Should You Outsource Distribution to a 3PL?

More companies are outsourcing their supply chain functions to 3PL providers. According to recent studies from Armstrong & Associates:

• 86% of Fortune 500 Companies are outsourcing to 3PLs, up 7% from 2012
• Projected 2010-2015 Compounded Annual Growth Rate (CAGR) for North American 3PL market 5.5%

And for good reason — outsourcing supply chain management allows you to focus on providing your customer with the best service and high-quality products.

Outsourced warehousing and distribution also allows you to leverage a 3PL’s core competencies: improving supply chain operations, driving efficiencies across logistics channels, built-in infrastructure including technology, labor and real estate, as well as expertise of global market conditions.

Here are three reasons to consider outsourcing to a 3PL:

Tier 1 Technology (TMS and WMS)

Complex supply chain operations require the visibility and efficiencies gained from Tier 1 warehouse and transportation technology to forecast, plan, manage labor, reduce inventory and deliver on time. A Transportation Management System (TMS) provides real-time visibility of cargo while in transit, and allows shippers to optimize their transportation networks by providing least-cost shipping options. Warehouse Management Systems (WMS) offer inventory visibility, optimization and automation of warehousing and distribution processes.

A full-service 3PL will be equipped with Tier 1 Technology, which oftentimes can be a significant barrier for a company to acquire, learn and manage on its own. A full-service logistics provider will have these systems established and will be able to integrate your logistics operations to provide 24/7 visibility, and business intelligence otherwise not available.

Supply Chain Engineering

The business of supply chain management is a science that increases performance and efficiencies wherever possible, through thoughtful and strategic engineering. Bottlenecks and pain points need to be assessed, and systems built to handle them and resolve inefficiencies.

It takes a supply chain engineer with years of experience to not only develop solutions to optimize current operations, but also strategically design logistics networks that mitigate supply chain risk.

Network engineering should include network analysis and planning, optimization of multi-mode transportation, analysis of facility locations, relocation services if necessary, distribution network mapping and design, and reverse logistics. Warehousing and distributions solutions such as labor and staffing optimization should be taken into account, alongside facility design and space optimization. A thorough analysis of the slotting and pick analysis will also yield increased areas for improvement.

Supply Chain Best Practices

With decades of experience in supply chain, a 3PL  will be able to implement best practices, built on analytical and engineering expertise. Ask a potential 3PL provider about the following capabilities and experience:

• KPI development
• Lean and Kaizen events
• Implementation & Development of QMS
• Dedicated continuous improvement and cost out project teams
• OSHA regulations and standards
• Environmental Health & Safety (EHS) Best Practices

For more information on outsourcing, read our recent blog post on the evolution of 3PL, or download our whitepaper, Outsourcing Without Fear.