Menlo Worldwide
By Purchasing Staff -- Purchasing, 10/2/2007 10:25:00 AM
SIGNS THAT YOU SHOULD OUTSOURCE LOGISTICS
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Logistics is not a core competency. For many companies, managing the complexity of logistics¯from the procurement of raw materials to the distribution of the final product¯can be distracting. Particularly distracting if logistics management is outside of your organization’s core competency. Outsourcing this function to a logistics service provider moves your employees from tactical to strategic activities.
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Your company needs more flexibility. Longer supply chains coupled with compressed seasonal demand changes require significant flexibility. Managing inventory levels without keeping costs tied up in warehoused product is a balancing act. Outsourcing logistics management brings added understanding of supply chain demands and offers greater maneuverability.
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To gain scalability in the supply chain. Outsourcing offers any combination of solutions that meet with the customer’s present needs. A logistics partner can provide a fully outsourced solution that manages the entire supply chain process as well as inventory control and warehousing activities or can pick up any of the pieces of that puzzle to help in-house logistics staff complete the picture. As growth happens and needs change, the logistics services provider with an asset-light model can ramp up quickly and efficiently to meet the needs of the changing environment.
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To avoid the distraction of unnecessary infrastructure. In some cases the virtualization of the logistics management function presents unique challenges that can be most easily met by a third-party logistics provider. In the Menlo model, we can adapt any technology that a customer is presently using. But for those, whose IT systems are unable to provide the necessary functionality, such as tracking and tracing shipments, a 3PL can provide this service.
SIGNS THAT YOU SHOULD NOT OUTSOURCE LOGISTICS
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Logistics management is within your core competency. This should not preclude a company from considering outsourcing for some piece of its supply chain as a tool for driving greater efficiency into the supply chain but if logistics management is part of a company’s overall core competency it makes sense to keep the management of this function in-house.
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Your main goal is cost cutting. There may be some opportunities to reduce rates or transactional costs when considering logistics outsourcing, but this should not be a company’s primary consideration when looking at logistics outsourcing. Instead, a collaborative effort between the customer and the logistics service provider should present opportunities to derive greater value from the logistics function that can reduce total landed costs across the supply chain when those activities are handled internally.
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You want to outsource to drive internal change. True outsourcing partnerships work best when the customer and the provider match up at a fairly senior level. Internal change, where needed, can be best driven and embraced when the relationship is strategic. The logistics provider, alone, can not make this happen, but change can happen when championed within the customer company in collaboration with the efforts of the logistics services partner.
Source: Bob Bassett, vice president, sales
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