Jeremy Ferrer
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How do you switch to outsourcing logistics? A crucial and strategic question that requires good thought. The economic market is constantly evolving. Businesses must stay in line with this evolution in order to better meet the expectations of their customers. Facing competition is also an everyday challenge. In order to develop fundamental skills, managers must reconsider their management by refocusing their efforts on their “core business”. They must then delegate certain functions. One of these functions is logistics. This guide will allow you to have the necessary resources to successfully carry out your logistics outsourcing project. How and why should you outsource logistics?
Once a production threshold has been reached, in order to focus on its development and specialization, several companies decide to outsource logistics. Why opt for this strategy? Is it really beneficial? How to proceed without losing quality and improving performance with the outsourcing of logistics?
Logistics outsourcing refers to the fact of delegating all logistics operations to a specialized service provider. Delegation can start from stock management, preparation or packaging to the dispatch of goods.
In practice, the company will no longer have to think about warehousing, or about recruiting other employees to provide this service. This allows the company to optimize its transport and logistics strategies.
Identifying the core competencies of the company becomes crucial before making any decision to logistics outsourcing. The objective is to set up a strategic organization in line with the resources at your disposal.
Core competencies are skills that add more value to business results.
It is these “core competencies” that make the company unique. They allow the company to offer quality products or services in a vision of creating value while maintaining its competitive advantage.
Here are some criteria for identifying these skills.
There are only a few businesses that have skills.
They should not be easily imitated by the competition.
After identifying competencies, the next step in outsourcing logistics activities is the choice of a strategy based on these competencies. They must be communicated and imbued with the entire internal team. This makes it possible to create cohesion and collaboration in line with the same vision of the organization.
The strategy chosen must make it possible to exploit all the capacities relating to these skills to the maximum. Moreover, investments must be focused on these skills in order to benefit from better learning, a more efficient process and above all the best technologies available on the market. All this is developed in order to better position oneself in the market and to be one step ahead of the competition.
As with any type of outsourcing, outsourcing logistics has advantages and disadvantages.
Offshoring, regardless of its form, allows a company to focus on its main activity, i.e. on strategic tasks that cannot be delegated. The advantage of outsourcing is to allow better productivity and better profitability in operation.
In terms of logistics in particular, the outsourcing the logistics service allows you to get rid of time-consuming tasks associated with the inventory and maintenance of company material resources. You will no longer be dealing with legal obligations relating to logistics. This allows you to save time to focus only on your core business.
Outsourcing logistics will naturally mean that there will be fewer staff to take care of. However, HR management always involves administrative burdens. These will be reduced thanks to the outsourcing of logistics.
The service provider you are recruiting is an expert in the field. Generally, this type of services is accompanied by the implementation of advanced technology to optimize logistics management. It can only be good for you. Access to this technology improves the management of your supply chain. Outsourcing your logistics also allows you to have other warehouses in other strategic areas, such as China for example.
By opting for a logistics outsourcing solution, you can also save on operational costs such as freight transport.
Outsourcing logistics is an essential solution, especially for large companies. However, you must know how to choose the right provider at the risk of running into beginners. It may happen that the professional you choose charges you for unnecessary services that will only increase your costs instead of reducing them. When the climate between the provider and you is not good, this will be felt by your customers. Your reputation could suffer if you lose control of your logistics flows.
Of course, you should know that outsourced logistics has a cost. This service is mainly intended for large companies. Before you start, remember to check if it's really the solution that's right for you. Also, think about the budget you can allocate to this project.
Every company, regardless of its size and the nature of its activity, is obliged to work on its processes in order to improve its organization and its functioning in general. This also applies when outsourcing logistics. However, you should be aware that with outsourcing, there are always risks.
Outsourcing logistics certainly offers many advantages. However, there are risks of loss of quality in relation to the production or distribution process. The word quality here encompasses all the actions carried out around the product and not the quality of the product alone. Maintain the quality of supply chain processes is no easy task even for qualified service providers. On any front, concerns can arise, such as problems with product storage and packaging. It can also be related to a lack of experience in handling large orders.
To overcome these problems, you must inform the service provider well about the specificities of your products or services as well as the expected quality of service.
From the moment you sign a logistics outsourcing contract, you agree to entrust to the provider information that is most often confidential and that directly concerns your activities. However, by doing this, you run the risk of unwittingly disclosing sensitive information about your business, especially if your service provider is not trustworthy. In order to protect yourself, clearly clarify all the data disclosure clauses in the contract. Also, set up a system of regular control and monitoring of data to avoid unpleasant surprises.
