You have an e-commerce business and you’re expecting the business to grow. The key to success in this stage is a combination of supply chain optimization and effective supply chain management (SCM). You can achieve both when you outsource supply chain management to a 3PL. This article explains the risks and benefits of outsourcing supply chain management.
The Risks and Benefits of Outsourcing Supply Chain Management
It may sound optimistic, but the risks inherent to outsourced supply chain management are minimal compared to the advantages. Studies show that nearly 80 percent of businesses with highly efficient supply chains enjoy greater than average revenues compared to others in their industries.
What’s more, nearly 95 percent of businesses that outsourced their supply chain report a positive and successful relationship. In contrast, businesses that poorly manage their supply chains are usually overwhelmed by supply chain issues that arise from several areas:
- unprecedented growth in inventory,
- an uptick in customer orders,
- evolving consumer demands,
- last-mile delivery and logistics problems, and
- inefficient replenishment, among others.
Encumbered by these supply chain management issues, businesses often lose sight of their core functions, i.e., expanding the customer base, increasing market share, and growing revenue.
Top 10 Reasons to Outsource Supply Chain Management
Though SCM issues are common, they can be avoided if you outsource supply chain management to a 3PL. That statement may sound like an oversimplification of a complex operation, but it’s true.
Perhaps unsurprisingly, most retailers are not logistics experts, and few ecommerce store owners have degrees in supply chain management. If they did, they would probably work for a third party logistics provider.
Like any outsourced service, the number one reason any business would outsource supply chain management is because there is an expert out there who can do it better, faster, and cheaper than if you did it in house.
Third-party logistics providers are better equipped with the tools and technologies needed to manage a supply chain and, therefore, are in a better position to adapt to changing market conditions and consumer preferences. Those resources and expertise are particularly useful to brands looking to scale production and ecommerce fulfillment in line with fluctuating customer demands.
Ecommerce retailers can outsource their supply chain to boost productivity, facilitate more efficient service, and accelerate business growth. By doing so, they avoid entanglements with the strategic and tactical details of supply chain management and optimization.
In other words, the less your team has to worry about managing your supply chain, the more they can focus on their core competencies — developing better products and services for your customer base.
Third party logistics providers and other external supply chain partners offer the capabilities, solutions and expertise that normally take years, man power and significant capital to develop in-house. The expertise a 3PL like Flowspace brings to the table can be extremely valuable, especially when they specialize in your region, industry, and vertical.
Logistics and supply chain activities are some of the most expensive business operations any company can undertake. Warehouses, fulfillment centers, and delivery vehicles all require trained professionals to operate.
Those professionals cost money, and so do the supplies and infrastructure they need to do their jobs. In most cases, it’s more cost-effective to outsource supply chain activities to a reliable third-party than to handle it in-house.
An inefficient supply chain can seriously damage customer relationships and profitability. In most cases, customer satisfaction is only achieved when supply chains operate smoothly and with regularity.
By outsourcing supply chain management functions to an expert partner you can reduce the chance of an inefficient supply chain, and better equip your business with the human resources, technology and effective processes they need to ensure all supply chain processes flow smoothly and efficiently.
As your store grows you have to consider whether or not you have (in your current capacity) the ability to totally service the needs of your customers. If the answer is “No” then it is time to outsource to a third party logistics provider.
Just as you are an expert in what you do, a 3PL specializes in different areas of the supply chain. A 3PL maintains a larger network of warehouses, fulfillment centers, and logistics providers than a typical retailer and is able to offer complete service customization to meet the specific needs of your customers.
Think of your supply chain as a ship. As it’s captain, you need lead time to execute avoidance maneuvers and mitigate disaster before it strikes. The best way to navigate uncertainties and strengthen your supply chain is by investing in new technologies that provide real-time supply chain visibility.
Unfortunately, many small businesses are strapped for cash and unable to invest in costly new technologies. Fortunately, there is still hope for those who outsource their logistics to a third-party logistics firm like Flowspace.
With a presence in every market in the country and the latest technologies at our disposal, Flowspace is uniquely situated to provide our clients with extensive supplier monitoring capabilities. Contact us today to get started.