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Fundamentally the thumb rule for making the decision about outsourcing any process is based two aspect.
1) The process to be outsourced should not be a core area of the company,
2) There should be a cost benefit without affecting the service level.
If both of these conditions are met then there is a merit in outsourcing any process whether it is logistics or any other function.
Now the question is how3PL can be a cost effective in comparison to in-house logistics management.
As rightly pointed out by one of the panelist here that3PL is very successful in developed countries and in3rd world countries it is not so common. The reason is that in developing countries3PL operators are not structured and joint player who can invest and manage the market to take the market leverages. Even3PL are further dependent on small fleet owner or middle man ( brokers). They are not able to take the advantage of consolidation and back haul movement.
It seems that it will take another years to become3Pl as reality in developing countries.
Deciding to a use a third party logistics company is a decision that depends on a variety of factors that differ from business to business. The decision to outsource logistic functions (i.e. inbound freight, freight consolidation, warehousing, distribution, order fulfillment and outbound freight.) will depend on the followings:
(1) Cost of in house operations vs.3PL services
(2) Reliability of3PL services in the country or region
(3) Availability of quality3PL services.
3PL services are reasonably reliable and cost effective in the developed countries where infrastructure is good,3PL companies provides all the required services at a cheaper cost and so that the company can focus on core business.
Whereas, in many developing countries or third word countries, the infrastructure is not good, the3PL companies do not possess the necessary equipment or premises or skilled manpower and the overall reliability is questionable. In such a case, it may not advisable to outsource the logistics functions to3PL companies and it may turn out to be risky and costlier.
Outsourcing in the supply chain of logistics teams may sound far fetched. After all, outsourcing typically refers to sending jobs overseas. Yet in outsourced logistics simply refers to hiring a third-party logistics service,3PL, to handle the logistics services. From securing inventory to transporting goods from Point A to Point B,3PL are taking over as in-house logistics teams fall flat.
The main reason that using a3PL service for a brand, big or small, is that outsourced logistics frees up a business to focus on what they know best. After all, unless a business is in the business of logistics, then it is not a forte that comes naturally. As organizations grow and expand the reality is that they are unable to keep up with the constant changes and evolution of the logistics world. The same goes for the marketing sector and IT departments. While in-house departments were once sufficient to handle the tech, marketing and distribution needs of a company, the expansion created by globalization and the Internet has changed all of that.
Benefits of a3PL
Supply Chain Satisfaction
As noted by Inbound Logistics more and more businesses are moving toward outsourced logistics and the use of third-party logistics companies to handle their supply chain needs. In a IL survey the results showed that percent of businesses utilized inbound logistics services. Warehousing was another popular category of3PL usage with percent noting they also used this service. The trucking industry is another faction that responds well to3PL, given the increase of freight opportunities from LTL to long haul due to3PL. Having a3PL provider handling logistics and transportation functions streamlines the efficiency for both shippers who move thousands of pounds of freight every day. Overall, the benefits of going3PL are exponentially increasing thanks to the growth of globalization and the increased supply and demand of consumer goods.
Hello Team,
While it is a business cliche, people really do make a company what it is.3PLs are no different. By staffing veteran supply chain managers and logistics technology experts,3PLs offer a breadth and depth of expertise that many shippers no longer retain in-house.
"Once companies decide to outsource their supply chain needs, they lose the people and expertise, and stop investing in the required technology," explains Adrian Gonzalez, an analyst with ARC Advisory Group, Boston.
Without this expertise, it can be challenging to efficiently manage the supply chain. Navigating the transportation industry, for example, can be tricky for shippers to attempt on their own.
