such as warehousing, transportation, and delivery.
Given the complexity of logistics service, all companies may not be equipped with the expertise to handle this segment of business. In such a scenario, it turns out beneficial to partner with a logistics service provider. However, while deciding to outsource logistics, you must also take capital costs, operating costs, revenue growth, customer service and human capital into consideration. It is also important to assess the service provider’s competency in the market, its bandwidth in supporting your business, service parameters, and service agreements.
A fair degree of risk is part of every business decision. And same holds good in logistics outsourcing too. But, by considering few steps as described below, you can avoid risk situations to a great extent:
– Do not follow others – Just because many companies are outsourcing their logistics activities, it is not necessary you must outsource it too. Assess your logistics requirement and internal competency before signing an agreement with a service provider. Also, determine what you need to outsource, for example, transportation, warehousing, delivery, or any other value added service.
– Choose after thorough evaluation – Definitely, logistics outsourcing will be a cost incurring factor. Hence, it is recommended that you have a thorough selection procedure to find and evaluate the potential service provider.
– Define terms of service implementation – Unless there is a set of defined terms and conditions to direct the implementation process, the decision of outsourcing may not turn out to be as fruitful as desired. It is critical for you and the service provider to have an understanding of the others need like transparency, data visibility and ownership etc.
– Managing outsourced service relationship – Once you have outsourced your logistics to a service provider, it is necessary to monitor the progress and take steps to improvise the existing relationship for the benefit of both the parties.
Talking about the advantages of logistics outsourcing, professional logistics companies can provide global coverage of your business, reduce cycle time, implement latest logistics technology in the operational process, and workforce and cost reduction. These factors will save you time, money, and resources for other peripherals of your business. Thus, assess, select, implement, and manage logistics outsourcing intelligently.