Key Trends in Logistics Outsourcing


Outsourcing Logistics Process Explained

Logistics is the backbone of the supply chain process. This is an important function in many organizations, especially for companies in the manufacturing and distribution industries. While some firms prefer to build, manage and maintain internal logistics departments, many firms rely on third-party service providers. Logistics process outsourcing is the transfer of responsibility for an organization's logistics activities to an outside specialist.



Outsourcing logistics processes makes sense in a market where shippers and merchants face increasing cost pressures, changing customer expectations and the need to keep operating costs down while driving process efficiency and innovation. Many firms do not have the resources or capabilities to build a dedicated in-house logistics team and focus on their strategic activities, such as developing new products and improving their competitive advantage.


 

Logistics activities represent a significant portion of an organization's overall budget. This is why supply-chain managers and business owners always want to make the most of their logistics expenses. Most companies outsource logistics to cut costs, access expertise, and improve the bottom line. Some companies outsource logistics functions because they believe third-party specialists can better simplify supply chain management and deliver goods to customers faster and more cost-effectively.



Whatever the reason, the use of outsourced logistics services is increasing across all industries. Service providers clearly bring value to organizations in the form of cost savings, better processes and better customer satisfaction.


Outsourcing Logistics Process: The Service Providers


Third party (3PL) logistics providers provide discrete services or end-to-end management of an organization's entire supply chain, from transportation to warehousing to IT infrastructure. Some companies outsource only parts of their logistics operations, for example ACI e Manifest processing, while others adopt more extensive outsourcing engagement. For importers, exporters, brokers, forwarders and shipping companies, trust is an important factor when choosing a logistics partner. Companies often renew existing contracts with service providers instead of looking for new partners. In general, they prefer logistics partners who have extensive industry experience and who provide added value over time.


The following are some of the important observations from logistics outsourcing


1. Internet, ERP, SCP and SCE technologies continue to accelerate adoption. Many ERP systems are used for financial, payroll and HR, but not for core operations. Most ERP systems lack logistics service provider-specific functionality There is a need to enhance the intelligence and productivity of ERP by combining Internet communication technology, supply chain planning and supply chain execution components. The ROI of these techniques is often unclear.


2. Global visibility has now become a basic requirement. Customers wishing to reduce transportation costs, increase delivery reliability and cross docking activity and reduce cycle times are demanding complete visibility of goods. For example: Shippers not only want to be able to track their cargo via the Internet, but also want to receive automatic notification when shipments deviate from their schedule. Logistics service providers need to create or buy inventory visibility across the supply chain to meet this need.


3. Most carriers and 3PLs in India are unwilling to move from a transaction-based customer relationship to a strategic supply chain partnership with customers. Customers will be successful through mass customization and web commerce initiatives. Shippers expect That their logistics providers will help them improve supply chain processes and increase revenue. Logistics suppliers need to respond to such initiatives. SCM IT tools will help facilitate cross-docking, delayed allocation, in-transit merge, deferred assembly and other value-added services, thereby increasing the agility and velocity of their customers' supply chains. Influencing product and procurement strategies Innovators will use IT to move beyond strategic logistics.



4. Ability to match market demand with available supply Leveraging and collaborating closely with suppliers' distribution systems to ensure seamless information flow across the supply chain. Sales to shift demand for in-stock products and accessories Using strategic initiatives like promotions and pricing changes. Use of scientific tools for better demand forecasting.



5. Outsourcing of Non-core Activities An increasing number of organizations are now outsourcing their non-core activities to specialist logistics service providers for whom this is their main business. The previous cost centers have now become the current profit centers and are focused on innovation and continuous improvement. has been focused.

Conclusion:-


Third Party Logistics Service Providers have core competency in a specialized area of ​​Logistics such as Warehousing, Transportation, Inventory Management etc., to provide comprehensive logit service solutions for the entire supply chain. A new and emerging trend in outsourcing is Fourth Party Logistics which assembles and manages its own organization's resources, capabilities and technology along with complimentary service providers to deliver a comprehensive supply chain solution. Management's decision to outsource may be justified by its value proposition or benefits. By outsourcing, the company benefits on several fronts such as cost reduction, higher return on investment, utilization of manpower for more productive work and a clear focus on core competency areas.