Although companies handled logistics in-house in the past, it has become more challenging to do so now. This is due to the constant development of new technology and changing regulations, which have made it costly and inefficient.
Fourth-party logistics (4PL) has gained increasing relevance as a viable alternative to in-house logistics. Here’s an assessment of its benefits
Table of Contents
- 1. Access to Expertise
- 2. Increased efficiency
- 3. Access to Technology
- 4. Enhance scalability
- 5. Focus on Core Competencies
- 6. Reduce Risk
- 7. Improve customer satisfaction.
- 8. Develops business relationships
- 9. Access to resources
- 10. Bargaining power
- Conclusion
1. Access to Expertise
Outsourcing provides you with the best transportation solutions from industry professionals. 4PL teams have a breadth of experience with different markets, processes, and technology. Such expertise would take a long time and prove more costly to develop in-house.
Furthermore, logistics operations come with a lot of turbulence. Economy and industry disruptions, capacity fluctuations, etc., are the norm. So, it can be difficult for a company to keep up, especially one whose core competency is not logistics.
Logistics outsourcing thus proves very helpful in managing your supply chain. They have the data and resources to derive workable solutions quickly. So, your company would remain at ease, confident that your supply chain is in capable hands.
2. Increased efficiency
In-house logistics can increase your company’s overall costs. These expenses occur in the form of transportation costs, labor costs, warehousing, technology, etc.
4PL providers often have extensive networks. Through such networks, they can help your business transport goods more cost-efficiently. This, therefore, significantly reduces your shipping costs.
You also do not need to hire more people to handle logistics-related operations, thus saving you a lot in labor costs.
Outsourcing logistics puts the critical components of the supply chain into the hands of another party. Doing so saves you added expenses in warehousing, technological development, etc.
Fourth-party logistics providers negotiate competitive rates for freight better since they “buy in bulk.” As a result, the company saves a lot on transportation costs in the long run.
3. Access to Technology
To provide the best logistics services, you must use the latest technology. Logistics technologies often integrate critical functions of order management, CRM, and ERP systems.
While these could be quite expensive to adopt in-house, a credible logistics provider would have these technologies readily available. By outsourcing to them, you can then have access without any investment.
Technology boosts the efficiency of many logistics tasks. These include data analysis, order tracking, among others. In so doing, it also reduces the risk of human error.
4. Enhance scalability
Logistics outsourcing helps you to scale with fewer risks and costs. Rapid adjustments can prove a challenge, especially to small businesses.
However, when you outsource logistics functions to the experts, they can strategically scale their operations to keep up with your business. Fourth-party logistics providers can quickly respond to surges or drops in demand. For example, by increasing capacity or expanding their services.
Additionally, logistics outsourcing simplifies processes of entering new markets and changing suppliers.
5. Focus on Core Competencies
Outsourcing enables you to focus solely on your core competencies. With their expertise, third parties simplify your transportation processes.
Doing so allows you to focus more on using your core capabilities to realize your business goals.
Additionally, if you chose to handle logistics in-house, you would incur high costs. Such costs include labor, physical and monetary resources that you could use in other core areas of your business.
Therefore, logistics outsourcing helps you reach your goals with fewer costs.
6. Risk
Logistics come with a lot of risks and unexpected occurrences that you must be aware of. However, when you outsource your logistics, you entrust it to experienced professionals. 4PLs are better equipped with handling such situations with more thoroughness. They can identify and minimize risks or even remove liability.
This dramatically reduces your risk management tasks.
Furthermore, these companies are better positioned to find alternatives in case of any incidents. Such actions help reduce downtime in your operations.
7. Improve customer satisfaction.
It is critical to offer your customers the best possible experience at every stage of their encounter. Customer satisfaction guarantees more business and enhances your brand image. Reportedly, over 93% of customers consider the experience to be a massive factor for brand loyalty.
Logistics outsourcing provides efficient delivery solutions. These ensure fast, timely, and top-notch services to keep customers satisfied. Fourth-party providers are in a better position to pull resources to meet sudden demands from customers. Doing so increases and maintains customer satisfaction.
Furthermore, outsourcing logistics frees up internal resources to invest in customer support, enhancing customer experience in the long run.
8. Develops business relationships
Logistics outsourcing is an opportunity to form long-term strategic partnerships. Besides moving your products to their destinations, logistics providers can make great business partners capable of advising you on critical supply chain issues. Therefore, they often create a foundation to expand your business.
When both your companies can derive mutual benefit from the partnership, it can help advance your capabilities.
9. Access to resources
Fourth-party logistics providers often have rich networks of helpful resources. A regular company usually has no access to these, and it would cost a lot of resources and time to develop them.
When you outsource your logistics, however, you can take advantage of these networks and relationships. These will ensure the smooth movement of your goods to your customers in time.
10. Bargaining power
Since fourth-party logistics providers ship large amounts of cargo, they have significant bargaining power. They use this to secure substantial discounts from freight carriers and can therefore achieve much lower operational costs than a single small-medium sized enterprise.
Conclusion
The logistics industry has undergone rapid changes recently. The most dominant is the rise of on-demand delivery. This phenomenon has forced modern-day businesses to reevaluate their logistics operations to stay in business.
As a result, logistics outsourcing has become a feasible option for many. It overcomes the complexities of speedy last-mile deliveries. By outsourcing logistics to a third-party service, you can offer cost-effective deliveries with fewer risks. In so doing, you also enhance customer satisfaction.
Nextsmartship offers a variety of custom logistics solutions guaranteed to grow your business. Reach out today for more.
