Building a Smarter Supply Chain

A few months back, we talked about some mission critical reasons why companies should consider outsourcing their logistics and supply chain functions.

The 5 key reasons we identified were to achieve or realize gains in:

Flexibility | Consolidation | Expertise | Solutions | Maximize $

As companies come out of the recession with a renewed (yet skeptical) energy to drive forward, there is a sharper focus on core business drivers and financial responsibility – putting supply chain strategy at the forefront of many companies’ agendas. Companies are getting much smarter about how they manage the flow of their goods all around the world.

Gone are the days of companies erecting multiple warehouse buildings to decentralize their own distribution model. Real estate devaluation and the corresponding recession have shown us that. Gone are the days where companies that ship nationally or globally are able to fulfill customer demand from a single distribution point. $4/gallon fuel prices have clearly demonstrated that. Heightened security, regulations, and compliance requirements make it more and more difficult for companies to get their product to their clients. However, as companies downsized during the recession, many logistics and supply chain staffs were reduced significantly or eliminated altogether.

What this means is that for the first time, business focus on supply chain optimization may be aligned with the concept of outsourcing supply chain functions to 3PL providers.

This creates opportunity for the 3PL and supply chain companies of the world to create real value for companies. Value is created by providing something more efficiently, more economically, or just plain better than the current option.

Value is also in the ability to allow companies to focus on their core business rather than managing their supply chain. Let’s face it- the world of supply chain and logistics is a complicated one. There are time and space issues to manage, ever-changing regulatory and compliance considerations, cost constraints, packaging and handling requirements, process and systems infrastructure needs, documentation and legal requirements, as well as general logistics knowledge that frankly many companies do not have the resources to invest in to bring it under their roof. Precious human and capital resources should be invested in the product or service that is being produced and sold. One of the most significant benefits a 3PL provider can directly or indirectly return to a client is the value of this opportunity cost.

Many companies we talk to are beginning to apply this. They have become smarter and realized that it makes more sense strategically to outsource the logistics function to a 3PL provider. They see benefits in better optimization of their labor, better agility and flexibility in supply chain decision making, and also the direct cost benefits involved in transportation, warehousing, and distribution.

Other companies are looking deeper at their existing supply chain partners. Although price is a consideration, companies are asking 3PLs to be flexible enough to mold to their business, and provide tailored supply chain solutions to their business needs.

We anticipate a real opportunity for solutions-driven 3PLs to create real value for companies of all sizes. These companies are more focused on maximizing their resources. These companies are actively engaged in opening new markets, and looking for creative and cost-effective ways to get there. They are doing so with more strategically aligned teams, allowing them to focus their energies on areas core to the business. Also, they are leveraging the use of a third party to manage their logistics and supply chain flow.

Pretty smart.