Outsourcing Logistics Management

Aug 30 2021

Outsourcing Logistics Management

Outsourcing of logistics services is when an organization or company employs an external service provider, also known as a third party, to manage various supply chain functions that could have been provided in-house—for instance, storing, shipping, packing, and delivering physical goods, from the raw materials to the finished product. Outsourcing logistics management is an essential business practice today and can become more in the future.

Over time, the growth in outsourcing of logistics services has resulted unknowingly than by design. Thus, explaining why there is much victimization in the industry, including lack of understanding, inadequate performance, resulting from objecting failure in extreme scenarios. However, it has since become one of the emerging industries. Even though there are several reasons for this negative depiction, lack of understanding from both users and providers is the main root of difficulties and failures in outsourcing logistics management relationships.

Moreover, outsourcing of logistics services involves sub-contracting logistics functions to firms equipped with providing the services. The concepts of third and even fourth parties are often meant to get neutral and best management results. Besides, the success in business logistics translates to many logistics advantages including, higher production rates, lower costs, increased efficiencies, better inventory control, increased customer and supplier satisfaction, more intelligent use of warehouse space, and improved customer experience. Below is a list of more logistics advantages that will convince you to consider outsourcing logistics management services.

  • Delivery Fulfillment
  • Enhanced Distribution Network
  • Costs Reduction

Types of Logistics Systems

Logistics systems (LS) refers to a network of people, organizations, activities, resources, and information taking part in the physical flow of merchandise from suppliers to customers. Logistic Systems may comprise three main types of logistics: inbound, outbound, and reverse logistics.

  • Inbound Logistics - refers to the procurement of products and information from suppliers, through to the warehouse, and further to the manufacturers for processing and production. The goods transported through this flow are raw materials, including tools used for manufacturing, spare parts, and pieces of machinery for production inputs or consumable products needed for fuel.
  • Outbound Logistics – refers to the movement of finished products and information from production facilities to the following supply chain link. These products move through warehouses to the end-users.
  • Reverse logistics – refers to the process of moving goods past their usual final destination for value capturing, re-use, or proper disposal. In supply-chain networks, products flow from suppliers through to end-users.

In addition, Logistics activities refer to all that happens in the production process through to the consumption of products. Likewise, several systems have been put in place to ensure efficient and timely delivery of products from the manufacturing plants to consumers. Find the types of logistics activities below.

  • Distribution processing
  • Storage
  • Warehousing
  • Information processing,
  • Cargo handling
  • Packaging
  • Inventory control
  • Transportation

Furthermore, types of logistics pdf define logistics service providers as companies that specialize in offering services that help supply chain management, including order fulfillment, warehouse management, and shipping orders. Even though several types of logistics service providers are on the market, it is essential for e-commerce business owners to thoroughly research before settling for any logistics service. Thus, the types of logistics outsourcing go a long way in meeting specific business needs.

Benefits of Outsourcing Logistics

Outsourcing logistics refers to the process of hiring a third party or an external supplier to manage particular functions of a firm based on specified performance measures. Outsourcing has become a popular business trend because of the following benefits of outsourcing logistics services.

Reduction of operating costs – the most valuable benefit of logistic outsourcing is cost-efficiency. Working with a third-party service provider translates to a reduction in the cost of investing in staff/employment, storage, and paperwork and invoices, thus reducing daily organizational expenses.

Saves time - outsourcing logistics frees your staff from the monotonous, stressful logistics tasks, allowing them to focus and work on other company needs. Thus, positively helping in the development of your entire business.

The above two reasons are the main benefits of outsourcing logistics. However, if you read the benefits of outsourcing logistics pdf, you will find several other compelling reasons to consider outsourcing logistic services. Take, for instance, efficiently running a warehouse. It takes significant time and resources, not forgetting special equipment, investments, and racking systems. Moreover, this kind of intricacy can prove challenging for firms to manage alongside their strategic activities. The other reasons to outsource according to benefits of outsourcing logistics pdf include:

  • To gain access to global capability
  • To achieve customer service improvements
  • To achieves a single point of contact
  • To increase flexibility
  • To gain in productivity
  • To get open-book management and complete transparency
  • To achieve data ownership and visibility (reporting)
  • To gain global sourcing strategy and synergies
  • To achieve material flows optimization
  • To gain substantial logistics costs savings
  • To benefit from economies of scale

Logistics Outsourcing pdf

Logistics Outsourcing is the strategic use of outside parties to execute activities traditionally handled by internal employees and resources of a firm. Business owners or entrepreneurs who want to learn more about logistics outsourcing can download the pdf to improve their knowledge. Since logistics outsourcing has been a growing and developing business trend, there exists much content online, including logistics outsourcing ppt, which are readily available for anyone interested in learning more for the betterment of their business.

