Logistics Outsourcing
You could be excused for assuming that success is a guarantee when you consider how popular logistics outsourcing has been over the last few years. However, if your cooperation with a 3PL provider is to be successful, there are key traps to avoid in logistics outsourcing, as some businesses have discovered the hard way.
Avoiding Logistics Outsourcing Mistakes
Your supply chain can realize economic, labor, and efficiency benefits by being aware of the logistics outsourcing traps to avoid, however…
Mistake #1: Expecting too much – Rarely does an outsourcing initiative achieve all of the anticipated savings. But don’t be too horrified by this discovery. Even if you only accomplish 70% of what was anticipated, your organization will still benefit greatly.
In fact, you should be extremely cautious when outsourcing logistics solely to save money. Unless your current internal operations are truly inefficient, outsourcing may actually raise your logistics costs.
Mistake #2: Assuming that nothing needs to be said – Everything you expect from your outsourcing partner should be provided in the form of detailed written procedures.
Mistake #3: Too much, too soon – Make a honeymoon period a priority and begin by outsourcing a portion of your chosen process. If everything goes well, you can increase the scale.
Mistake #4: Going in with no exit strategy – Make sure your contract with your provider includes a procedure for disengagement if the partnership fails to meet expectations.
Mistake #5: Abdicating responsibility – Keep in mind that your outsourced processes are still your processes. While micromanagement is undesirable, monitoring and measuring activities are critical.
Mistake #6: Treating the process as if it were a purchase – When you outsource logistics processes, keep in mind that you are entering into a long-term partnership. Chasing the lowest price is rarely the best way to select a provider.
Mistake #7: Lack of internal buy-in – Nothing is more likely to derail a partnership than finger pointing and negativity within your own organization. Every dollar spent on change management and gaining stakeholder support is money well spent.
Mistake #8: Tendering the process too quickly – If you expect to select a 3PL partner, finalize an agreement, and begin an outsourced logistics operation in a matter of weeks, you’re going to get stuck at some point. A reasonable timeline for launching an outsourcing partnership is four to six months.
Mistake #9: Outsourcing as a business strategy – An outsourced logistics operation is not appropriate for every business. You must be very clear about your outsourcing objectives; otherwise, you will make the mistake of treating outsourcing as a strategy when it should only ever be considered as a strategy enabler.
Mistake #10: Overlooking the importance of communication – Once you begin working with a 3PL provider, you must resist the temptation to keep your cards close to your chest. Logistics outsourcing will not work unless you are willing to share short-term forecasts, long-term plans, and, perhaps most importantly, relevant business data with your partner.
No Pain, No Gain? That is Trash
The points mentioned above may appear to be common sense, and they are. However, they are all real traps that real organizations have fallen into, sometimes with disastrous results.
When done correctly, 3PL outsourcing is a proven enabler of supply chain service and efficiency gains. Avoid the ten mistakes listed above, and choose your 3PL partner wisely, and you’ll be creating the best opportunity for your company to profit without suffering.