Managing logistics requires taking a step back on a regular basis, whether from procurement, storage or delivery. However, by outsourcing this activity, you are getting away from this whole process. The problem is that you cannot entrust this moment of setback to the service provider. You would lose visibility if you didn't take the time to take care of it. For example, you have entrusted the purchase of raw materials to a service provider that you have chosen. The ones you used to order have become obsolete. On the market, there are more and more innovative products. If you haven't taken the time to check what's new, you'll lose efficiency. To avoid this, you need to establish better communication between you and your provider.
This risk is often overlooked by businesses. However, it is important to take this into account, because in the long term, they may effectively lose know-how and skills in outsourced processes or functions. Risk is the vulnerability of the company, which can lead to a lack of competitiveness. A concrete example of this is for example the loss of internal employees who took care of these outsourced functions, including outsourced logistics. Or, in the absence of practices, some employees in the company have lost their know-how in relation to the function in question.
When a company outsources too many functions that are fundamental to its activity, we can face enormous risks of loss of knowledge. These functions can be linked to Core competence of the company. Losing them will make the business less competitive.
The change generated by outsourcing always has an impact internally and operationally. This is the social risk that we find at the level of employees. Outsourcing logistics will inevitably lead to changes in the way we work. However, this can cause the team to be demotivated and lose interest in the task at hand. Some employees will even go so far as to challenge this change, which will lead to social conflicts.
A possible transfer of personnel is also possible as part of a strategic change such as logistics outsourcing. However, this can also generate conflicts within the company if it is not controlled and does not comply with the Law.
The risk of losing control of outsourced activities is real within companies. Generally, it is the contract that must determine the limits of the services provided as well as the establishment of careful monitoring and control of each operation carried out by the service provider. In logistics outsourcing, there is no question of being dependent on service providers. You risk paying dearly for it on your reputation. Dashboard for control, regular audit of services... there are as many processes and systems that allow you to avoid this risk.
Risk management in logistics outsourcing consists in implementing effective strategies in order to better manage traditional and exceptional risks throughout the process. Here are some steps that allow you to carry out this management in the most efficient way possible.
You should know that zero risk does not exist. Whichever solution you choose, there will always be risks. On the other hand, you should ask yourself what level of risk you want and can take on.
Without this step, you can't know what the risk is that could harm you the most. It is possible to group risks according to their nature: legal, environmental, economic, operational... Then determine if it is an internal or external risk.
It is not enough to classify them. You have to understand them, take a step back to think carefully about what they really represent. Sometimes one risk can lead to another.
This is done by implementing measures and systems in order to reduce risks as much as possible. Anticipation is the best solution here. Create a mitigation plan, but also plan for what could happen. Note also that for transparency in collaboration, the service provider must be involved in the risk management process.
It is now a question of properly setting the objectives of your outsourcing project. We must therefore move on to comparing offshore and onshore costs. You need to see the details of fixed and accounting costs. What do you get if you do it yourself or if you outsource it. The cost of time must also be taken into account during the transition phase.
It is a good idea to compare quotes from several providers. In order to successfully outsource your logistics, it is important to create a relationship of trust with the logistics provider over the long term. The idea is to have a clearer vision of actions with high added value and to make the required efforts on time.
Your project to use outsourced logistics should solve the following problems:
Once you decide to outsource logistics activities, you will go through a transition process. There are providers such as BME Consulting who offer you a logistics platform to support you from this transition period.
During this stage, you must establish with your service provider a precise and detailed estimate for each phase of your logistics outsourcing process, from storage to the shipment of products, including preparation. The estimate must be perfectly adapted to your activities.
Your choice will therefore depend on the specificities offered by the carriers, on your preferences, on the characteristics of your products (weight, dimensions...) on the preferences and delivery conditions of your customers.
Thanks to an online interface, communication takes place in real time. Inventory tracking and management are easy and transparent.
Also thanks to the logistics platform, a qualitative and quantitative check can be done upon receipt by accurately mentioning the volumes, expiration dates, quantities, lot numbers, the specificities of products and goods, etc.
This step allows you to optimize your production costs. The digital platform allows you to visualize the number of orders in real time:
This allows you to predict restocks and avoid stock shortages. Data is transferred automatically and daily to your platform so that you can optimally manage your logistics.
In outsourced logistics management, it is the service providers who label and ship products. It will save you more time.
A complete report concerning your orders will be available on the platform, allowing you to analyze at any time the content of your orders and the evolution of your activities.
A well-organized logistics service is simply a guarantee of customer satisfaction.
By using professionals in the outsourcing of logistics activities, you become in control of your specialization.
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