Talk with any logistics professional and they will tell you
that it is all about efficiency. However, nobody can seem to agree on what exactly
that means. Some feel that logistics should be managed in-house while other
feel it should be outsourced to a third-party logistics provider (3PL). Neither
side is wrong. It all comes down to what works best with your company’s
strategy, so you’ll need to evaluate the benefits of each option as it relates
to three key areas: people (employees), technology (TMS), and vendors
(carriers).
Outsourcing Logistics
The most obvious benefit of working with a 3PL is that
logistics is their specialty. Manufacturers and retailers can focus on their
core competencies without being distracted by logistics or supply chain
management. Additional benefits of working with a 3Pl include:
- You will receive better freight quotes from a wider variety of carriers
- Your company will require fewer employees to carry out logistics operations, which equals less fixed overhead
- A 3PL will keep your company up-to-date on all the latest logistics technologies
Outsourcing is not always the best option, though. You
should also consider the following drawbacks before making a decision:
- A 3PL will push to become more integrated in your daily operations which can make it difficult to end the relationship.
- Working with a 3PL will limit the amount of control you have over deliveries. If problems arise, communicating with drivers is difficult when you have another later of people to go through.
In the end, it is still up to you to manage your
relationship with the 3PL. Just because you work with a 3PL doesn’t mean they
will handle 100 percent of your logistics needs.
Managing Logistics In-House
While managing logistics in-house is a lot of work, changes in the
industry have made it easier for companies to manage their own supply chain.
For example, Transportation Management Systems (TMS) used to be very expensive
and costly to operate. However, technology costs have gone down in recent years
and created some very affordable and accessible TMS options. There are other benefits, too. Consider the following:
- Everybody’s product is unique and finding a partner that understands your business can be a challenge.
- Resolving OS&D issues is easier without going through a middleman
- Having no contract obligations makes it easier to adapt to a changing market.
- Operating in-house means that you will spend a lot of time finding carriers, getting freight quotes, and negotiating on prices.
- Having lots of carrier relationships and contracts to keep track of can be chaotic. Plus, it is difficult to know just how competitive your rates really are.
Just because your company is focused on manufacturing or
retail doesn’t mean you can’t be good at logistics, too. While it is a lot of
work, recent changes in technology and industry have made in-house logistics a
much more viable option.
Getting the Best of Both Worlds
Don’t forget that you can always combine in-house and
outsourced logistics services too. This is sometimes the best way to created
optimum financial and operational efficiency.
Businesses can use a scalable TMS solution with variable but predictable cost to reduce the amount of fixed overhead. If you are considering working with a 3PL for the purpose of accessing a TMS, this option will save your company money and free you from commitment.
You can then outsource some of the less frequent shipments
that are harder to manage to a 3PL. Sure, you will pay a marginal cost for the
shipment, but you will most likely save time and money in the long run. You can
also use websites like FreightCenter.com to instantly get freight quotes and book shipments online.
Weighing the Pros and Cons
The decision to go with in-house or outsourced logistics
services is not as black and white as it used to be. There are lots of
different options available and the best choice will depend on how your
operation is run. Consider your choices and decide which one will allow you to utilize your staff, technology, and vendors to achieve the best service at the lowest cost.
operation is run. Consider your choices and decide which one will allow you to utilize your staff, technology, and vendors to achieve the best service at the lowest cost.
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