Logistics services are critical for any business providing transportation services. Attempting the entire supply chain management in-house could be complicated and overwhelming, especially if you are already wearing several hats within the organization. As transportation costs for logistics increase every year, it makes sense to consider outsourcing your logistics service requirements to a reliable company and reap the benefits of significant cost savings.

Outsourcing your logistics operations requirements to an external service provider or a third-party logistics (3PL) company can be an excellent decision. These logistics service providers (3PL providers, for short) primarily deal in trucking, warehousing, delivery, and other related operations.

More companies have begun to outsource logistics as supply chains have become more complex, technology and physical assets have become more costly, and workers have gotten scarce. Outsourcing to third-party logistics providers streamlines the day-to-day operations, so workers can focus on other business functions, such as customer satisfaction and improving the company’s bottom line.

What is Logistics Outsourcing?

A logistics strategy involves how, where, and when to procure materials and goods. It assesses and manages the assets used to handle the acquired, stored, and shipped resources. Some companies, even those with simple logistical strategies, might need more support to manage their resources to prevent damage, missed deadlines, or lost shipments. In these cases, a company may seek to outsource logistics by forming a partnership with a third party.

Outsourcing logistics refers to a company hiring an external provider, often known as a 3PL provider, to handle various supply chain operations about storing and moving goods. These providers can handle warehousing, supply chain procurement, inventory management, shipping, and freight forwarding.

Why You Should Outsource Logistics Operations

There are plenty of good reasons to outsource logistics services, but you must first understand how it will affect your business and whether it will save you money. Some of the main reasons to outsource logistics services include the following six:

1. Saving Time and Money

3PL providers can offer several financial advantages to businesses by saving their clients from hiring more workers, building warehousing, expediting transportation, and purchasing various technologies. Not only do these companies reduce their logistics costs dramatically, but they help free up valuable time to focus on core business programs.

Leveraging the in-depth expertise and experience of a 3PL provider to carry out logistics operations also saves companies the stress of billing, audits, paperwork, staffing, training, and supply chain optimization. It is also an excellent way to measure and improve specific KPIs for your business.

2. Gaining Flexibility and Scalability

Another benefit of third-party logistics in supply chain management is the flexibility and scalability it offers to use third-party supply and distribution resources based on your present business requirements. In other words, when company sales are down, a third-party logistics service provider can ramp down services. When there is a surge in orders, your company does not have to increase the team to perform in-house logistics services.

3. Improved Customer Satisfaction

Most 3PL providers are specialists in logistics services, helping shippers develop inventive ideas and strategies resulting in improved services and response time, timely pickup and drop-off of orders, fewer schedule disruptions, and a boost to brand reliability. These benefits lead to enhanced customer satisfaction and partnerships lasting a lifetime.

4. Reduced Liabilities

Delays and damages are common in the supply chain, and they happen even with the most efficient preparation and communication. The logistics service providers help manage all inter-connected carrier contracts, safety ratings, carrier vetting processes, and insurance certificates. And since logistics is their core business, working with a third-party logistics provider means you’re covered by someone experienced in dealing with delays and damaged products and is mitigating risk on your behalf.

5. Transportation Cost Savings

According to Statista, transportation accounts for about two-thirds of all business logistics costs in the U.S. By outsourcing your transportation logistics, you can save money in several ways, such as negotiating lower rates with carriers and picking the best shipping modes for your load, like truckload or less than truckload.

Working with a professional 3PL partner enables you to handle specific freight operations like certain routes and products. However, under a managed transportation model, you could assign all day-to-day logistics operations to the 3PL and have them incorporate a TMS (transportation management system) software solution. Remember, 3PLs can give you access to new or proprietary logistics technology, which your company might not be able to integrate easily.

6. Access to a Warehousing Solutions

Some third-party logistics providers can support your products with warehouse management systems (WMS), ensuring the safety of your goods. Others may provide integration with enterprise resource planning (ERP). The 3PL’s IT capabilities and automation are solutions many companies could not afford or manage the complexities independently.

While basic warehousing and transportation services are the most popular outsourced logistics, other services are also available. In addition to merely storing and distributing goods, a warehouse management 3PL might offer product tracking and inventory to add even more value.

Other accompanying services include customer and fulfillment support, which could consist of taking customer service calls, processing orders, and managing customer returns often referred to as reverse logistics.

Two Challenges of Outsourcing Logistics

Although outsourcing your logistics has many benefits, you may also face challenges, such as the following:

Lack of Flexibility

Not all logistics operations are as flexible and responsive as you may require. When you outsource your logistics to the same company, they become an extension of your process and must be capable of responding quickly to changing customer and market demands.

Software Compatibility Issues

Many companies outsource logistics because they want to incorporate the 3PL’s technology. Unfortunately, sometimes their software does not integrate seamlessly with your existing technology, and outsourcing may become more of a hassle than expected. Before you commit, ensure you have buy-in from your internal teams and excellent integration between systems.

How Do You Know When to Outsource Logistics?

Outsourcing your logistics operations supplies your company with numerous benefits. Still, you should be certain the service is right for you. Ask yourself if the following apply to your business before you commit:

You want to focus on your core business
Your costs are increasing
You want the flexibility to scale your business quickly
You’re having trouble hiring the right people
Your customer service is worsening
You’re restructuring your business
You’re entering a new market
Your in-house people are working in areas outside their expertise

How Much Should You Outsource?

The late Peter Drucker, a management consultant extraordinaire, once said, “Do what you do best and outsource the rest.” Regarding your logistics, outsource what you must to improve your costs and efficiencies, and choose a leader in third-party logistics services. The wrong 3PL could end up increasing your costs and decreasing your efficiency.

Titan Worldwide Logistics Creates 3PL Solutions for Every Business

Titan Worldwide offers innovative logistics services to shippers nationwide. We can help you strategically plan and coordinate the logistics for everything, including the structural components, machinery, and equipment.

Using internal proprietary execution models, our logistics experts will help you get your heavy-haul project in on budget while creating efficiencies to mitigate risk, so you can relax and tend to other core business matters.

Talk to us today, and move forward with confidence!

Author: Justin Tyme

Justin Tyme is a seasoned marketing expert with a focus on the supply chain, logistics, and heavy machinery transportation sectors. He serves as the Senior Director of Marketing at Titan Worldwide, where he manages the company's content marketing strategy and lead generation. You can connect with Justin via his email.

6 Reasons to Seriously Consider Outsourcing Your Logistics