distribution third party logistics

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Brian Templar, chairman of logistics consultancy Davies & Robson, addresses some of the important issues companies should consider when outsourcing or managing logistics contractors.

Getting it right

utilisation. Companies should be wary of cost plus contracts or minimum throughput guarantees however, which can simply reintroduce fixed costs but in a different form.

• Flexibility and speed of response

There is no doubt that a major logistics contractor has a level of resource and expertise that gives it the capacity to respond quickly and flexibly to operational changes. Companies faced with a period of significant change or restructuring may gain benefit from a contractor able to flex and deploy resources as required.

• Return on Investment

contractors and the range of services they provide has never been greater. In total, some 70% of transport is outsourced and nearly half of all warehousing.

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These statistics might suggest that outsourcing in supply chain and distribution operations is now so well- developed that it can be relied upon to run like the proverbial ‘well-oiled machine’ with perfect processes always delivering clearly defined benefits.

Of course, the reality is often less clear cut and, in order to realise these benefits, companies must be realistic about what they can and cannot not expect to achieve through outsourcing to a third party logistics provider.

38 ShD April 2010 www.PressOnShD.com

he use of outsourcing in supply chain management has been steadily increasing since the 1960s. Today, the number of logistics

Good reasons to outsource

The primary reasons to outsource include the following:

• Lower cost

A contractor will often be able to provide the same or better service levels at a reduced cost through synergies that are not available to the company. However, the customer should be confident that the savings are sustainable and justify the contractor’s management fee.

• Variable costs

A particularly attractive feature of outsourcing can be the reduction in fixed costs in favour of activity-related charges. The contractor provides a similar or better level of service but the charges are related to activity rather than resources used. This can prove sustainable for both parties where the contractor is able to combine traffic flows in order to maximise resource

A past justification for outsourcing can be that the company is better using investment for its core business rather than investing in vehicles and supply chain assets. Today, with the extensive availability of leasing and rental there are arguably better ways to minimise investment than resorting to outsourcing.

• Management expertise

For small companies, recruiting and retaining the required level of expertise can be particularly challenging.

Outsourcing can be an effective means of ensuring ongoing specialist support. Companies need to be wary however, as they will still need a certain amount of expertise to manage the contractor. An alternative to using outsourcing to gain expertise is the selective use of consultancy or interim management which have the advantage of only incurring cost when they are actually required. Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60