As growing companies seek to scale operations, they often face the build versus buy dilemma. In the case of warehousing and order fulfillment, significant management and operations resources are consumed – often at the expense of allocating resources to the growth trajectory that provided a company initial success.
What is Service Logistics?
More “warehouses” today are calling themselves integrated solutions providers (among other things). Solutions is a big word, however, many companies do deliver on the promise of effectively and efficiently providing an outsourced inventory warehousing and management solution that extends to delivery your product to their customers. Customers can be distributors, retailers, or even end consumers. In short, service logistics is the management and coordination of inventory, storage facilities to provide service to customers and importantly – the human resource horsepower that goes along with this management.
Outsourcing warehousing and logistics services can make complete sense for many companies, particularly fast growing ones that need to scale up quickly and especially for those with seasonal fluctuations in capacity (facility) and resource (staffing) requirements. Outsourcing the “mechanics” of storage, management and fulfillment can leave management focused on marketing and revenue generation activities and free them to work on these strengths.
Factors to Consider – Evaluating Third Party Logistics Providers
It goes without saying that when considering outsourcing a large piece of your operations to an outsourced partner, there is much to consider. First among them is your comfort level and the reassurance that they can “deliver on the promise”. That promise has to include an assurance (in writing) that they can delivery the precise services your company requires. In fact, they will often evaluate your current processes and be able to “trim the fat” to improve your operational efficiency.
When seeking a warehousing and logistics partner, consider the following elements when outlining your Request for Proposal or bid documents.
- Warehouse Location– Is it near a transport/courier hub, near highways for freight, and does it matter if they are local to you – or not?
- Facility– does the facility meet all local safety and code requirements? Is it clean and sound?
- Technology Adoption– Email and internet connectivity are not enough. Do they apply software that you can leverage? Is it more robust than yours? Do they offer proprietary technology that works for you? Do they have inventory management, planning and scheduling software that will help provide clues of your inventory production and storage requirements?
- Transport “Connectivity”– Does the partner own its own fleet of trucks [asset based] or provide freight brokerage services? These could be a big plus and can add value as a one stop shop.
- Leveraged Courier Rates/Accounts– Can you leverage their master courier accounts to achieve courier savings – if it matters – that you could not achieve alone based on your shipping volumes?
- Storage and Warehousing Organization– Is it organized, automated, and efficient. If your current system looks better than theirs, you’re probably in the wrong place.
- Handling capacity – Clarify their staffing levels and how they can handle your peak seasonal requirements.
- Waste, Recycling and Disposal– How will they handle your spoiled or defective merchandise and at what cost. Is it secure and confidential (if this matters)? Have you/they adopted “green” procedures?
- Insurance and Risk Management– Are they fully insured and is your inventory and operations in good, safe hands? Always ensure you’re named as an “Additional Insured” on their policy.
- Corporate Social Responsibility – Do they share your company social values and do they treat employees as you would want yours treated?
The considerations when outsourcing your warehouse and logistics – a big part of your supply chain – to the third party service provider are critical. A thorough evaluation of 3PL providers that can serve you well is a must. Ideally, new levels of efficiency can be achieved whereby management can focus on key growth functions, knowing they have the operational scale to support that business success.