Logistics Outsourcing: What Is It and What Are the Benefits?

Outsourcing is an essential topic in the manufacturing industry at all times. With issues about ethical sourcing and ensuring that quality is not compromised in the production & storage of a product, it is essential to ensure that your company provides an improved sustainability experience for your customers. This is especially concerning during the coronavirus crisis due to supply chain issues. Outsourcing logistics is a low-cost way to broaden your global appeal and profits. Talent acquisition and renting storage capacity are typically less expensive than hosting processes in-house.

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Logistics outsourcing is an excellent method of releasing resources while getting closer to your customers to ensure on-time delivery. The potential benefits of logistics outsourcing include the following:

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• Reduced human capital.
• Cost savings in operations.
• Streamlined operations.
• Guaranteed global on-time delivery.

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Before incorporating logistics exporting into your business, think about the pros and drawbacks of this idea. We have explained and covered this topic very well. Let's take a look!

What Is Logistics Outsourcing, And What Are The Benefits Of Doing It?

Are you opting for outsourcing warehousing for your business model? The logistic outsourcing model is based on the combination of 3rd party logistic companies. Most of the 3rd party logistic companies access their warehouse & offer the logistic services for their clients. This is why these businesses are frequently referred to as fulfillment centers. 

Logistic outsourcing is known for serving various logistic services to the eCommerce store. These services mainly include managing logistic-related services to the suppliers & providers and keeping an eye on the orders & fulfillment. This service also includes managing the supply chain and working for organizing, warehousing & shipping of products. Now let's check the benefits of logistic outsourcing.

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Related: What Is Freight Logistics?

Benefits Of Logistic Outsourcing

Reduced Indirect Costs

You can convert some direct transportation costs into variable costs by outsourcing your supply chain to a partner. Our logistics solutions eliminate the need for customers who outsource their logistics to engage in systems, warehouses, employees, and safety measures.

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Increased Adaptability

You will benefit from high flexibility in volume growth and inflection cases because the companies arrange spaces and personnel based on your needs.

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Gaining Access to Supplementary Skills

Furthermore, 3PLs can offer the additional skilled personnel needed to implement the processes of supply chains required to expand the company internationally. In-house managers may only have experience with national supply chains. Furthermore, as the use of tools and technology grows, especially in the context of implementation logistics, so does the need for managers with a higher-level skill set.

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Improved Customer Service 

Outsourced distribution not only has the potential to improve customer service by enabling the business to focus on its core business, but it also offers opportunities for developing emerging markets. With the increased flexibility that the 3PL provides, a business having to launch new products in new geographical areas is better able to do so.

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Gain Control

Shippers report that logistics outsourcing gives them more control, owing to improved systems that provide real-time accessibility and advanced reporting capabilities. This allows for better and earlier planning.

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Related: What Is Retail Logistics?

Different Types Of Logistics Outsourcing

Distribution And Warehousing

These types of logistics strategies mainly benefit product storage. Whether it's about raw materials or finished goods and products in progress, it will help you! The area of logistics is concerned with the tracking of goods entering the warehouse and how they are stored.

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Fulfillment

This type of logistics covers everything related to the order fulfillment method. This logistics includes managing inventory levels, fulfilling the order status, placing & shipping levels, and goods packaging. It also includes tracking the products when it leaves the warehouse.

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Transportation Outsourcing

This logistics service involves hiring a third-party transportation provider to manage all aspects of shipping goods from point A to point B. This includes arranging the most efficient routes, tracking shipments, and ensuring timely delivery. Companies who outsource their transportation needs benefit from lower costs and improved accuracy.

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Warehouse Management Outsourcing

For businesses that have high inventory needs, warehouse management is a must. Outsourcing this task to a third-party provider allows companies to manage their supply chain better and reduce costs associated with storage and shipping goods. A logistics service provider will handle all aspects of the warehouse management process, such as stocking items, tracking shipments, maintaining accurate records, and more.

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Customer Support Outsourcing

For companies that sell products or services online, customer support is critical to their business. A company can benefit from reduced costs and improved customer satisfaction by outsourcing customer support activities. This logistics service includes providing help desk services, managing returns and refunds, and providing customer technical assistance.

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Reverse logistics

If the customer claims that the product is damaged or doesn't fit their preferences, this logistic outsourcing can help you! It covers the product's returns to the warehouse/distribution centers.

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How To Choose A Logistics Outsourcing Partner?

