As your business grows, or in order to encourage growth, it makes sense to assess your supply chain logistics and consider what a 3PL supplier could do for your business.
In order to illustrate the benefits of outsourcing logistics-related business processes, Colm Donnelly, Director of 3PL (third-party logistics) at StarTrack, describes a current long-term client of his company.
“Australian sportswear company New Balance employs us to manage all of their warehousing and distribution processes,” says Donnelly. “As a result of that outsourcing, they have no facility costs or related electricity, machinery, IT and labour costs or risks. Their management is not distracted by issues concerning logistics, so is instead able to concentrate on sales, marketing and brand. At the same time, the business has full visibility of stock levels and stock movements at all times, thanks to the systems we provide.”
Of course, a logistics solution can be owned and managed by a business. But for SMBs in particular, it’s important to ask whether managing logistics is distracting you from other vital components of your business, such as product development, sales, marketing and customer service. When you consider that an effective logistics solution will involve lease negotiations on warehouses, recruitment of warehouse management and staff, filling shelves, picking and packing and development of IT systems to keep track of all incomings and outgoings, it’s clear that it’s a serious undertaking.
Comparing 3PL suppliers
“The first and most important step when considering outsourcing is to develop a very clear picture of your current supply chain costs,” says Donnelly. “How much does supply chain cost you per item? Or how much does it cost you as an exact percentage of your sales? This helps to manage your own expectations as to what you should be paying a third-party provider and assists in negotiations.”
When you’re comparing potential 3PL suppliers, says Donnelly, be sure to investigate the systems they offer that allow you to keep an
eye on exactly how things are going. This means being able to see stock levels, tracking of deliveries both into and out of the warehouse, the ability for customers to track their own orders and more.
“As a client, you should have full visibility of the operation,” he says. “In fact, if the systems are good ones, then a business that outsources its logistics processes also often finds it has greater control over, and understanding of, the processes and of opportunities for improved efficiencies.”
If you decide to outsource logistics to a 3PL supplier, it may involve some tinkering with IT systems to ensure the two businesses work together. Also, a new delivery address and potentially different packaging methods may need to be communicated to manufacturers or suppliers working with your business.
Once that is done, then the various stresses and risks involved with logistics can become a thing of the past, and you can get back to ensuring that the other core areas of your business are performing as strongly as possible.
Essential 3PL terminology
It may be helpful to become familiar with industry terminology such as:
- Cross docking – skipping the warehousing and storage part of the process by having products come in from the manufacturing plant, then shipped straight out again to retailers or customers, without needing to be stored.
- Picking and packing – the process of having the correct product(s) selected from the shelves and packed, ready for distribution.
- Warehousing – the storage of products in an easy-to-manage manner.
- De-stuffing containers – unloading containers once they arrive at the warehouse facility.
- Factory gate – prices paid by businesses whose manufacturers do not manage or cover costs of transport, meaning you pay the costs from the factory gate onwards.
The views expressed in this article are those of the author and the interviewees, and not of Australia Post.
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