What is Transport Logistics?
We all know the importance of transportation in today's time. It's just like the way blood is for life. Transport logistics is the nitty gritty of the logistics business. Logistics deals with the activity of transporting goods from one location to another by making using of the modes of transport like trucks. The logistics industry thrives on relationships between truck owners and logistics companies. Association with the right partner can help your business become bigger, better, and more profitable. It is seen that logistics outsourcing continues to grow. Almost 73% of the people in the business tend to outsource their logistics function to third party logistic providers or 3PLs.
Benefits of Outsourcing Logistics
Reduces overall logistics costs: According to 2016 State of Logistics Outsourcing report, almost 90% of 3PL users agree among themselves that outsourcing their logistics function has improved their bottom lines. This is all due to the success of 3PL relationships between the company that outsources and the third-party vendor. Outsourcing reduces overall logistics costs.
Avoids distribution infrastructure investments: 3PLs have already created a backbone of buildings and systems at the ground level. The logistics outsourcing company only has to utilize this backbone and pay for using it. These costs are shared across many clients, by the third-party vendors. Therefore, the per unit cost to the client comes to minimal.
Avoids systems investments: 3PLs invest heavily in warehouse and transport management tools like software, maintenance tools, etc because they can recover them from their service to all the clients. Therefore, the outsourcing company does not have to invest in systems and services to the same.
Avoid fleet investment and maintenance costs: A dedicated contract carriage gives you the option of owning a battery of trucks or wagons without having to bear the burden of owning the transport systems, maintaining the fleet and the associated human resources headaches. This will help the client avoid fleet investment and maintenance costs.
Leverage freight buying power: The 3PLs are able to leverage their relationship with the carriers to achieve substantial discounts. These discounts are then passed on in part to the customer. Therefore, the vendors have much lower operating costs per load. This is how the vendors leverage their freight buying power. As they have a large consignment to transport, they get heavy discounts from the carriers.
Share freight costs By making use of planning techniques, the outsourced vendors can match your freight with that of other clients going to the same location. This enables them to consolidate loads into full truckloads. This ensures savings of up to 25% compared to the LTL shipments. This helps to share freight costs among different clients.
Transport fixed to variable costs: 3PLs can bring down their carrying costs by adjusting internal space and labor to align with the distribution volumes. They can ramp the space up and down based on the need. This helps keep logistics costs parallel to the revenue stream. This is how fixed costs are converted to variable costs.
Quickly access new markets: A company takes time in building its reputation and creating a relationship with the channel partners in the distribution system. It may not have this time with it. The 3PL can be vital in this space as it can help in its symbiotic relationships created with the channel partners in the distribution system for the benefit of their clients.
Thus, these are the advantages of outsourcing transport logistics management systems to third party vendors. These are not the only advantages. There are others too but they are beyond the scope of this article.