1. Knowledge

A critical component is expertise in the company's specific needs. A particular vehicle, a different temperature to guarantee the quality of its products, various processing methods, and so on will be required. To cover all these specific needs, you must deal with experts with years of experience and knowledge in this industry. 

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2. Customer care

Is the logistics provider's customer service, responsiveness, and problem-solving prioritized? These aspects may be challenging to recognize, but educate yourself on these critical elements. But what exactly is exceptional customer service? Almost every company claims to continue providing outstanding customer service; however, how do you know? Inquire with their clients & request referrals, preferably to businesses.

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3. Adaptability

The key to success is adaptability. Your partner should be adaptable when accepting and responding to changing customer or market needs. If your business has unique needs, you should be aware of the potential response of your logistics provider. 

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4. The reputation of the company

A new business agreement will almost certainly put the business relationship into question. The logistics provider's leadership personality is frequently revealed at this stage. Determine whether the supplier will respond with integrity and honor before it is too late. Time will tell whether the company has a positive or negative reputation among customers, suppliers, and employees.

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Steps Involved In The Process Of Logistics Outsourcing

The process of logistic outsourcing explains what logistic activities & processes are. It includes the five most essential functions of logistics that provide for.

Storage, Warehousing & Handling Goods

Logistics may involve outsourcing activities such as warehousing and storage, picking and packing, inventory control, transportation management, order fulfillment, and tracking. This outsourcing can help reduce costs associated with having physical warehouses while ensuring that goods are stored securely and safely. 

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Packaging & Unitization

When outsourcing logistics, it is essential to ensure that the chosen provider offers good packaging services for the shipped goods. Properly packaged products can ensure that they reach customers intact and help improve efficiency when handling large orders. Unitizing individual items for storage or shipping can also simplify processes by consolidating an entire order into one package.

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Inventory & Transport

An outsourcing company will be able to identify the most cost-efficient transportation method for the shipped goods. They can also help manage inventory levels to ensure that products are always in stock and available when needed. 

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Information & Control

A logistics outsourcing provider can provide detailed information about orders, shipments, and delivery times. This allows companies to control their supply chain better and make adjustments as necessary based on customer demand. Logistics outsourcing helps businesses maintain visibility over their operations while ensuring they receive affordable services. 

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Outsourcing Warehousing

Outsourcing warehousing is an excellent way for businesses to reduce costs associated with maintaining physical storage locations and keep up with growth without investing in new facilities. By outsourcing warehousing needs to an experienced provider, companies can ensure that goods are stored securely and efficiently without having to manage the logistics themselves.

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Challenges And Risks Associated With Logistics Outsourcing

1. The Risk of Confidentiality Breach

Every business has sensitive information agreements with its vendors, suppliers, and customers. Prices, conditions & delivery terms are sensitive data that should never be communicated outside your company. However, this is precisely what happens when you outsource logistics.

When you enter into an outsourcing agreement with a 3PL, that firm will be given all of the confidential contracts and other documents required to perform logistics processes for your company. The 3PL firm may need more adequate internal procedures to protect personal data. In the event of a data leak, your business and its reputation will be the ultimate victims.

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2. Inadequate Control

When you register an outsourcing contract for the supply chain, you are relieved of commitments, but you also lose control over the choices made in your company's name. Of course, the 3PL firm will consult with you on significant decisions and require you to sign specific documents, but you will have to learn what happens daily.

And, as you know from controlling your company, it is the little things that can cause significant changes, both good and bad. In the long run, entrusting your logistics operations to others puts you at risk of failing to detect a critical mistake.

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3. Lower Quality Standards

Another threat of outsourcing the supply chain is that your quality controls differ from those of the 3PL company. However, once the minimum expectations are apparent, the damage is done; your clients are already searching for another supplier, and your company's reputation is harmed.

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Conclusion

In conclusion, outsourcing your logistics for your eCommerce business can be a great way to save money and increase efficiency. You gain vital storage, packing, and shipping expertise from multidisciplinary professionals and free up time and resources on your end that can be used elsewhere. As the business climate continues to renovate itself to lend success to those willing to embrace change and invest in it, having access to the right resources is essential. With 3PLs managing the backend of your operations, you can take control of customer service management and marketing campaigns – or even expand into new areas. If you're ready to start on the journey towards reliable logistics outsourcing, come check us out at Conveyr for your new all-in-one 3PL management solution – Where we build the tools 3PLs use to compete and excel! With our experienced team and top-of-the-line technology, strategic implementation has never been more straightforward.

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Recommended: Expand Your Business With A Third-Party Logistics Provider