Although outsourcing as we know it today was not labeled until 1989, outsourcing as a business strategy to countries like India continues to grow across the globe — despite the current “political hot topic”, anti-outsourcing campaigning. The positive benefits are simply too great. Turning non-core processes and essential functions over to an external supplier enables companies to leverage their resources, spread risks and concentrate on issues critical to their survival and future growth. One way of extending today’s top logistics organizations beyond their standard projected growth rate is through the use of third party outsourcing suppliers for logistics services.
But how much of a business can be or should be safely outsourced? That is the first question that needs to be decided. Every company is unique, so which portions of your business makes sense to outsource and which capabilities are you better off handling in-house?
Today almost 90% of companies use a logistics service provider for warehouse management, transportation management, and supply chain management activities (as per the survey conducted by *Aberdeen of over 123 supply chain professionals).
According to this survey, the top pressures driving outsourcing are:
- Increasing supply chain complexity
- Overall cost of managing the supply chain
- Rising logistics costs
- International commerce/guidance or geographical pressure
- Warehouses are running out of space
According to the study’s author, Bob Heaney, “Outsourcing is not an all or nothing strategy. It can be applied to isolated segments of your business to address specific logistics challenges. Today’s logistics executives are looking for the proper balance of outsourcing strategic processes with growing core competencies within the organization.”
To achieve best-in-class performance, Aberdeen recommends that companies must:
- Develop a future outsourcing strategy roadmap for growth, considering geographic and customer / logistics trade-offs inclusive of cost and service benefits under in-house or outsourced alignment.
- Leverage core competencies in the supply chain and create a balance of in-house and outsourced activities.
- Integrate collaboratively with internal and external partners and LSPs on enabling collaborative technologies, and link planning and execution across today’s multi-party, complex supply chain.
So what are the core benefits of logistics outsourcing?
- It lets the organization focus on its basic activity/ core competence
- Use of the best methods and experience
- Increase of competitiveness
- Cost-cutting and application of high technologies
In addition to the above mentioned general advantages, the use of logistics outsourcing is being extended because of:
- High quality servicing by the specialized outsourcing companies
- The growing flexibility it offers
- The synergic effect
- Insufficient expertise among in-house staff
- Experience by companies providing logistics services is superior
- Strategic reasons
The use of third-party logistics services providers in India, like Vee Move, has grown dramatically over the last several years as an increasingly effective way for companies to reduce costs and spread the risks in traditional, vertically integrated firms.
The economic advantages of using 3PL suppliers are:
- Elimination of infrastructure investments
- Access to world-class processes, products, services or technologies
- Improved ability to react quickly to changes in business environments
- Risk sharing
- Better cash-flow
- Reduction of operating costs
- Exchange of fixed costs with variable costs
- Access to resources not available in one’s own organization
Does outsourcing make sense for your company? Why not try speaking with a potential provider or two to discover exactly how to maximize the outsourcing model for your particular needs. If your company is looking for deep cost benefits and improved processes, then your best bet is to seek out a logistics services partner in India, where providers offer customers real-time or up to 48 hour turnaround service, 365 days a year. You can’t beat that!