Managing your resource operations in the supply chain used to be an internal process: You determined where items needed to go, where goods would be stored, and what routes the goods would take to reach destinations. Now, contract logistics handle those steps for you.
What is contract logistics? Think about what all is involved in a typical supply chain and how you manage those resources while mapping every unique process.
You work with research and development to determine a product’s design creation and the best materials to use. Then you must decide which suppliers will offer those materials. Your company also should choose who will produce the finished products. Will it be your operations, or a manufacturer that will sign a contract (contract manufacturing) detailing how the products will be made and the number that will be delivered?
Next, you design warehouses to store products and distribution stations that will handle order fulfillment. Lastly, you pinpoint key retailers that will display the goods and target customers who will purchase the products. In addition to thinking about each point in the supply chain from start to finish, you have to develop transportation routes and decide on the best modes of transportation — rail, truck, ship, and airplane — that will be needed between each point.
Contract logistics takes all the work that is involved with resource management and hires other companies to perform these tasks. The contract logistics company — normally called third-party logistics (3PL) — will handle how the product moves from the product line to the warehouses and distribution centers and, finally, to end consumers.
Contract Logistics Services
Contract logistics services from a 3PL will vary based on how each company brands itself. Some companies offer the basics, while others provide add-on services for additional fees.
Typical offerings that most companies provide include the following:
- Contract warehouse services: What is contract warehousing? It is where you have a partner warehouse that will receive, store, and ship goods based on the details of an agreed-upon contract.
- Inventory management: Inventory management involves the storing and stocking of raw, work-in-progress, and finished goods at the right levels in the warehouse to meet customer demand without increasing costs or waste.
- Order processing management: The management of picking and packing products to fill customer orders as those packaged goods are delivered to a shipping company.
- Transportation and freight forwarding services: This service involves aligning all the logistical strategies of how to receive raw materials and ship finished goods with shipping partners — whether it is to manufacturers, distributors, or end customers.
- Reverse logistics: Reverse logistics involves the transportation strategies and methods used to reclaim products from end users for the purposes of recapturing the products’ value. This service may require obtaining the product from a customer due to quality control issues, the product is not desired by the customer, or the product has become obsolete.
- Greenfield opportunities: We can leverage our knowledge and expertise to build a new facility from the ground up for our clients. With our extensive experience, we serve as an expert source for conceptualizing, engineering, and constructing a state-of-the-art warehousing and distribution space.
Keep in mind, contract logistics entails more than just the physical work in moving the product from the production line to the warehouse and the end user. It also involves managing all the contracts with the raw material suppliers, manufacturers, contract warehouse companies, distribution centers, and retailers.
These contract terms and considerations offer greater details involving the movement of goods so that the right number of materials is shipped and received at specific times. The contracts will also state what services each business partner, supplier, manufacturer, shipper, and logistics company will agree to provide to your company.
A contract logistics provider should ensure the logistics service contracts detail required protections that will be valuable to your company, such as:
- Contract terms
- Liability damage responsibilities
- Consequential damage responsibilities
- Warehouse lien procedures
- Contract termination obligations
Benefits of Contracting Logistics Services
Contract logistics services provide a range of benefits to companies that wish to further leverage their supply chain strategies. Some advantages that you may gain will be based on the services that you wish to contract from the 3PL, which could include:
- Versatility: The 3PL will adjust the services it offers to your company based on your ongoing needs and customer demand. It can scale operations quickly and cost-effectively.
- Supply chain improvements: Obtaining a contract logistics company can help fill the supply chain gaps to make your operations efficient. It can discover problem areas and provide solutions that are more tailored to how your processes function.
- Cost savings: Contract logistics offers cost savings for companies by reducing warehouse labor and operational costs. They are also partnered with numerous shipping and freight forwarding companies, which allows them to develop logistical strategies that save on fuel and transportation costs.
Products and Industries Using Contract Logistics
Contract logistics can be used for a wide range of industries whose supply chains are complex because of the types of products that are manufactured. For example, pharmaceutical companies often rely on contract logistics companies due to the nature of certain medical products that could contain hazardous materials or require temperature-controlled storage and transportation solutions. Contract logistics can also provide benefits for companies dealing with high-volume production lines.
This solution also benefits companies that operate internationally. The contract logistics company is aware of import/export custom duties and government regulations based on the region. It can coordinate all the processes for a smooth supply chain. Contract logistics are utilized by companies that are expanding their current operations and need versatile warehouse, order processing, and transportation options.
The types of products that can be used with contract logistics services are only limited by what the contract logistics company wishes to handle. Many companies do not handle livestock. Other companies will not transport hazardous waste. Speaking directly with the contract logistics company will allow you to understand what products and materials it will receive, store, and ship.
WSI Contract Services
Contract logistics may be the ideal solution when your company wants to expand its manufacturing operations into other countries, or when you are looking for a more robust and versatile supply chain and warehousing solution for raw materials and end products. Contract services can offer solutions to optimize your resource management operations efficiently while saving on costs.
Here at WSI, we offer contract services to companies of any size. Our logistics and warehousing services help ensure your products are stored safely and shipped quickly to destinations. Contact WSI today for more information.