When expenses squeeze a company's bottom line, assistance is vital

Six paradigms to consider before outsourcing to 3PLsJohn Fitzgerald, vice-president of global sales and marketing for SEKO, a US global provider of supply chain solutions, gives his opinion on the outsourcing of supply chain servicesOutsourcing of supply chain services is still increasing despite the weakened US eco-nomy, but the decision for a company to outsource to third party logistics providers is not an all or nothing proposition, and requires an in-depth evaluation of the entire supply chain process.In today's dynamic global business environment with enhanced technologies and vastly extended supply chains, companies are often confused by the many logistics options available to them. Before making a decision on how to best implement a supply chain management process, companies should evaluate their own cultural alignment, core competencies and business capabilities.A company's cultural alignment and cross-departmental capabilities, especially as they relate to technology, will provide the factors in determining whether it should keep supply chain management services in-house, outsource them to a third party logistics provider, or employ a combination of both.John Fitzgerald of SEKO suggests six paradigms that companies should abide by when making an outsourcing decision: Determine the state of your warehouse management system: How state-of-the art is the WMS system you have in place? If your company is consistently out-of-stock with finished products for your customers, your in-house system probably does not have the IT capabilities to avoid poor lead times and missed shipments for your customers. You need to outsource or lose customers. If, on the other hand, your company has the wherewithal to provide the proper implementation of an enhanced and robust IT infrastructure, you may be able to realise cost-savings and efficiencies by avoiding the need to outsource your logistics functions. Take a good look at your production facilities: If you find that your production facilities are down for long periods of time and your logistics operations are not flexible enough to meet the requirements of after-hours deliveries and expedited service, you may have no choice but to pay the extra costs by outsourcing your logistics process on top of paying for large overhead for an inflexible logistics operation. Evaluate your delivery date success: If the targeted dates for your time-sensitive product launches are not consistently being met, it is a good indication your internal staffing and facility capacity cannot keep up with your customer demand. Your company probably requires the assistance of a 3PL. Assess your overhead and fixed logistics costs: If these expenses are squeezing your bottom line, you may realise virtually instant savings by consolidating your warehouse operations with a "shared" facility operated by a 3PL. This can enable you to move fixed costs to a variable expense, which provides flexibility in responding to market dynamics.Examine your company's IT capabilities: If your in-house technology is unable to adapt to your growing supply chain needs, you should consider outsourcing your company's logistics data and integrating it with that of a 3PL that specialises in customised supply chain solutions. Rather than waiting years for a new system to be developed internally, you may find that outsourcing both the technology and logistics process to a suitable 3PL will realise cost savings, while expediting the supply chain process. Evaluate your company's Cus-toms compliance readiness: If your company is unable to develop compliance and cost goals, formal policies, training programmes, internal revenues and supplier compliance programmes, the selection of a suitable 3PL to provide the required skill sets to establish a process-based compliance function is critical.Ultimately, following an in-depth evaluation of the entire supply chain process, many companies find that including a mix of in-house and outsourced logistics functions may provide the best solution for them.In a global economy, where there is no set criterion for supply chain success, companies have to carefully analyse their requirements and determine what logistics processes are best suited to meeting their specific and unique global distribution needs.

Source by cargonewsasia.com