If your business is manufacturing or distributing, you’ve probably considered outsourcing non-core functions to a third-party logistics (3PL) provider.
For most companies, the benefit of being able to devote more company resources to the core functions of a business is countered by the added cost of outsourcing.
But disruption is now the norm for any business that relies on transportation and warehousing, and last-mile delivery. With this in mind, many manufacturers and distributors would be well-advised to renew their analysis of the cost benefits of outsourcing to a 3PL.
But, this time, do it with a view of the added cost that they can incur if they keep everything in-house.
How Outsourcing Non-Core Functions to a 3PL Saves Money
1. Lower IT Costs
The days of managing your fleet by phone and fax are long gone. If you can’t pinpoint where your shipments are at any given moment, you increase your risks and put the company at a competitive disadvantage.
But the software, hardware, and support required for robust transportation and warehousing management systems not only drain your IT budget, they take energy away from what your business does best.
2. Reduced Transportation Costs
This is the one that can be the toughest to get your head around. If you pay someone else to deliver your goods, how can they do it for cheaper than you can in-house?
There are a number of ways that 3PLs a can help you lower your transportation spend. First, 3PLs can use their shipping volume to negotiate better rates with trucking suppliers. Similar economies of scale often mean more advanced technology and less fluctuation in transportation rates.
3PLs also work with many transportation providers, in addition to their own fleets. They know which provider may be looking for freight and in a position to offer better rates.
3. Less Overhead and Administration
How much time and resources does your company devote to a back-office administration that isn’t related to your core functions? Put another way, imagine not needing to chase down invoice variances from transportation suppliers, and outsourcing order entry and invoicing.
There are many ways that 3PLs help you control and reduce costs. More than enough to justify outsourcing. Please contact us here at PiVAL to learn more.