It is not news to hear about the growing rate of logistics outsourcing. A significant driver in this respect has been the increasing globalization of manufacturing that has generated longer and more complex supply chains. Thus, increasing the risks in these long supply chains.

Nonetheless, there are numerous reasons why companies outsource their logistics activities. Their objectives of logistics outsourcing include reduction in fixed assets, leveraging more significant supply chain expertise, the ability to concentrate on core competence, and gaining economic return through the purchasing power of logistics companies. However, before outsourcing, it is vital for both parties to fully understand the relationship being created and the relevant obligation of each party.

Disadvantages of Logistics

There are different aspects of influence to contemplate in the logistics sector. For instance, technology, globalization, legal aspects, consumer evolution, and government policies. These facets directly impact the logistics sector and may hinder its ability to flourish. The following are a few disadvantages of logistics:

  • They are multinational – The most unswerving disadvantage of the logistics sector is being covered with substantively large companies. Thus making it difficult for small and medium companies to gain access due to the high costs associated with it.
  • High cost of transport - A more significant distance to travel equates to a greater cost as well. Thus, making it harder to get a competitive price.
  • Legality - Barriers affecting entry and exit can also be challenging to overcome, considering that every country and state can have its say on logistical practices.

While outsourcing logistics delivers highly economic benefits, there are also several disadvantages of outsourcing logistics. For instance,

Outsourcing minus proper appraisal processes – Finding a good logistics partner is complex. Hence, rushing through the entire tender process devoid of observing a well-thought process may lead to problems in the future.

The temptation to choose a low-pricing vendor to save costs – one of the other disadvantages of logistics outsourcing is the after-effect of rushing through the logistic outsourcing vendor process because you may end up signing a deal with someone who offers the lowest rates with poor services. This might create chaos rather than having an orderly logistics function.

Lack of specific responsibilities and roles in writing - Logistics is a subsection of supply-chain management, a combination of several other micro-steps. Therefore, increasing the complexity in planning and implementation logistics. Without each party specifying their exact roles in the agreement, there may be severe complications when the process commences.

Not viewing logistics outsourcing as a strategy – Outsourcing Logistics play a significant role in the overall strategy of a firm or organization. Hence, if you are outsourcing logistics simply as an activity to get done with and not as a strategic element, then your business may not gain much, notwithstanding the economy of scale.

Reverse logistics is defined as the complex process of consumers returning products and purchases to the respective retailers and third-party liquidators. It is the opposite of typical order fulfillment. However, nowadays, end-users expect free return shipping costs, and if a company fails to offer a positive and easy return experience, the chances of damaging effects on future sales become higher. Here are some of the common disadvantages of outsourcing reverse logistics.

  • High reverse logistics cost.
  • Poor visibility into products received
  • Inadequate labor resources to "handle" returns
  • Inability to understand the rationale of returns

Logistics Outsourcing Companies

Every firm, organization, or company starts from somewhere when looking to outsource logistics services. There are very many logistics outsourcing companies all over the world and near us to choose from. However, before that, companies need to learn basics, if not everything, about logistics and outsourcing. For starters, logistics outsourcing definition, logistics outsourcing examples, and logistics service provider meaning. Being knowledgeable about these few factors will go a long way in helping you select the best logistics outsourcing companies in your region or around the world.

Here are some of the best logistics outsourcing companies in India:

  • AWL INDIA PVT LTD. Logistics & Supply Chain Company
  • Wheel India
  • OmTrans Logistics Ltd. Simplifying Your Business
  • Mahindra Logistics
  • Future Supply Chain Solutions
  • ProConnect Supply Chain
  • B2B Logistics
  • JUSDA Supply Chain Management

Conclusively, as much as it may seem that logistics outsourcing comes with an equal measure of merits and disadvantages of logistics management, in reality, many of these demerits are purely pitfalls resulting from poor planning. However, keeping safe from these drawbacks will enable your business to take full advantage of outsourcing logistics functions while scaling tasks flawlessly with the assistance of an outsourced partner.

Your Outsourcing Logistics Management Partner

Is your team overwhelmed with the challenges of managing your logistics process in this current market? At Accion Performance we partner alongside your team to create a process that improves upon your results and performance without interrupting your teams current flow. To get a free time study and understand how we partner with your team to be your outsourcing logistics management partner, click the link below.

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