Should You Be Outsourcing Your Distribution Requirements to a Third-Party Logistics Provider?

Should You Outsource Distribution to a 3PL?

Research shows that more [Fortune 500] companies are outsourcing their supply chain functions to third-party logistics providers (3PL's).

According to studies from Armstrong & Associates:

86% of Fortune 500 Companies are outsourcing to 3PLs, up 7%
Projected Compounded Annual Growth Rate (CAGR) for North American third-party logistics 3PL market is 5.5%

And for good reason, outsourcing supply chain management allows you to focus on providing your customer with the best service and high-quality products.

Outsourced warehousing and distribution also allow you to leverage a 3PL’s core competencies: improving supply chain operations, driving efficiencies across logistics channels, built-in infrastructure including technology, labor, and real estate, as well as expertise of global market conditions.

Here Are 3 Reasons to Consider Outsourcing to a 3PL

1. Tier 1 Technology (TMS and WMS)

Complex supply chain operations require the visibility and efficiencies gained from Tier 1 warehouse and transportation technology to forecast, plan, manage labor, reduce inventory and deliver on time.

A Transportation Management System (TMS) provides real-time visibility of cargo while in transit and allows shippers to optimize their transportation networks by providing least-cost shipping options. Warehouse Management Systems (WMS) offer inventory visibility, optimization, and automation of warehousing and distribution processes.

A full-service 3PL will be equipped with Tier 1 Technology, which oftentimes can be a significant barrier for a company to acquire, learn and manage on its own.

A full-service logistics provider will have these systems established and will be able to integrate your logistics operations to provide 24/7 visibility, and business intelligence otherwise not available.

2. Supply Chain Engineering

The business of supply chain management is a science that increases performance and efficiencies wherever possible, through thoughtful and strategic engineering. Bottlenecks and pain points need to be assessed, and systems built to handle them and resolve inefficiencies.

It takes a supply chain engineer with years of experience to not only develop solutions to optimize current operations but also strategically design logistics networks that mitigate supply chain risk.

Network engineering should include network analysis and planning, optimization of multi-mode transportation, analysis of facility locations, relocation services if necessary, distribution network mapping and design, and reverse logistics.

Warehousing and distributions solutions such as labor and staffing optimization should be taken into account, alongside facility design and space optimization. A thorough analysis of the slotting and pick analysis will also yield increased areas for improvement.

Read: LEGACY SCS Enhances Ecommerce Fulfillment Capabilities, Acquires Direct Shot Distributing

3. Supply Chain Best Practices

With decades of experience in the supply chain, a 3PL will be able to implement best practices, built on analytical and engineering expertise.

Ask a potential 3PL provider about the following capabilities and experience:

KPI development
Lean and Kaizen events
Implementation & Development of QMS
Dedicated continuous improvement and cost out project teams
OSHA regulations and standards
Environmental Health & Safety (EHS) Best Practices

For more information on outsourcing, read our Supply Chain 24/7 blog post on the evolution of 3PL, and make sure you download our whitepaper, Outsourcing Without Fear.

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