Managing logistics and your supply chain is time consuming, expensive, and complicated. But it's a key aspect of your business that needs to be covered adequately. So why not consider outsourcing it to a third party logistics company?
The premise is simple. You'll hire an external partner to take care of most, if not all, of your logistics and supply chain management needs, including transportation, warehousing, inventory management, order fulfillment, shipping, reverse logistics, and even technology management and data analytics. You may be billed hourly or charged a fixed monthly fee.
Is this always a worthwhile investment?
The Advantages of Working With a Third Party Logistics Company
Let's start by looking at the advantages of working with a third party logistics company:
· Faster delivery options. In this type of arrangement, you'll usually have access to faster delivery options. You'll be able to get your products from one place to the next faster, tightening up your shipping times and minimizing headaches. You may also be able to offer faster delivery options for your customers, serving a broader range of needs.
· Time savings. It's easy to argue that time is a business's most valuable resource – and it's yours personally, too. That's why we can confidently say that the time savings associated with a third party logistics company are among the best benefits. You won't have to spend as much time thinking about logistics or supply chain management, nor will you be totally alone in researching or navigating your company's biggest challenges in this space. You'll be delegating most of the work to true experts, so you can focus on more important things.
· Operation streamlining. The seasoned experts at a third party logistics company know exactly what it takes to streamline operations. They're in the business of operating efficiently in supply chains and logistics, so they'll likely have recommendations for how you can improve things and a clear vision for how to keep your company running smoothly.
· Immediate access to experts. You can spend years training people internally to help them become better supply chain managers. You can also take the time necessary to search for and recruit experienced, talented managers who already exist. But both of these options are challenging and time consuming, while working with a third party logistics company gives you immediate access to the experts you need.
· Growth and scaling opportunities. Most of these third party companies are extremely flexible, capable of offering you services throughout the course of your company's growth. If you're interested in scaling, the right partner can make it trivially easy for your company's supply chain to grow unimpeded.
· A better overall customer experience. Working with a third party logistics company often leads to a superior overall customer experience. Customers have more options, faster delivery, less complexity to deal with, and fewer headaches overall.
· A critical competitive advantage. The combination of all these benefits and more means that working with a third party logistics company gives you an inherent, critical competitive advantage. If you work in an industry filled with rivals, it could make a significant difference in how you perform and how you're perceived.
The Disadvantages of Working With a Third Party Logistics Company
There are a few disadvantages you'll need to consider as well:
· Partner research and selection. As is the case in any other niche, there are examples of excellent and substandard companies in the realm of third party logistics. Much of your success is going to depend on your ability to vet a good partner, but this research and due diligence can sometimes be challenging. Making this decision isn't easy, but you'll thank yourself for doing your research in advance.
· Costs and budget concerns. Some business owners worry that hiring a third party might be too expensive. If you're operating on a thin budget, or if you've historically followed a lean philosophy, you might have trouble justifying this investment. However, this expenditure has the potential to increase your efficiency so much that it's worth considering, regardless of your initial budgetary concerns.
· Lack of direct control. Working with a third party always introduces some element of relinquishing control or transparency in your business. For leaders who like to have a hand in everything, this can be a tough sell.
One of the best things about working with a third party logistics company is that you'll gain access to in-depth data analytics to help you understand how your supply chain is being managed. In other words, you'll have direct access to data that can help you determine whether this investment is worth it. This type of partnership isn't a perfect fit for every business or every industry, but it has tremendous advantages for the situations in which it fits.