Logistics Outsourcing: Business Optimization Opportunities You Should Be Aware Of

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Over the past year, it has become more apparent that, regardless of the size or nature of your business, companies rely on establishing a reliable supply chain to keep them going. That often means acquiring and deploying the right tech to optimize their logistics capabilities.

Advances in transportation software development have accelerated to reduce supply chain disruptions brought on by the COVID crisis. Applications for digital transformation range from streamlining inventory management and ordering to production, shipping and logistics.

Knowing which technologies will boost your business and which will complicate matters can be confusing, however. Getting it right will reduce costs and improve your company's time-to-delivery.

So, what logistics challenges does your business face? There's an outsourcing solution that can help you meet them.

Supply Chain: Trends and Challenges

The purpose of digitizing the supply chain is to provide faster and more efficient service while keeping an eye on the budget. As technology advances further, the platforms that support this important business component become more affordable, often paying for themselves in no time.

Part of the problem when it comes to logistics is knowing what you can handle in-house and when it's time to outsource. Your ultimate goal is to avoid unnecessary supply chain disruptions and improve delivery times. The trick is finding the right balance that allows you to play to your strengths and maintain your level of reliability while making room for innovation.

What are some of the typical challenges in these realms?

  • Limited or single sources increasing risk or disruption

  • Inability to maintain traditional strategies

  • Unforeseen delays

  • Lack of sufficient data

  • Inability to analyze data for daily decision-making and long-term strategy

  • Lack of transparency

According to a recent survey, 74 percent of CFOs say that increasing their flexibility has helped them remain competitive and improved their outlook for business viability, longevity, and strength. Thirty percent of those say that embarking on some form of digital transformation is a priority.

By completely outsourcing your shipping and logistics, you will find that you can: 

  • Improve customer and B2B relationships

  • Increase shareholder value

  • Streamline services and/or core processes

  • Manage cost

  • Reduce risk

  • Avoid unforeseen delays

  • Respond to quickly-changing markets

  • Remain competitive

Outsourcing, Business Optimization Opportunities & You

Although optimization is easier than ever, managing it and getting your team on board remains a challenge. Before you embark on this exciting but sometimes complex journey, gather your team and ask yourselves these questions:

  • What is the end game or big picture strategy with our logistics capabilities?

  • How does our current optimization level fit into this picture?

  • How would 100 percent outsourcing improve or advance those goals?

  • What would be the impact of outsourcing on our business and business relationships?

How Outsourcing Helps You Meet Logistical Challenges

Much as they understand the benefits of optimizing their supply chain, most businesses don't have the technology, industry expertise, or human and financial resources to achieve their goals.

For example, you'll realize that installing a smart meter can reduce costs and provide you with accurate, real-time data but, without a clear strategy and commitment to making the transition, you'll encounter prolonged disruption and quite a few headaches during rollout.

Once you determine which supply chain functions are fit for purpose, you can begin to develop a cohesive plan for implementation. To this end, we offer some practical guidance toward improved logistics optimization.

1. Evaluate Your Current Capabilities

Any plan should begin with a detailed analysis of your current setup and capabilities. What are your requirements as far as basic operational practices, inventory management, transportation, and warehousing, and how are your current provider relationships in this regard? Compare the reality to your forecast and future goals. Where can conditions and cost be improved?

As part of your analysis, pay special attention to areas concerning the supply chain time cycle, inventory turnover, fill and perfect turnover rates, and ROI.

2. Evaluate the Areas Where Outsourcing Will Benefit Your Company

Many SMBs with limited reach and resources will benefit from a 100 percent transition to outsourcing. Based on the above analysis, which elements of your supply chain management would benefit from third-party solutions and which are better managed in-house?

Areas to look at include:

  • Improving communications between suppliers, retailers, and customers

  • Use of advanced technology

  • Centralized systems and platforms

  • Improving the quality of products and fulfillment obligations

3. Locate Service Providers Who Will Help Meet Your Goals

The odds are that your company can turn over all of their shipping and logistics to outside providers and breathe a sigh of relief. However, single-source service can lead to undue disruption, service gaps, and time delays. 

Does the provider offer warehousing, shipping, and inventory management - and have the resources to back up their claims - or will you need to work with several providers? If something happens with one company, do you have a backup in place? 

4. Align Your Service Levels With Customer Demand

Providing great service is all about knowing your customers. It's marketing best practice to identify your core audience and meet them where they are in their journey, but how does that apply to order fulfillment?

By determining who your customers are, what they want, and when they want it, you can anticipate everything from maintaining ideal stock levels to the best value proposition to entice new customers. For example, are you able to offer free or overnight delivery? Analyze previous sales figures and trends to determine future trends and requirements.

5. Allow Technology To Guide You

Outsourcing doesn't always mean a tangible service at a physical location. Many of your logistics and inventory management challenges can be met through technology and acquiring Software as a Service (SaaS). 

The right analytical tools and inventory management applications will provide you with more granular data for decision-making or provide you with a centralized system for managing end-to-end oversight and management. You'll tie all of your loose ends together neatly and get more accurate information for strategizing and cost/quality controls.

Selecting the Right Provider For Logistics & Supply Chain Management

Of course, your logistics strategy should include your service provider. You know where you want to go with this transition, and your provider should know how to get you there faster and with minimal business disruption.

When looking for an outsourcing provider, here are some considerations to take into account:

* What are the results when you review analysis on cost, gap, and feasibility?

* Are there major functions, like receiving, inbound inspection, and pick up or drop off fully in place or will there need to be some adjustments before they're ready to roll?

* What is their level of expertise and capabilities regarding warehousing, customer service channels, procurement, and transportation?

* What are the results of a cost/benefit analysis and customer interaction levels between them and their nearest competitor? 

* What is their overall performance index? What about their exceptional incidence rates?

 * Do they have adequate back-office support?

Efficient and reliable supply chains are more essential than ever. Even if you're an SMB with limited budgets, optimization to initiate, manage, and track your logistics is an investment that will pay dividends in terms of providing more accurate and timely customer fulfillment obligations.

The above optimization trends and best practices are only the beginning of the possibilities when it comes to supply chain management.

What logistics challenges does your business face, and how do you think optimization will help you overcome them?