Logistics Outsourcing: Advantages and Disadvantages

Outsourcing in general is a substantial topic within the manufacturing industry at all times. With concerns over ethical sourcing and ensuring that quality isn’t diminished in order to produce or warehouse a product - it is essential to ensure that you are providing a quality and ethical experience for your consumers. This is especially concerning during this time of the coronavirus crisis, due to issues arising with supply chains and many questions of where sourcing and procurement may have to move as the crisis has completely altered modern-day supply chain. 

This may have you also pondering logistics outsourcing and getting closer to your consumers, as on-demand delivery has started booming due to consumers staying home. The rise of on-demand delivery has forced supply chains and modern-day businesses to rethink their logistical operations, which is where you may be running into logistics outsourcing. 

Logistics outsourcing is a brilliant method of freeing up resources and ultimately coming closer to your consumers to ensure for on-time delivery. The benefits pertaining to logistics outsourcing comes into several forms, with operations cost savings, human capital reduction, streamlined operations, and ensurement of global on-time delivery. Before implementing logistics outsourcing into your operation, it is a must to take a look at the advantages and disadvantages pertaining to this concept. 

Advantages and Disadvantages of Logistics Outsourcing 

The advantages of logistics outsourcing pertains to the following: 

• Economies of Scale - Economies of scale are an essential component to understand before attempting to outsource logistics. If you have a global operation, then logistical outsourcing can be extremely advantageous to your operation. 3PL users usually have a global distribution network of carriers and fleets, which will enable them to reach any destination with ease. With this function being outsourced, it is rather simple and easy to scale up or down logistical reach without having to alter owned infrastructure and personnel. Economies of scale play a substantial role in developing an operation that pertains to logistical outsourcing. 
• Real-Time Inventory Visibility - Inventory visibility is a vital concern within manufacturing operations around the globe. Professional logistics outsourcing companies utilize ERP systems or cloud-based Warehouse Management Software to ensure that inventory is tracked on a real-time basis. This data can also be received from the service provider on a regular basis for supply chain management planning. Utilizing a credible and top logistical outsourcing provider will always be able to integrate you into their software and allow you to have real-time information pertaining to inventory. 
• Back-Office Management Burden Reduction - Another issue within manufacturing operations and logistics is the back-office management burden. While logistics appears to be simple - it is a grueling and rather complex process that includes auditing, verification, paperwork, and of course any transportation issues. 3PL outsourcing providers will have the necessary backend personnel and systems in place to take care of these procedures. This includes assigning a dispatch note and carrying out verification, all the way to ensuring that shipping papers are in order and routine activities are taken care of, thus sparing time for businesses to focus on other priorities. 
• Expert Documentation Handling - Logistics in general requires governmental regulation, commerce oversight, and adherence to sophisticated paperwork. For a business that has logistics only as a particular smaller function or department, this may be a tedious job to conduct on a routine basis. Utilizing logistical outsourcing can easily aid with this concept and ultimately reduce the workload associated with it. 

The disadvantages of logistics outsourcing pertains to the following: 

• Choosing a Low-Pricing Vendor - A substantial issue with sourcing of any kind, procurement and logistical, is choosing a low-pricing vendor solely for cost benefit purposes. Having said that, there are low-cost vendors that are conducting business in an ethical manner - but there are the vendors that are used to cutting corners and therefore do not require the same price as other legitimate vendors. This is a common practice amongst many manufacturers, usually outsourcing in other countries that have low wage workers and not nearly the amount of safety requirements as places such as the U.S. have. When choosing a logistics outsourcing vendor - make sure to tour the facility and speak with the workers in order to get a thorough understanding of how the operation works. 
• Not Viewing Logistics Outsourcing as a Strategy - Four a period of time, logistics and procurement have been deemed as not part of the “strategy” or “value” of a company, which has led to poor logistics and quality choices. Logistics plays a key role in the overall strategy of an organization, especially today as on-time delivery has become absolutely essential. If you are choosing to outsource logistics as a function to be done with and not as a strategic element, you can fall victim to your business not gaining the real competitive edge it needs to thrive in this modern era of E-commerce. 
• Disconnect Between Clients and Agents - It is important to establish a thorough understanding and mindset between you and your logistical agent. Without having a thorough understanding, your needs of the logistics agent may fall short and ultimately lead to a waste of resources - especially if you are attempting to go toward a particular direction. A lack of consensus and communication may lead to cost inefficiencies or worse - delayed deliveries. Therefore, communicate with your logistics agent and make sure everyone is on the same page. 

A software that can aid with on-time delivery and scheduling pertaining to logistics and manufacturing is PlanetTogether’s Advanced Planning and Scheduling (APS) Software. Advanced Planning and Scheduling (APS) Software is a must for manufacturing operations that are seeking to enhance operational efficiency and establish thorough visibility into the production facility. Advanced Planning and Scheduling (APS) Software allows manufacturing facilities to maintain a competitive edge within their operation and ultimately take their production up a notch. 

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

• Create optimized schedules balancing production efficiency and delivery performance
• Maximize output on bottleneck resources to increase revenue
• Synchronize supply with demand to reduce inventories
• Provide company-wide visibility to capacity
• Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.