When dealing with the inherent complexities of supply chain logistics, many companies come to a point when they may wish to use a third party logistics company to manage their supply chain. While outsourcing supply chain management is usually less costly than managing it yourself, there are other factors that should weigh in on the decision.
Using a third party logistics company to manage the supply chain frees up your company's resources and allows your business to focus on its own core competencies. Since a third party logistics company's focus is on supply chain management, their business is devoted to managing the inventory, transportation, and distribution of your product. When outsourcing, your business re-allocates its resources back to your industry, and the external logistics company can continue to improve its own area of specialization, namely, supply chain logistics.
The result is usually more cost-effective than managing your own supply chain. An external agency reduces costs across the board, such as transportation costs, inventory management and maintenance costs, procurement costs, materials management costs, and warehousing costs. The shortened cash conversion cycle and increased inventory turns means reduced working capital, and consequently, reduced investment. In the end, the continuous savings means an increased ROI for your business.
However, cost-cutting should not be the sole reason for choosing a third party logistics company. While lower costs and increased ROI may be a driving incentive, it is important to make sure that the outside company's culture and philosophy at least complement – if not integrate with – your own company culture.
Nowadays, the management in the global supply chain has become a complex industry demanding new methodologies and approaches to logistics planning. More wholistic, systemic approaches have driven the successes of the newer logistics companies.
The industry has evolved from concepts such as physical distribution to focus on the total supply chain of inventory management, transportation, and distribution. With the globalization of the supply chain, new systematic methodologies have improved the industry from the ground up. New waves of third party logistics companies have risen to pioneer the industry in conjunction with the rapidly evolving technology that is empowering the global supply chain.
Today, the successful third party logistics company has shifted its focus to the movement of the product in the context of the whole business. Leaner models of logistics and supply chain management take into account the total supply chain and the cost of fulfillment. Flow and speed become more important in the end-to-end supply chain. When viewing the whole picture of the supply chain, the customer, the business, and the processes of supply chain logistics, it becomes much more possible to eliminate the wasteful processes that end up as lost revenue.
Companies such as LeanCor take these ideas a step further by educating a business in supply chain problem-solving. Ultimately, a third party logistics company that strives to build a culture of problem-solving would strengthen a business, in addition to cutting costs. Problem-solvers would prevent errors at the source, eliminating revenue-wasting processes before they begin. The integration of a problem-solving mindset in your supply chain would help strengthen your business as a whole. Giving your business an integrated perspective of the supply chain from end to end is another benefit of outsourcing to specialists in supply chain logistics.
Posted by LeanCor Supply Chain Group
LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.Facebook LinkedIn Twitter Google+