Outsourcing-To be or not to be, that is the question.
Think on the following data!
Eighty per cent of Japan Logistics is handled by 3 PL.
Sixty per cent of Logistics is done by 3PL in U.S. while fifty five per cent of Logistics is done in Europe by 3PL.
Only 10 per cent of Logistics in India
So India
What is Contract Logistics?
Contract logistics is the outsourcing of the distribution function. Contract logistics providers invest in assets, dedicate capacity and personnel, and customize information systems and communications in order to improve the productivity and customer satisfaction of their manufacturing and retailing clients. Successful companies have found that delivering the right products in the right quantity to the right place at the right time and at the right cost is a key differentiator today.
Scenario without Contract Logistics
- Costly Manufacturing space was utilized by stock and stock level were higher now only in supplier’s warehouse
- Excess inventory was lying in the plant.
- Supplier had to set up warehouse near the plant and the cost of operation was higher.
- High cost of obsolescence and high cost of a quality reject was due to desynchronized supply chain and engineering change implementation lead time was high
Benefits through Contract Logistics and 3PL
Logic of outsourcing for manufacturing Enterprise and Retailers is to concentrate on one’s core competencies and leave distribution function on Contract Logistics players who are specialists in this field and can offer cheaper services as they take benefit of Economies of Scale operations arising due to concentrated capacities offered to many of their customers in terms of assets and personnel and services..
Outsourcing distribution permits you to get out of the transportation and warehousing businesses altogether, reducing equipment, facilities and personnel, as well as freeing up cash and improving ROI.
. Logistics providers can and do deliver greater savings and increased efficiencies because distribution is their business. They have greater resources and specialized expertise that is hard to find in-house. The capacities in area of transportation and Warehousing are optimally utilized and information technology, communication technology and Automation can be carried out seamlessly by one dedicated party deriving the benefits of technology ultimately serving both manufacturers and Retailers in terms of better infrastructure, lesser logistics costs and more trade ultimately leading to better GDP growth. . Logistics providers also build integration economies that in-house transportation departments, no matter how large, can rarely match. Furthermore, the contract ensures that distribution process improvements and the resulting savings will be pursued continuously and single-mindedly automatically.
There are marketing benefits too. You'll never miss a sale again because of "out-of-stocks." Faster distribution means more selling days for retailers. Increased flexibility makes it easier to enter and to supply new markets, and to do so quickly.
Risk management becomes much easier. Outsourcing provides distribution insurance that a manufacturing company cannot secure by itself. Logistics providers have the resources to keep your distribution network running in spite of unexpected disaster, wherever it strikes.
Offerings
Contract Logistics players offer services like door pick up , brokerage , consolidation center , freight management, clearance at destination, deconsolidation center, pull to door through transparency, visibility, seamless communication and ownership among transporters, customs, labor and warehouses, forwarder, steamer agent, Airlines, clearing agent.
Through Optimized inventories, routes and trucks, there is no longer a barrier of loss of control for manufacturers and Retailers. JIT deliveries can be led to the line.
Conclusion
Written By
Prof. Akhil Chandra
