Logistics are a key component of virtually any business that handles a physical product, but it takes time and money if you choose to manage the function internally. The primary reason companies turn to logistics outsourcing with third party logistics providers (3PLs) is to save money. Here are some ways 3PLs are able to find savings.
Reduce people costs
Labor is one of your largest logistics expenses. The median salary of Logistics Managers is over $62,000. And that’s without the cost of benefits, training, insurance, and technology. When you look at the all-in costs for logistics staff — executives, managers, warehouse workers and drivers — the burden on corporate overhead is significant. 3PLs specialize in logistics labor management and can significantly reduce your direct and indirect labor expenses.
Reduce transportation costs
3PLs may have favorable carrier rates based on the aggregate volume they ship with a carrier across multiple customers. They can pass these discounts on to you.
Avoid technology investments
A well-run supply chain requires sophisticated technology to optimize networks, transportation and processes. The right 3PL has already made these multi-million dollar investments and can spread the cost across multiple customers. So, logistics outsourcing gives you access to the best technology at a fraction of the cost of purchasing it yourself.
Due to the seasonality of many products, companies that do their own logistics and fulfillment struggle to right-size the infrastructure and staff for the operation. 3PLs, on the other hand, can more easily flex labor across many customers. This ensures you have coverage during peak times, but can scale down when demand, and revenue, decrease. Logistics outsourcing contracts can also allow for variable space, where you pay only for the warehouse square footage you use, month to month.
Tap new ideas
One of the largest potential savings from logistics outsourcing comes from the application of best practices. 3PLs have exposure to many different logistics challenges across different companies in different industries. So it’s likely that, whatever your challenge, they have tackled it before and learned from the experience. They can apply these learnings and their successful strategies to your business.
If managing logistics is pulling you away from your core focus, it may be time to consider outsourcing. If you’d like to explore the time- and cost-saving options an expert could bring, contact us to arrange a discussion.