Why should you outsource your logistics functions?
Updated: Sep 23, 2020
Everyday big and small businesses are on the lookout for support from external agencies and parties with proficiency/competence to run their supply chains efficiently and gain a competitive edge. This is exactly where third-party logistics (also known as 3PL/TPL) service providers come in. Before we elaborate further, what are the advantages of this?
3PL providers are organisations that provide holistic or one-stop solutions to enterprise supply chains in processes like packing, warehousing, transporting and order fulfilment. 3PLs take necessary steps to identify and fill the gaps in your supply chain. They solve complex challenges in logistics by using expertise, best practices and technology that can be integrated into business processes. This helps to make your supply chains a more agile and responsive function which is absolutely necessary in today’s market environment.
As per recent studies, India’s 3PL market, currently pegged at 6 Billion USD, has seen a potential to grow to reach 17 Billion USD by 2025 with an annual growth rate of 17-18%. The main factors that drive this growth are :
(i) a mindset shift among large clients to outsource logistics to 3PL players and focus on core business
(ii) recent supportive regulatory reforms such as GST which will boost warehousing expansion at central hubs in the country.
(iii) e-commerce, which contributes 15% to the 3PL sector’s size has the potential to grow 25–30% annually, is another case in point
Some key benefits of 3PL partnerships include :
3PLs firms have wide, extensive networks and also specialize in logistics. They have close ties within parties in the logistics sector and hence will be in a better place during negotiations. They also offer better volume discounts to clients and ultimately help in minimizing overhead costs.
3PL partnerships make way for savings while minimizing infrastructure investments like transportation, warehouse spaces, staff assistance and tracking technology. Expertise and Experience
In the current scenario, there is difficulty in identifying and accommodating expertise with all the capacities within an organisation. With thorough knowledge and experience, 3PL firms have understanding about things such as export/import, transport documents, compliances etc. Businesses in a growth phase with plans to make entries into the international markets can benefit from the logistics support and expertise that their partner can provide. This will help organisations i) reduce costly delays, ii) shorten time cycles, and iii) ensure smoother transition into new regions. Core Competencies / Continuous Optimization
3PL firms make sure that the needs of organizations are met in a timely manner and through cost effective methods. They have the resources and tools to strengthen the supply chain, and use technology to confirm that correct amounts of goods are delivered on time and as per requirements. Outsourcing 3PL services will ensure continuous improvements are made to the logistics process. This also gives management space to focus more on non-core but critical functions. Flexibility and Scalability
3PL offers employees the space to utilize supply and distribution based on the needs of the business. Enterprises get the flexibility to scale up space, labour and transportation quickly with lower capital investment risk. In case of seasonal periods for businesses, there is stress-free transition to use space and resources effectively. In instances of drop in sales, there are no unessential investments or underutilized resources, and when there’s a demand growth, enterprises can scale up seamlessly.essly support growth into new markets.
Business Growth and Market Expansion
3PL supports rapid expansion into new markets or new supplier sources, such as expanding e-commerce, buy online-pick up in store and other omnichannel initiatives. It will be easy for organisations to establish presence and gain access in new markets. By managing inventory in new markets without having to spend on equipment, labor and warehousing, can save money, as well as the effort of learning the tones of a new market.
The above listed benefits improves quality of services and minimizes response time, ensures timely deliveries and increases the customer reliability on the brand. This translates to satisfied customers — the fundamental goal of all businesses.
Navata supply chain management solutions is a 3PL logistics company that provides a complete high quality supply chain solutions in tune with changing needs of the clientele through innovation, state of art infrastructure and reliable service. We thrive in complex situations which can help both enterprises and SMBs save a lot of cost on their logistics.