• Diversitech Global

The Growth of Supply Chain Outsourcing

Updated: Aug 22

With decreased costs and spending on manpower, capital equipment, training, shipping and delivery, outsourcing supply chain management enables companies to stay competitive in their respective industries.


Introduction

Companies are turning to supply chain service providers or managers in order to provide more efficient and cost-effective supply chain management.


With decreased costs and spending on manpower, capital equipment, training, shipping and delivery, outsourcing supply chain management enables companies to stay competitive in their respective industries. Expert guidance can help you on every step by handling everything from sourcing, packing, warehousing, inventory control, distribution, order picking to shipping.


Why Supply Chain Outsourcing is Beneficial

Outsourcing your supply chain management will give you all of its benefits without having to establish an internal team that would need to be trained properly on how things are done. A third party provider already has this knowledge and experience which can help businesses save money while improving their turnaround time, quality control, inventory accuracy and last but not least staffing requirements.


Small or medium sized businesses often have a hard time competing against larger companies since they lack the necessary resources and money that enables them to run efficient chain-supplies especially those based internationally. However, using an experienced supply chain management team will not only boost profits, provide a competitive edge, but also free up company employees to focus on their core competencies eg. product development, excellent customer service and engagement.


Scaling Up or Down Is Easier

Outsourcing also reduces the risk of fluctuations in demand, making it easier for businesses with limited capital start-up money to establish themselves.


Supply chain management outsourcing is often cost efficient because there’s no need for expensive equipment purchases or maintenance or maintenance/repair expenses.

It’s an easy way to scale up or down your supply chain, while decreasing the amount of operational risk.

A reliable supply chain manager can handle all aspects of your product delivery needs, no matter what size package it may be. This provides the opportunity to streamline operations, without having to hire more staff or invest in expensive infrastructure.



Ability to Focus on Core Competencies

A supply chain manager (including third-party logistics) is specifically designed to handle supply chain activities. Ranging from order fulfillment, distribution management, product sourcing all the way down to data analysis so businesses can focus their attention on what’s important and ultimately boosting sales:

  • Developing creative marketing strategies

  • Building new relationships with key suppliers

  • Fine tuning operations

  • Providing excellent customer service

  • Anticipating future customer needs


Eliminate Inventory and Supplier Delivery Challenges

Many companies may experience difficulty trying to manage alone the important logistics of warehouse supply and delivery in the supply chain.


  • Shipping. These companies may not know how much it should cost or how long it will take thus creating uncertainty resulting in lost business

  • Inventory Management. Keeping track on what’s entering warehouses and leaving them is complicated especially when you’re dealing with a large number of products and a constantly changing supply line

  • Warehousing. Problems include overstocking, under stocking, expired product, rack congestion, theft from the warehouse

3PLs often have access to lower rates for shipments on items from suppliers/manufacturers. Together with their access to multiple carriers allows for more reliable delivery packages so clients can be sure of on-time deliveries. If you’re using many different vendors every year, you’ll save significantly by using a logistics provider to help with fulfillment and distribution.


Take Advantage of More Markets

If you outsource your warehousing to a third party provider, it will take care of making sure the product is received from the supplier, stored appropriately and available for fulfillment and distribution.


This might lead to opening up new markets that weren’t previously accessible due to expensive shipping fees. By outsourcing your supply chain, you’re more likely to gain access into foreign markets because 3PLs are often global companies who are already well-connected within their respective fields.


How Can You find Reliable and Reputable Supply Chain Managers?

If you’re looking for a reliable and reputable supply chain manager, there are a few things you can do to find the right company. One way is to ask other people in your industry what they think or do. Another example is to use the internet and search for supply chain managers in your area. You can also find out more information about them by reading their website and learning how long they’ve been in business.


If you’re looking to outsource your supply chain management, use those with experience. Make sure that they have a working relationship with all the key players within your supply chain.


This will ensure that shipments are delivered smoothly and on time. When choosing one, consider how much information you want to provide them versus keeping some tasks under your own supervision.


Also, if you’re going to manage certain aspects yourself, find a provider who can integrate its efforts seamlessly into yours.


In order for outsourcing to work it’s important that there is an open line of communication between both parties so there aren’t any misunderstandings or gaps in information. Know what exactly you expect from the supply chain manager so when an issue arises neither party blames the other person or company. When you outsource your supply chain, make sure it is a multi-year agreement with the supply chain manager which will avoid any contract loopholes and confusion as to costs and responsibilities.


Outsourcing has its advantages for all parties involved as long as they do their research before committing to one particular company. Make sure that both of you know what exactly the expectations are so there aren’t any surprises later on down the road. The more open and honest you can be during this time the easier it’ll be to establish a good relationship with your provider. By communicating regularly and continuing an ongoing dialogue about issues or concerns, negative effects of outsourcing may be prevented from occurring in the future.


Conclusion

Working with supply chain managers/third-party logistics providers can often yield better results than your own direct hands-on engagement with unknown suppliers or manufacturers. With expert advice and guidance they can help prevent or solve issues by providing both large-scale and small-scale companies with solutions that save them time and money.


Business owners and managers will be able to enjoy all the benefits of greater returns on their investment, faster product deployment, improved market shares and better customer engagement. As long as both parties are transparent about their needs and expectations, outsourcing can have many benefits for everyone involved.




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