When it comes to opportunities, CEOs look at the big picture and weigh all options based on the company’s vision, mission, and objectives. Few CEOs have a perfect success record; some opportunities can turn to failures if not executed properly.
But when it comes to outsourcing a company’s warehousing, distribution, and logistics to a third-party logistics (3PL) provider, rarely is it a failure. In fact, businesses who take non-core activities out of the mix of their in-house functions can focus more resources on core activities and realize improved results to their bottom line.
As with all company decisions, though, CEOs should fully investigate the business opportunities a 3PL provider can bring to the table, especially these three key benefits.
1. Better Management of Resources
Successful businesses know what their core functions are and allocate their resources to them. Trying to do both core and non-core functions to their fullest will drain your resources faster, lead to ineffectiveness in one or more areas, and negatively impact your profit margins.
Doesn’t it make more business sense to outsource non-core functions to a company that specializes in that area? Take warehousing and distribution as an example. Why stretch your in-house resources on these non-core functions when there are companies that are equipped to do it much better than your business ever can because it’s their core competency.
According to the 2014 Third-Party Logistics Study conducted by Penn State University, companies that switch to a 3PL provider realized an average inventory cost reduction of six percent, an average distribution cost reduction of 11 percent, and an average fixed logistics cost reduction of 23 percent.
As a CEO, it’s important to look at non-core functions and analyze how much of the company’s resources are going towards them, thus taking away from the main reason of being in business.
With warehousing and distribution alone, think about the money your company would save by shedding their related assets, such as the costs of the warehouse facility, equipment, software, utilities, insurance, taxes, security, maintenance, labor, etc.
2. More Extensive and Current Technology
In the world of logistics, technology is key in accurately tracking the movement of goods. Having the right computer systems, software, and equipment to properly do the job isn’t enough. They also have to be updated regularly with the latest technological advances to meet the competitive demands of the marketplace.
CEOs should consider how their logistics compare to their competitors. If your competition is doing a better job, it’s going to hurt your business.
Take this scenario: Your inventory is managed in-house with a warehouse management system that has not been updated in many years. Your competitor uses a 3PL company with the latest technology. Your company is more at risk of having a stock-out, forcing your customers to buy from the competition.
The question to consider is: Will you ever win that customer back?
3. Improved Customer Satisfaction
When it comes to fulfillment, companies are coming up with all sorts of solutions to get goods to customers faster than ever before. It quickly is becoming a defining factor for consumers in choosing one company over another.
A 3PL provider is already established and equipped with the necessary tools, technology, equipment, and personnel to enhance fulfillment and ensure accuracy at the same time.
By partnering with a 3PL, your company not only builds a more positive customer satisfaction culture, it builds more rewarding customer relationships and higher service levels.
Are You Hurting the Company?
That’s the question CEOs need to ask themselves by not outsourcing non-core competencies. Technology is quickly changing the warehousing, distribution and logistics industry, making the decision to switch to a 3PL company all the more urgent.
Is your company losing money or straining its resources by doing non-core logistics functions in-house? Brendamour Warehousing, Distribution & Services can assist you with your analysis.
Contact Brendamour today to discuss a business strategy that is best for your company.