Outsourcing—Far From Taboo

Your company’s job is to ensure your product appeals to the consumer, but in the transportation, shipping or logistics aspect of the company, you are tasked with making sure your product gets to the retailer in the quickest and safest way possible. And maybe up to now, the relationships you’ve worked hard to establish with your carriers have brought you some pretty competitive rates. But as of late, you might be noticing an increased order volume and a greater emphasis on speed by your retailers.

If you’ve come to the realization that it might be time to begin looking for a third-party logistics (3PL) provider, you may have concerns centered around what an implementation of this plan could entail. However, think of it this way: The goal of this endeavor is to increase efficiency and profit, and if you approach the issue from these angles, you may quickly find yourself beginning the 3PL provider search, because who doesn’t want to save time and money?

Efficiency: Code for Green

So your company has pitched an all-natural, 100% pure compact powder packaged in nothing but recycled material. Everyone loves the idea because research shows one in two consumers prefer sustainable products. But going green doesn’t have to live solely in sales and business development. Corporate sustainability is more about efficiency and waste reduction, and finding the right 3PL provider is bound to save your company time and money.

Begin by assessing your performance objectives. Are your needs growing to new markets or shifting to include new retailers? Either way, the ideal logistics provider will have a transportation and warehousing network with locations and carrier relationships that sync with your distribution needs. The provider you choose should be experienced in handling your product, both in the warehouse and on the road, and knows the unique needs each case can bring with it.

Efficiency also comes in the form of advanced technology and a forward-thinking logistics programs. Leading 3PL providers offer a technology platform to their customers, allowing them to obtain quotes, book freight, track shipments and file claims with one simple online login. Imagine being able to determine the exact location of your shipments, know when they left the loading dock and when they arrived at the distribution center, all the while having a customer service team from your 3PL provider doubling up on these efforts to help keep you in the loop.

Many 3PL provider companies also employ efficiency-driven programs such as retailer consolidation. This is especially important for small to mid-sized beauty care companies needing to plan for changing needs like expanded distribution and new retailers. Experienced providers operate consolidation programs that combine various products headed to the same retailer onto one purchase order, shortening delivery times and reducing costs and damages.

For suppliers, your back-end transportation costs are significantly reduced. As opposed to reducing logistics costs by lessening service levels, these programs effectively enhance your on-time rates and allow you to focus on additional sales. Also, your retailers may thank you for decongesting their loading docks and reducing damages. CaseStack CEO Dan Sanker says, “There is no longer a gap between the resources available to small suppliers and large competitors.” He explains that many 3PL providers now can provide a high on-time rate by working directly with retailers, transforming less-than-truckloads (LTLs) into full trucks, and reducing transportation costs and transit times. Take Advanced Beauty Systems (ABS), a Dallas-based manufacturer of body oils, moisturizers and cleansers. A CaseStack customer since 2005, ABS has saved money each year through the provider’s warehouse consolidation program, Sanker says.

“On-time rates are high, damages are low, and both the customer and the retailer benefit,” he notes. “It’s a win-win. ABS increased its performance by nearly 20% and in the process, it was able to focus on growing the company rather than maintaining the status quo.”

Profit: The Ultimate Motive

Your job likely exists because your company is making money, which had been hard to do during the recent economic upheaval.

So when you decide to make the switch to a 3PL provider, be sure to target the area that will have the most impact. Simply put, emphasize cost savings. The rates you’ve garnered during the time with your carriers are nothing compared to the rates offered by the right 3PL provider.

Third-party logistics providers operate with much larger volumes than you, allowing them to offer substantially discounted shipping rates, some as low as 40% below what you may be paying. By outsourcing your logistics, you take advantage of their expertise and infrastructure, reducing your damages, shortening your lead times and cutting down on lost sales. Imagine being able to please a retailer that has been submitting purchase orders with increasingly shorter lead times. And with retailers reducing their inventories so significantly, that pressure isn’t likely to abate any time soon.

Once you find the right 3PL provider, remember to plan for the future. If sales go well and you find this move freeing up additional dollars for business development, you could well be in for higher shipping volumes. Outsourcing to a 3PL provider is not only a way to save money, but also a way to increase sales. Make sure you go with a provider that offers order flexibility, and also look for value-added services such as cross-docking, kitting and polybagging. Growth inevitably brings hiccups and the occasional odd request, so be sure to put yourself in capable hands to experience the smoothest business relationship.

And of course, remember to find a provider with the ability to back up your savings claims. A 3PL provider exists to serve you, so find one with dedicated customer service representatives who not only look out for your day-to-day needs, but work with you to determine your upcoming needs using their platforms for analyzing and forecasting. Managing in-stocks, expiring SKUs and on-time rates effectively is a key component to a successful supplier-provider relationship, and your company will love the ability to receive data-driven metrics at the drop of a hat.

Logistics is ultimately about speed and savings, and there comes a point in every successful company’s history where processes need to be improved in order to continue to compete in the marketplace. By looking at outsourcing as an extension of existing operations designed to save time and money rather than a risky outside venture, convincing your company to enlist the help of a 3PL provider becomes an easier task. And by selecting the right one, you enter into a fluid, flexible and faster partnership.

Elizabeth Abrams is the marketing associate at CaseStack—where she handles the public relations, advertising, marketing and business intelligence strategies for the growing provider of sustainable logistics solutions. A substantial background in journalism and advertising brought her to CaseStack, where she has worked since 2008.

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