The Value of Outsourcing Supply Chain Management to a 3PL
Before we dive into the benefits of outsourcing your supply chain management, let’s define what supply chain management (SCM) is. At its core, supply chain management involves overseeing the movement of goods, information, and financial resources associated with a product or service, starting from the acquisition of raw materials and extending to the product’s ultimate delivery to its destination.
While many associate the supply chain primarily with logistics, it’s essential to recognize that logistics is just one facet of the entire supply chain landscape. In today’s digitally-driven SCM systems, we integrate material handling and cutting-edge software to facilitate collaboration among all stakeholders in the creation of products or services.
This collaborative effort encompasses order fulfillment and information tracking, involving crucial players like suppliers, manufacturers, wholesalers, transportation and logistics providers, as well as retailers.
The spectrum of supply chain activities extends beyond logistics and includes procurement, product lifecycle management, supply chain planning (encompassing inventory planning, enterprise asset maintenance, and production line management), logistics (encompassing transportation and fleet management), and order management.
There are several benefits organizations can receive by outsourcing their supply chain management to a Third-Party Logistics (3PL) provider. As companies begin to grow, they may realize an in-house logistics team will lack the expertise needed to manage complex logistics operations in a cost-effective way. On the other hand, larger companies can find they don’t have the manpower needed to handle a high volume of shipments. While every 3PL is uniquely different in how they operate, many offer the same comprehensive solutions for shipping, warehousing and distribution of clients’ goods. The following are five advantages to outsourcing supply chain management to a 3PL.
Supply Chain Management Benefit #1
A 3PL’s network of transportation providers is a major resource for any company with freight to move. Searching for proper equipment, insurance and other qualifications can be a major undertaking. However, a 3PL vets their carrier network to include only qualified and reliable service providers. 3PLs can also leverage carrier relationships and volume discounts which results in lower costs and faster service. Ultimately, choosing a 3PL allows businesses to benefit from capacity they would be hard pressed to find in-house.
Save Time and Money
Supply Chain Management Benefit #2
Outsourcing logistics saves a considerable amount of time and money for any organization. Using a 3PL can eliminate the necessity to invest in warehouse space, technology, transportation, and staff to execute supply chain processes. 3PLs also save time for their clients by handling day to day functions like booking, billing and training; leaving companies ample time to focus on their core competencies. Furthermore, a 3PL endlessly looks for ways to improve efficiencies, cut costs, and add value to business operations.
Supply Chain Management Benefit #3
A 3PL is capable of scaling space, labor, and transportation according to inventory requirements. With service providers nationwide, a 3PL can easily respond to fluctuations, connecting businesses to resources without any added risk or legwork. Businesses with seasonal volumes can seamlessly transition between ups and downs; utilizing more space and resources when needed. Additionally, 3PLs also have the resources to seamlessly support growth into new markets.
Supply Chain Management Benefit #4
Businesses can have confidence knowing their supply chain needs are being met by reliable and experienced professionals. A 3PL can share important information tied to regulations, the freight market and industry insights. Quite often a 3PL will work with the same receiver locations for multiple clients allowing them to share information on receiving preferences. Understanding customer requirements and communicating them to carriers can make a huge difference in performance.
Specialized Technology Access
Supply Chain Management Benefit #5
3PLs can offer a Transportation Management System (TMS) that analyzes and monitors operations to eliminate inefficiencies and streamline the supply chain. With a TMS, companies can receive real-time visibility with tracking updates for all their shipments. A TMS is also capable of advanced data analysis, route optimization, and freight payment solutions. The TMS is a powerful tool that can help businesses maximize profits, reduce wait times, and improve customer service.