Given the increased focus of most organizations to reduce their costs and increase their operational flexibility logistics outsourcing is becoming an even more attractive option.
It is estimated that over 85% of Fortune 500 companies outsource all or part of their logistics functions (warehousing, order fulfillment, transportation) to a third party logistics service provider .
Outsourcing logistics functions represents a number of opportunities that organizations can take advantage of. These include:
- A reduction in capital and operating costs
- An increase in service levels
- The flexibility to handle fluctuations in volume more readily
- The ability to leverage the 3PL service providers expertise and network to quickly support future growth
- Removing the costs associated with compliance overheads such as human resource and occupational health and safety requirements
It should be noted however that despite the benefits described above, no relationship with a 3PL service provider will ever be successful without a properly defined scope of work, clear service level expectations, well defined key performance indicators, a disciplined process of management and a person that has the right skill set to manage the ongoing 3PL service provider relationship.
Leydin Consulting Group assists companies to first determine if outsourcing is the right strategy and then to manage the selection and implementation of a suitable partner and to establish a disciplined process for managing the ongoing relationship.
LOGISTICS OUTSOURCING STRATEGY DEVELOPMENT
Determining if outsourcing some or all of your logistics functions is the right strategy will require careful consideration, particularly if the function is currently being undertaken in house.
Often times it will be the perceived opportunity to reduce operating costs that will drive the decision but it is important to understand the true cost of both operations in order to make an accurate comparison.
Apart from the obvious costs such as rent, labor, materials handling equipment and the like that are relatively simple to determine it is also important to consider the additional costs related to the physical move and any IT integration requirements and the intangible costs associated with the disruption to operations, suppliers and customers.
Leydin Consulting Group have extensive experience creating cost comparison models that take into account both the tangible and intangible costs associated with moving from a company operated model to a model outsourced to a third party logistics service provider.
LOGISTICS SERVICE PROVIDER SELECTION AND IMPLEMENTATION
Identifying and selecting a suitable third party logistics service provider requires a deep knowledge of the third party logistics market, experience managing the process of requesting quotations, evaluating responses and project managing the transition to the selected third party logistics service provider.
Leydin Consulting Group consultants have extensive experience managing logistics outsourcing projects from end to end.
This includes developing the necessary documentation including scope of work, response templates and cost models, identifying suitable logistics service providers, undertaking all internal and external communications, the analysis of all proposals based on cost and other predetermined criteria, negotiating the final rates, providing a recommendation and managing the transition to the logistics service provider including any system integration requirements.
LOGISTICS KEY PERFORMANCE INDICATORS AND REPORTING
The old saying by Peter Drucker is as relevant today as it was when it was first published
You cant manage what you don’t measure
Establishing a set of key performance indicators (KPI) and a reporting process to monitor and measure logistics service provider performance is a key component of successful third party logistics service provider management processes as described below.
Whilst there is a tendency to think that a lot of KPI are required to monitor and measure an outsourced third party logistics operation , the reality is that only a handful of key performance indicators are required for effectively monitoring 3PL operations.
Leydin Consulting Group consultants have extensive experience developing reporting templates and dashboards for capturing and analyzing operational data and displaying the results in a manner that enables managers to quickly identify trends and exceptions that are relevant to the key performance indicators that have been established to monitor, measure and manage third party logistics operations.
LOGSITICS SERVICE PROVIDER MANAGEMENT
The performance of your third party logistics service provider is directly proportional to the effectiveness of the service provider management process that has been established.
Successful third party logistics service provider relationships are built on a disciplined process of monitoring and managing activity volume, cost and service levels.
Leydin Consulting Group has extensive experience establishing a disciplined process and the ongoing management of third party logistics service providers.
Our proven process focuses on a regular rhythm of meetings with a clear agenda and well documented meeting notes, keeping participants accountable for their assigned actions, consistent formats for data collection and reporting of activity volumes, costs and performance against agreed service level expectations and a formal corrective action process to ensure non compliance issues are adequately resolved.
GLOBAL LOGISTICS NETWORK DESIGN AND IMPLEMENTATION
Whilst not always the case, the most common strategy pursued by many brands when establishing a global logistics network is to engage a third party logistics service provider to provide warehousing and transportation services.
Leydin Consulting Group has extensive experience identifying, selecting and implementing suitable third party logistics service providers for brands that require a reliable and cost effective logistics network to support their global expansion.
In addition to our deep knowledge of the Australian market we have experience establishing logistics networks in the Asian, North American and European markets.
In addition to our experience implementing physical logistics networks we also understand the nuances of establishing overseas business entities that are complaint in regards to importer of record and taxation requirements.