When discussing logistics, the basic meaning refers to the tasks that assist with the movement of goods from point of origin to destination. Yet this task is far-reaching in the supply chain.
A logistics strategy involves how, where, and when to procure materials and goods. It evaluates and manages the assets used to handle resources when they are acquired, stored, and shipped.
Companies may have simple or complex logistical strategies based on their supply chain needs. For many, they may not have the assets to properly manage their resources to prevent damage, late deadlines, or missing shipments. In these events, a company may seek to outsource logistics to other businesses.
What is logistics outsourcing? When a company cannot handle the task of forming logistical strategies or doesn’t have the resources available, such as warehouses or fleet carriers, it may partner with a third-party logistics company. The third-party logistics company (3PL) offers specialized solutions for the storage and movement of goods.
Types of Logistics Operations
Logistics operations entail several areas of the supply chain. Companies may need 3PL outsourcing to handle their entire supply chain, even warehousing, while others simply need transloading or reverse logistic services.
Below are supply chain areas that may become outsourced to logistical companies:
- Distribution and warehousing: Distribution and warehousing focuses on the storage of products. Whether it is raw materials, works-in-progress (WIP), or finished goods, this area of logistics concerns tracking goods entering the warehouse, how they are stored, and the movement of products leaving loading docks.
- Fulfillment: Fulfillment logistics handles everything involved with order fulfillment. It may include managing inventory levels on behalf of the customer, filling orders, packaging goods, placing on shipping labels, and tracking products when leaving warehouses.
- Transportation: The transportation side of logistics involves the physical movement of goods and the assets used to perform this task. A 3PL may have its own carrier fleets to perform the transportation of goods, or it might partner with carrier networks — as they act as middlemen for businesses.
- Warehouse management: A 3PL may also offer warehouse management logistical services. While warehousing focuses on the storage of goods, warehouse management involves tracking product flow, looking for places to implement efficiency, and providing analysis and reports.
- Customer support: Companies may not have the personnel on hand for customer calls, transportation support, or order processing work. A 3PL may also offer customer support management as part of its solutions.
- Reverse logistics: On certain occasions, customers may claim a product is damaged, is not the right ordered product, or does not fit their preferences. Reverse logistics will handle the return of products to warehouses and distribution centers.
Benefits to Outsourcing Logistical Operations
Third-party logistics outsourcing provides benefits for companies that need a variety of sources. Many 3PLs offer tailored solutions to companies to fill the gaps in their supply chains.
Some benefits that a company may find could include:
- Transportation cost savings: A 3PL has access to a large network of fleet carrier partners. This tactic allows a 3PL to compare prices and receive quotes that better fit into the company’s budget. It can also help lower fuel costs.
- Service expansion and reach: A company might not have the transportation capabilities to expand into other regions or countries. A 3PL could have a global network allowing customers to expand their reach so they can offer products to consumers around the world.
- Latest technologies: A 3PL stays on top of its industry by investing in the latest tracking devices and inventory management software. A company doesn’t have to invest in internal technology as it can take advantage of these tech innovations to stay competitive.
- Enhanced customer satisfaction: Since companies are working with bringing in more clients, they may not have the staff to provide comprehensive customer service as 3PLs can take on this task.
Industries That Benefit From Logistical Outsourcing
Many industries turn to logistics outsourcing to properly manage their supply chains. Some industries may include, but are not limited to, the following:
- Consumer Goods Logistics
- Building Materials
- Equipment & Industrial
- Food Products
WSI for Outsource Logistics
When asking why to outsource logistics, there are many benefits that a company can find to help it with its supply chains. Here at WSI, we offer innovative solutions for companies requiring logistical services to make their supply chains more efficient. Contact WSI today to learn more.