With rising customer expectations and intense competition in the market, businesses around the world have turned to third-party logistics (3PL) providers to professionalize their supply chain management.
Business managers understand that 3PL and 4PL providers allow them to tap into more sophisticated supply chain resources, such as the latest operations technology to support increasingly complex logistics operations.
By eliminating the need to invest in transportation and warehouse rent, equipment and personnel, and in taking over the entire supply chain operations, from billing and auditing to staffing and training, a 3PL and 4PL provider cuts an entire department’s expenditures from the operational costs of a business. Additionally, due to their expertise, 3PL and 4PL providers also improve the efficiency of your supply chain, allowing your business to develop a robust logistical network with higher returns and lower risks.
When a 3PL and 4PL vendors are not efficient, businesses end up hiring extra manpower to compensate for the shortfall, which ultimately increases labor costs. Apart from wasted monetary resources, a poor 3PL and 4PL vendor will also cost your business time and thus, potential money. On the other hand, if your 3PL and 4PL vendor was delivering an efficient end-to-end supply chain, your business would produce inventory in the required amounts and quickly ship to customers in the correct timeframe and quantities.
With an increasingly digitized business environment, vendors are expected to be able to provide real-time status updates about shipments, order tracking and the availability of inventory at warehouses. Moreover, a major function outsourced to a 3PL and 4PL vendor is inventory control. Remember that when this is compromised, several business outcomes are adversely impacted.
1. Your logistics costs will be higher than the industry average for your business volume
2. Your business productivity suffers, which affects profitability
3. You don’t have access to the right information for effective decision-making
4. You lose control over your inventory
5. You suffer losses in the form of frequently damaged inventory
6. Your reputation for delivery timelines gets damaged
7. Employee turnover increases at warehouses
8. You will lack the necessary technological support
8 Ways a Poor Logistics Services Provider Impacts Your Business
With rising customer expectations and intense competition in the market, businesses around the world have turned to third-party logistics (3PL) and fourth-party logistics (4PL) providers to professionalize their supply chain management. The latest research by Gartner Inc. indicates that more than 80% of professionals plan to expand their logistics outsourcing budgets beyond warehousing and fulfillment in 2020.
The rationale behind this trend is that specialists will simply do the job better, leading to improved order turnaround times, fewer losses, more transparency and increased overall efficiency. Moreover, business managers believe that 3PL providers allow them to tap into more sophisticated supply chain resources such as the latest operations technology to support increasingly complex logistics operations.
In theory, this is all correct. However, a key aspect of ensuring improved operations is making the right choice of 3PL and 4PL provider for your business. While there are many benefits of outsourcing your company’s logistics, there are as many disadvantages to bringing on board an inadequate 3PL and 4PL provider.
Below is a breakdown of the many ways a poor choice of logistics service provider can hamper your business growth:
1) Your logistics costs will be higher than the industry average for your business volume