In an increasingly volatile market many businesses have opted to mitigate risk by using third party logistics (3PL). The Logistics Business has considerable experience in this area and is keen to discuss why businesses should look to 3PL’s in the future.
A common trend with the rise of big data is the need for increased visibility across the supply chain and outsourcing logistics can improve this visibility. 3PL’s have the technology and resources to allow for real time tracking, giving suppliers and customers a more accurate view, building confidence in forecasts and improved sharing of information across the supply chain.
As well as technology, 3PL’s benefit from additional resources because of the high level of volume they process on a daily basis. This means that businesses can exploit economies of scale which can lead to reduced rates and access to markets beyond current scope, resulting in an increase in market size.
Reduced rates that 3PL’s can offer, in line with reduction in warehouse space or eliminating the warehouse all together, can actually lead to an increase in profit margin. As touched upon before this is because of the economies of scale that the business can gain, hence reducing fixed costs to a point where businesses are actually saving on margin and investment.
3PL’s can also reduce stress when entering into new markets. They have the expertise to effectively distribute a business’s goods in a wide range of far reaching markets. Hence minimising the risk when entering new markets in terms of documentation and legal logistics requirements.
The main benefit of reducing fixed costs through 3PL usage is of course the reduction in threat when operating within a volatile market. Resources are not owned by the business and so are flexible to the levels of demand of a business. Businesses can benefit from removing the logistics bottleneck in times of great success and minimise loss when the firm is underperforming.
There are a variety of benefits awaiting businesses who want to utilise 3PL’s. However, it is key to consider the reliability and fit of any 3PL during the early stages of taking any outsourcing decisions. It is fundamental that a rigorous selection process in place to ensure businesses are aligned with a 3PL that cannot only minimise its costs, but also meet demand and be able to offer all of the above benefits.
28th October 2015