October 2009 | How-To | Ten Tips

Outsourced Logistics: Gaining Management Buy-in

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What company doesn't want to achieve greater product availability rates, more flexible work processes, fewer customer complaints, and improved order accuracy? If you can't seem to reach these goals on your own, it might be time to outsource some of your company's logistics functions to a third-party logistics (3PL) provider. Steve Dean, senior vice president, supply chain solutions, sales and marketing, for Ryder System Inc., offers the following advice for convincing management it's time to call for help.

1. Promise improved metrics. A 3PL can help your company develop quantitative, data-driven key performance indicators in areas such as inventory turns, stockouts, and on-time delivery.

2. Emphasize the potential to reduce costs.Taking advantage of a 3PL's expertise and infrastructure can help shippers reduce excess carrying costs, returned goods costs, and lost sales. They can also move more material with fewer assets, and realize savings by using shared facilities.

3. Describe the 3PL's buying power. Because 3PLs manage billions of freight movement dollars, they have industry buying power and can pass along transportation savings to shippers.

4. Explain the improved global capabilities.Many 3PLs can facilitate moving goods through an international supply chain with their on-ground knowledge of local markets, regulations, and government agencies.

5. Outline the technology benefits. 3PLs often make substantial investments in the technology used to manage supply chain efficiency. These tools provide shippers with end-to-end visibility of their supply chain networks, ranging from track and trace for day-to-day management to detailed reporting for long-term strategic planning.

6. Communicate the environmental impact.3PLs can help shippers optimize distribution networks and consolidate routes, train drivers to incorporate fuel-efficient behaviors, specify equipment to reduce emissions, and leverage technology to streamline inventory and enhance vehicle performance.

7. Talk up the security enhancements. A 3PL partner can assist in navigating new regulations and provide counsel on best practices to improve security policy and procedures. Some service providers manage supply chain security program implementation, from facility and asset security to security monitoring services and training.

8. Predict efficient process changes. It's easier to make process changes with an outside provider, especially when you can tap into another company's existing infrastructure, technology, and people. This is critical for shippers who need to grow at an accelerated pace.

9. Anticipate improved accountability. Shippers can benefit from synergies by engaging 3PLs in adjacent processes that take place "before" or "after" what is considered a traditional supply chain activity. Eliminating hand-offs improves accountability, increases speed to market, and reduces costs.

10. Elaborate on your vision.Logistics is a complex process that requires planning, technology, competencies, and integration. There is no one-size-fits-all solution. Clearly communicate not only the strategic advantage of outsourcing, but also the process for getting there, the time line involved, and what the selected 3PL brings to the operation.

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