What do restaurants, pharmaceutical firms, and manufacturing companies have in common? They all rely heavily on logistics, especially when it comes to the transportation of goods and services.
As your company grows, the supply chain grows more complex, and it becomes more difficult to manage on your own. This is when an external service provider may be of assistance. Outsourcing in logistics refers to when you hire a third-party logistics service provider to manage the varying functions of your supply chain.
Why Outsource Logistics?
If you’re new to the world of outsourcing, you may be wondering, “Why would a firm outsource logistics?”. It may seem contradictory to outsource an external team halfway across the world to manage your internal operations, but there are several reasons why outsourcing logistics can benefit your company in the long run.
Let’s look into the advantages of logistics outsourcing so you can see if this is the right path for you and your business goals.
Lower Labor Costs
Cost efficiency is one of the main reasons why a company would turn to outsourcing. Operational costs can stack up over time, especially for small and medium enterprises, and can set a company up for success or failure.
Companies can reduce operation costs by up to 70% when outsourcing to countries like the Philippines. Although there have been several economic breakthroughs in recent years, the Philippines is still a developing nation in Southeast Asia with a lower cost of living and a highly capable workforce. To put it into perspective, the minimum daily wage in Manila as of 2024 is set at ~$10 USD which is significantly lower than the minimum hourly wage in New York of $16 USD.
Efficient Management Systems
In logistics, there are several costs incurred throughout the transportation process such as personnel, vehicles, and warehousing costs. When done in-house, accounting for these costs requires your business to implement a management system for all the moving parts of the operation.
Another reason a company might opt for outsourced logistics is because the external team can handle these expenditures with systems that they already have in place. Other than handling costs, an external logistics team can also help manage domestic and international transportation systems and assist you in warehouse expansion. Growing businesses can benefit from these services as the demand for their product rises and the supply chain becomes more complex.
Specialized Services
When you’re outsourcing shipping and logistics, you entrust your operations to a specialized team of professionals. This team then provides you with customized logistics services that best fit your desires as the client and align with your business goals. This saves you from the difficult, and often expensive, process of scaling up your in-house team to better meet the demands of your consumers.
For example, your company may be dealing with multiple carrier contracts while also looking to expand warehouse capacity. A mistake on an invoice or an overlooked insurance certificate can put your business at risk. An outsourced logistics team usually has a back-office staff that specializes in vetting carriers, managing invoice variances, filing insurance certificates and all the other grunt work that goes into the distribution process.
The faster rate of response allows your company to become more dynamic and adaptable, especially in markets where speed is a key factor in success. With an increase in efficiency and capacity, it then becomes easier to reap the benefits of economies of scale.
Enhance Operational Efficiency
Finally, outsourcing logistics allows you to better allocate your resources on core competencies and entrust a team of expert service providers to handle logistics operations. This allows you to divert your in-house team’s time and resources towards critical operations that support and advance your business goals.
How do I find the best outsource provider for my business?
Overall, outsourcing logistics can increase efficiency, reduce costs, and set your company on the right track for success. This makes it more important for you to find an outsourcing company that caters to your business’ specific needs and ensures your requirements are met by professionals who specialize in logistics.
Evidence-based Solutions. An important signifier of a business’ success lies in its ability to satisfy the customer’s needs. This is true for you, as it also should be for the outsourcing provider that you select. A great outsource provider should have a remarkable track record that can be backed up by references and work samples.
Competitive Pricing and Services. If you’re new to outsourcing, you may be tempted to go for the cheapest available option to save on costs. It’s important to weigh the quality of the service, the skillset of the employees, and how they compare to other vendors.
Experience and Work Ethic. Legendary management consultant Peter Drucker famously said, “Culture eats strategy for breakfast.” No matter how clear-cut an outsourcing company might seem on paper, if their work ethic doesn’t mesh well with your company’s culture, it can be difficult to have them manage your operations.
With FGC+ as your dedicated outsourcing partner, you’ll find yourself on the right track to sustained growth for your company. When you’re ready to level up your logistics operations, you can find more information about our services at www.fgcplus.com.
