Companies of all sizes decide to outsource noncore business operations and processes for many different reasons. Historically, cutting costs has been a primary driver behind the decision to outsource, and it remains a key consideration in many cases. But more businesses have also come to realize the array of strategic advantages outsourcing can provide.
In its recent Global Outsourcing Survey, consulting firm Deloitte found that 59 percent of firms viewed outsourcing as a cost-cutting tool. However, almost as many respondents—57 percent— said they embraced outsourcing because it enables them to focus on their core business, and 47 percent turned to outsourcing to solve capacity issues.
Other reasons survey respondents gave for adopting outsourcing include enhancing service quality, meeting business-critical needs, gaining access to intellectual capital, managing business environments, and driving broader transformational change.
Perhaps most striking among the Deloitte survey’s findings is the growing awareness among businesses of the value that innovation in outsourcing can provide. Almost 60 percent of respondents said they used outsourcing innovation to increase quality levels, 44 percent to lower delivery costs, and 38 percent to improve user experience.
Those trends are clearly reflected—and sometimes magnified—in the world of 3PL providers, companies that offer outsourced transportation and supply chain logistics services. In particular, a 3PL’s ability to help companies improve their customers’ user experience has emerged as a driving force in the industry.
In its State of the Third-Party Logistics Industry report, 3PL Central, a provider of warehouse management software, documents the developments that have dramatically transformed the logistics industry over the past five years. “But of all the factors that have sparked this upheaval,” the report states, “none has been more revolutionizing than the rising demand for a superior customer experience.”
Other research confirms that 3PLs are doing a good job of helping their clients with both cost savings and improved customer service. In the 3PL Central report referenced above, 71 percent of 3PL clients said that using outsourced services contributed to reductions in overall logistics costs, and 81 percent said use of 3PLs contributed to improved customer service. What’s more, 73 percent of clients said their 3PLs provide them with new and innovative ways to improve logistics effectiveness.
One of the most significant findings to emerge from recent research in this area is the increasingly strategic nature of relationships between shippers and their 3PL providers. Technology plays an important role in this development. Increased availability of data and more advanced tools to analyze it enable real-time decision making and support the development of innovative solutions that clients can leverage to their competitive advantage.
Best Practices When Selecting a 3PL Outsourcing Partner
- When choosing which services to outsource, focus on the pain points in your business.
- Take a team approach to the decision-making process. Every aspect of the organization that will be touched by outsourcing— finance, management, operations, sales, end users—should be included in the process to make sure the right solution is secured and expectations are met.
- Pay close attention to a potential 3PL partner’s ability to provide all the transportation and supply chain logistics services you need right now, as well its ability to scale those services as your business grows and your needs expand.
- Don’t skimp on data during the search process. The more information you can provide a potential 3PL partner, the better job it can do in designing and pricing solutions that meet your needs.