If you are a manufacturer or online retailer processing many purchase orders, you need to have robust logistics operations to keep your customers satisfied. It is not easy to maintain such large logistics operations by yourself while focusing on the core business processes. This is why businesses tend to opt for logistics outsourcing.
Traditionally, companies engaged in manufacturing stored the finished products in their own warehouses and had their own transport fleet to deliver it to the end consumer or retailers. Now, logistics companies have cropped up around the world promising businesses excellent logistics management along with real time visibility into the logistics chain.
The process of hiring a third-party company to do one of the business processes either to eliminate the in-house resources spent on the process or to get expert help to simplify and make the process more efficient.
What is logistics outsourcing?
When a company hires a logistics provider to manage its logistics operations entirely or a part of its operations it is called logistics outsourcing. The objective of logistics outsourcing is to simplify the logistics process of a company and have logistics experts at your disposal to strengthen your logistics chain.
These are a few of the logistics activities that are outsourced by companies:
- Distribution and warehousing
- Warehouse management
- Reverse logistics
Let us understand logistics outsourcing with an example:
Example of logistics outsourcing solutions
Imagine you are an online retailer with at least 200 orders coming in every week. When you outsource your entire logistics operation, your logistics partner will pick up the package from the manufacturer, transport it to the warehouse and then the fulfillment centre. From this location it is shipped to the final consumer.
If you have only outsourced the shipment of products to the end consumer, then the logistics partner will send a truck to pick up the finished product from your warehouse and then deliver it to the customer.
Why should business outsource logistics operations?
For many companies, especially those profiting off the e-Commerce boom, outsourcing has become the only sensible logistics solution. As in the logistics outsourcing example above, if you have 200 orders or more a week handling the logistics operation with your in-house resources is not the right practice because this can cause delays in shipment.
This is because employees on your team lack logistics expertise, or you have no experience devising a logistics strategy for your business. Help from logistics companies can prove beneficial as they would know how to tackle unexpected situations. There can be other reasons for outsourcing logistics like gaining access to a global market, cost efficiency and resource optimisation.
Types of logistics outsourcing
Types of logistics outsourcing simply means the types of logistics services that you can hire to outsource your operations. Here are a few types of logistics services in India you should know about:
- Outbound logistics services
Services that carry your shipment to the point of consumption from the shop floor or the warehouse are called outbound logistics services.
- Full truckload (FTL) services
A full truckload service uses a single truck to carry a dedicated shipment from a company where products stay in the same truck from pick-up to drop-off.
- Partial truckload (PTL) services
PTL services are used when the shipment only needs a part of the truck space. The rest of the space is used for cargo from a different firm, which means that multiple companies will share a delivery truck.
If you are looking for partial truckload services for your business, you can try Tata nexarc’s Logistics, a platform hosting multiple logistics partners who can offer the most affordable and hassle-free cargo movement.
- Third party (3PL) logistics
A 3PL service provider offers warehousing, inventory management, shipping and receiving, picking and packing and reverse logistics services to their clients. Most companies prefer 3PL services as they can handle the entire supply chain with live order tracking. Companies can also choose to outsource a single activity like warehousing to a 3PL service provider.
- Fourth party (4PL) logistics
Companies hire 4PL logistics providers when they want their entire supply chain to be outsourced. This is easier for businesses as there is only a single point of contact for its logistics support.
Benefits of logistics outsourcing
Logistics outsourcing is a beneficial tactic employed by companies to simplify the logistics process and gain access to more markets. Here are a few benefits of logistics outsourcing:
- Use latest logistics technologies
Since logistics providers specialise in providing supply chain-related services, they are usually updated on the latest logistics tech trends and have modern technologies at hand like warehouse management solutions, cloud logistics, RFID technology, etc. Once you hire a logistics provider your supply chain will be benefitted by these technologies.
- Expand your reach
A single company might not have transportation to reach every part of the country, but logistics partners usually do. If you outsource your logistics process, you will be able to gain access to the urban and regional markets your logistics partners offer services at.
- Save time and cost
Outsourcing to a logistics partner reduces overall logistics costs. Instead of making space for your own warehouse and hiring staff to manage the warehouse, you can outsource this entire operation and cut down on the cost and time required for the entire logistics operation.
- Improve customer satisfaction
With demand for next-day delivery and same-day delivery increasing, you need to have a logistics partner who can quickly deliver your products with minimum lead time. They can also handle the customer support for the logistics operation.
Logistics experts recommend logistics outsourcing for large and medium scale businesses with an average of 1000 orders in a month. Hiring a 3PL or 4PL logistics company will ensure that all products reach the consumers safely within the stipulated delivery time.
Small businesses who are shipping their products anywhere in India are utilising PTL and Low Truckload (LTL) shipping. These are budget friendly logistics options for small businesses who have less shipments and shipments in small batches. This reduces the overall logistics costs and makes handling shipments easier.