Logistics Outsourcing Will Increase Throughout 2020
Experts have been predicting the growth of logistics outsourcing for the past few years, but some started to waver on these predictions when COVID-19 made its appearance.
However, despite initial concerns, we’re seeing that the global pandemic has only heightened the trend of businesses outsourcing their logistics to 3PL partners. More than ever, companies are looking to outsource not just basic operations but also design, planning, and other logistics services to third-party providers. Furthermore, the majority of these companies are outsourcing tasks to 3PLs that can provide a significant technological advantage. Whether they are looking for a TMS such as RedwoodConnect 2.0 or a completely decked-out WMS, logistics tech is the name of the game in 2020.
We anticipate that by the end of 2020, nearly all companies will outsource at least part of their logistics processes.
What Does Logistics Outsourcing Look Like?
Logistics outsourcing used to involve just handing over basic operations to a third party. A retailer, for example, would outsource the production of goods to a single manufacturer; then store the inventory with a warehousing service, and transport them to the customers with a shipping company. Though this seems simple and straightforward, this one-lined supply chain created a high level of risk, required immense organization from the retailer, and it was immensely budget-draining.
Today, the supply chain looks more like an interwoven web of partners, rather than a single line. All logistics providers have to communicate and work together to deliver goods for their clients (and their client’s customers). The supply chain has become a more complicated network, which means the management of logistics processes has also more complex. Globalization, digitalization, and new customer expectations are forcing companies to outsource a large portion of their operational strategy to businesses who know the logistics world inside and out—aka third party logistics providers.
Outsourcing logistics isn’t just warehousing anymore. 3PLs are offering services like packaging design, technology implementations, data collection and analysis, management of assets, and more. These providers don’t just offer a warehouse and some pickers; they design, build, measure, analyze, and customize business functions to create the most optimized logistics chain.
At Redwood Logistics, we offer customized solutions based on each of our client’s unique needs. For one client, we may offer supply chain consulting, another we handle their supply chain partner network overall. Yet, a third we do everything from transporting to technology integration and beyond. Every business is looking for specialized logistics services and offerings, and that’s what Redwood Logistics aims to provide superior service.
Businesses are no longer wondering if they should outsource their logistics. It’s just a matter of how much they should outsource based on their needs and resources.
What are the Benefits of Logistics Outsourcing?
Not all businesses know logistics. But 3PL companies know the complexity of logistics inside and out. That’s the heart of the advantages of outsourcing logistics. A third-party logistics provider (3PL) has the technology, connections, and expertise to deliver the best possible service on the backend. In most cases, they have more available resources in the logistics sphere than any individual retailer (especially small to mid-size) simply doesn’t have access to.
Companies can’t risk “trying it out” when it comes to their operations processes. It’s critical to get it right the first time to impress customers and deliver superior service. That’s why so many businesses are turning to 3PLs who already have the tools to deliver the greatest logistics processes. “Get it done right the first time” and you’ll never see a lost client.
Why outsource logistics to a 3PL?
Operations are often the most expensive part of running a business. For non-corporations, operational costs can be especially overwhelming. Outsourcing logistics to a 3PL means that businesses just have to pay an agreed-upon cost—a cost that is almost always substantially lower than having to host operations internally. By partnering with a 3PL, companies can save money on freight cost, labor cost, and overhead, while also increasing efficiency and optimizing supply chain costs. It optimizes expenses while raising revenue. Learn more about leveraging profitability with a 3PL here.
Let’s say, for argument’s sake, that outsourcing to a 3PL didn’t save you even a nickel. Wouldn’t you rather spend the exact same amount but also save time on handling all of the logistics processes
Outsourcing to a 3PL means your business has the time to focus on sales and service, knowing that your logistics provider has your back on the backend. 3PLs don’t just handle everything for you, they handle it with the highest level of optimization and efficiency possible. Your 3PL partner takes care of the time-consuming stuff quickly and effectively, and with the best possible tools, so you can confidently turn your sights to other aspects of your business.
Technology + tools
Interestingly, saving money isn’t reported as the top priority for all businesses looking to outsource logistics. Their top priority is access to the most updated operations technology in a way that can support complex logistics networks and processes. This is especially true as we move forward into an unknown sphere.
There are a lot of logistics technologies on the market that can offer an upper hand for businesses. But they’re expensive, time-intensive, and require a slew of strategy and resources for implementation. Partnering with a 3PL like Redwood Logistics gives you access to these technological advancements, such as our very own RedwoodConnect 2.0 platform, without having to implement it yourself. A strong 3PL has your custom tech solutions ready for integration and implementation.
A third-party logistics provider lives and breathes logistics. It’s their business. To thrive in the industry, they need to have the most experienced team, the most advanced technologies, and the most expansive network. This level of expertise is nearly impossible to obtain. At least, it is without an immense amount of time, money, and resources poured into operations. Partnering with a 3PL means you have instant expertise in the industry, so your business can have a competitive advantage over those companies still struggling to figure out just their distribution model alone.
Now more than ever, mitigating your supply chain’s risks is critical to success. Many businesses were hit by the effects of the pandemic because they weren’t prepared to address these kinds of losses.
Redwood Logistics is still going strong because we understand the importance of risk prevention through transparency and responsiveness. It’s our primary goal moving forward to ensure all of our clients have the same strength and durability to be on the strategic offensive and defensive.
Logistics is the backbone of every business, especially for product-driven companies. That means your logistics should always support your business goals. Outsourcing to a 3PL partner means you can create custom solutions that best help your business reach its goals. You’re not in “survival mode” trying to simply get operations figured out; you can actually get logistics services that will drive your operations and business forward. Your company can minimize costs while focusing on business growth.
Agility and flexibility
Perhaps the most notable benefit of outsourcing logistics is that it keeps the supply chain agile. 3PLs have a transparent network of partners in every sector of the industry, from manufacturers to distribution centers to transporters to technology providers and beyond. This means that if there are any snags or obstacles at any point along the line, it’s easy for a 3PL to pivot and adjust accordingly. 3PLs create and manage end-to-end visibility that individual companies struggle to. This level of supply chain transparency is unequivocally critical to a flexible business model.
Learn more about supply chain agility here.
Logistics outsourcing is on the rise
With all the benefits of outsourcing logistics, we’re not surprised that every data-driven logistics report in 2019 and 2020 proves that 3PL outsourcing is steadily climbing. We predict that 80% of businesses, particularly e-commerce businesses, will outsource part or all of their logistics operations to third-party organizations by the middle of 2021.
Get ahead of the pack with unparalleled expertise, technology, risk management, and flexibility with Redwood Logistics. We are one of the best logistics providers in the business (as proven by the awards we’ve achieved), and we are proud of the custom solutions we offer our clients.