Tags: Supply Chain
8 Pros and Cons of Outsourcing Third-Party Logistics
Deciding to outsource a business function is not a decision to be taken lightly. It requires an understanding of the costs associated with performing that function internally, as well as determining if it aligns with your core competencies and strategic vision. If retail fulfillment and logistics fall outside of your company’s core competency and expertise, it may be a good idea to consider a third-party logistics provider.
At Group O, we work with a variety of businesses who come to us in need of third-party logistic (3PL) solutions. We manage supply chains, inventory, and order fulfillment for some of the world’s biggest brands. To help you thoroughly evaluate outsourcing your logistics and its impact, here are the top pros and cons to consider.
Pros of 3PL:
Working with a 3PL creates a competitive advantage by leveraging experience, expertise, and best practices to improve efficiencies and productivity. By outsourcing particular tasks and functions that do not align with core staff’s competencies, companies can improve performance and productivity. Group O has long-standing relationships with thousands of high-quality suppliers so you will not have to use time and resources to find a trusted supplier.
Whether business volume is ramping up or winding down, experienced outsourcing providers will be able to adapt to demand quickly by utilizing their own resources. The ability to adjust staff as needed during those times of growth or slow periods ensures continuity and alleviates the financial pressure of recruiting and retaining staff.
Increased Facility Space
Functions like warehousing and customer care centers require space, which can be problematic in periods of rapid growth or expansion. Not only can a 3PL provider alleviate the financial (and mental) burden of inventory management and warehousing it frees up space for core activities and allows you to grow without increasing your resource footprint.
Focus on Core Activities
Growth can be a resource sucker, causing you and your staff to focus on tedious tasks that are outside the normal routine and available expertise, which leads to inefficiencies and errors. Utilizing a 3PL frees up staff’s time by eliminating interfering activities, thus allowing them to focus on their core competencies and intended job-related activities. An added benefit is boosted morale, lower employee burnout, and increased productivity due to reduced workload!
Cost savings is one of the largest motivators in the decision to use a 3PL provider. Cost savings commonly comes from a combination of outsourcing attributes and activities from shipping to storing inventory. Group O has a network of trusted transportation and freight carriers which helps keep your shipping costs low. Plus, our extensive and centrally located warehouse facilities mean less overhead and expenses for you.
Cons of 3PL:
It is a common misperception that outsourcing equals downsizing, so just hearing the word can make an employee feel like their job is at risk. When utilizing a 3PL, it is important to remain transparent and reassuring to avoid low morale.
Utilizing a 3PL provider is generally cost-effective; however, there is always the possibility that you will incur additional costs, especially if something unexpected occurs. Most contracts are very specific, and clearly defining project expectations will reduce the likelihood of unforeseen costs. It is also important to note that the upfront cost may be higher when using a 3PL but, when done right, you’ll save money in the long run.
Depending on what business process is being outsourced, confidential or intellectual information can be involved. Your outsourcing partner’s security and information policies should align with the type of data being transmitted to safeguard client and company information. At Group O, our warehouses and systems are securely monitored so that your inventory and customer information is safe.
Get Insight into Third-Party Logistics Solutions for Your Business
Using a 3PL for your logistics needs can be worthwhile for companies of all sizes to achieve business goals. Whether you are looking for shipping solutions, inventory management, order fulfillment solutions, or other supply chain support, Group O has the experience and capability to do it right.
Ready to discuss your business’s 3PL needs? Contact Group O at 866-476-8761 to learn more about our 3PL solutions today. Our company is excited to help you!