When growing businesses try to scale their operations, they often face the dilemma of build versus buy. In the case of warehousing and order processing, significant managerial and operational resources are consumed – often at the expense of resource allocation for the growth path that brought a company to its first success.
What is service logistics?
Today, more “warehouses” call themselves (among other things) integrated solution providers. Solutions is a big word, but many companies keep their promise to effectively and efficiently provide an outsourced inventory warehousing and management solution that extends to the delivery of your product to their customers. Customers can be distributors, retailers or even end users. In short, service logistics is the management and coordination of inventory, warehousing facilities to deliver services to customers, and most importantly – the horsepower of human resources that goes along with that management.
Outsourcing warehousing and logistics services can make perfect sense for many businesses, especially fast-growing businesses that need to scale quickly, and particularly those with seasonally fluctuating capacity (equipment) and resource (personnel) requirements. By outsourcing the “mechanics” of warehousing, administration, and fulfillment, management can focus on marketing and revenue-generating activities and free up time to work on those strengths.
Factors to Consider – Evaluation of Third-Party Logistics Service Providers
It goes without saying that there is a lot to consider when considering outsourcing a large part of your operations to an outsourced partner. Their top priority is your well-being and the assurance that they can “keep the promise”. This promise must include an assurance (in writing) that they can provide the exact services your business requires. In fact, they will often assess your current processes and be able to “shed the fat” to improve your operational efficiencies.
When looking for a warehousing and logistics partner, consider the following elements when outlining your request for quotation or proposal documentation.
- storage location– Is it near a transport/courier hub, near highways for cargo, and does it matter if they are near you – or not?
- furnishings– Does the facility meet all local safety and code requirements? Is it clean and healthy?
- technology takeover– E-mail and internet connection are not enough. Do they use software that you can use? Is it tougher than yours? Do they offer proprietary technology that works for you? Does he have inventory management, planning and scheduling software to help you provide guidance on your inventory production and warehousing needs?
- traffic “connectivity”– Does the partner have its own truck fleet? [asset based] or offer freight brokerage services? These could be a big plus and add value as a one stop shop.
- Leveraged Courier Rates/Accounts– Can you use your Master Courier Accounts to achieve courier savings – when it matters most – that you couldn’t achieve based on your shipping volume alone?
- Storage and warehouse organization– Is it organized, automated and efficient. If your current system looks better than theirs, you’re probably in the wrong place.
- Handling Capacity – Clarify staffing levels and how they can handle your seasonal peak demands.
- Waste, recycling and disposal– How will they deal with your spoiled or faulty goods and at what cost. Is it secure and confidential (if that matters)? Have you/they introduced “green” practices?
- insurance and risk management– Are you fully insured and are your inventory and operations in good, safe hands? Always make sure you are listed as an “additional insured” in your policy.
- Corporate Social Responsibility – Do they share your company’s social values and treat employees the way you would like them to be treated?
The considerations when outsourcing your warehousing and logistics – a large part of your supply chain – to the third party are crucial. A thorough evaluation of 3PL providers that can serve you well is a must. Ideally, new levels of efficiency can be achieved, allowing management to focus on key growth functions, knowing they have the operational scale to support that business success.