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Outsourced transport and logistics
Transport and logistics are vital to organizations in the retail, wholesale, manufacturing, and distribution industries. These functions serve as the backbone of the supply chain management process. Statista projects revenue in the third-party logistics (3PL) market will reach $1.39 trillion in 2025, and with a CAGR of 2.26 percent will hit $1.5 trillion by 2029. Rapid globalization, the booming e-commerce sector, and geopolitical tensions are making supply chain management an even more complex function.
As shippers and companies face pressures to reduce operational costs and manage changes in the supply chain while increasing top-line growth, the need for transport and logistics expertise is more important than ever. Because logistics functions account for a significant portion of corporate budgets, companies are always looking to improve the process and cost efficiencies of their logistics operations. A 2023 study conducted by NTT Data Services and Penske Logistics showed an increasing number of companies are outsourcing logistics and transportation: outsourced freight forwarding increased year-over-year from 44 percent to 60 percent, and international transportation from 44 percent to 52 percent. And more than 80 percent of both shippers and 3PLs report that their partnerships are successful.
Most firms outsource transport and logistics functions to reduce costs, increase revenue, and improve capabilities. Some companies outsource due to a lack of understanding of the logistics process and to determine the true cost of running supply chain functions. Companies find that experienced providers are better positioned to integrate their logistics activities and simplify supply chain management. Some are finding success and gaining better value by partnering with a single logistics vendor that provides multiple and end-to-end services, including transport, warehousing, freight forwarding, and materials planning.
Logistics and transport service challenges
Shippers and companies face many challenges that providers are aiming to address more effectively:
Long transit times. For most companies, the time it takes to deliver products or services to the consumer directly affects cash flow. Slow transit time means later payment, with cash getting tied up instead of being available for activities that further increase revenue.
Cost pressures. Logistics companies and shippers face mounting pressures to increase revenues while reducing operating costs. There is a growing need to maximize resources, particularly for small and medium-sized businesses, and minimize environmental impact.
Lack of understanding of logistics operations. Few companies can claim logistics as a core competency, and firms often do not have the resources to build in-house expertise to understand the inner workings of supply chain functions.
Corporate restructuring. Some firms are facing pressure to reduce headcount and trim their asset bases to achieve short-term improvements.
Transport and logistics outsourcing solutions
Cost savings. Citing various studies, DHL Freight reported that companies that outsource their logistics processes stand to gain an average cost savings of 15 to 20 percent. Outsourcing allows companies to convert fixed costs into variable costs and only pay for services. Training, staffing, paperwork, and audit expenses are also eliminated.
Innovation. 3PL vendors provide innovative methodologies and techniques to improve logistics processes and enable companies to easily scale up and down and meet changing business goals.
Access to domain expertise. Logistics providers are up-to-date on technology and logistics development and have in-depth knowledge of industry best practices. They have the tools to streamline inventory management, simplify reporting, and improve visibility of the entire process. For example, 3PL providers use just-in-time applications to ensure that the right amount of inventory is shipped according to need.
Comprehensive solutions and process optimization. A 3PL provider can offer a cost-effective, all-in-one solution — from assembly to warehousing to distribution. Each step of the supply chain can be optimized using the most efficient and cost-effective method. For example, sophisticated supply chain management software can analyze and monitor practices and eliminate trouble spots.
Better resources. Providers have a deeper and wider network of resources that allows each stage of the supply chain to be executed in the most cost-effective way. 3PLs have long-standing relationships with other vendors and can offer volume discounts, leading to reduced overhead and faster transit times.
Better scalability. 3PL providers can easily scale labor, transportation, and space according to inventory demands. During slow or peak periods and sudden market changes, the provider ensures that transitions are stress-free by mobilizing resources only where and when they are needed.
Outsourcing transport and logistics to the Philippines
An outsourced transport and logistics service provider should focus on being the client’s strategic, long-term logistics partner by filling the skills and operations gap and delivering significant cost and service advantages. A service provider like Sourcefit can put together a team of highly skilled logistics specialists who will support the business and provide a wide range of services — from transport management to logistics consulting and logistics education.
Please contact us to find out about Sourcefit’s transport and logistics solutions.
