Outsource or On-board: Why Third Party-Logistics is the Most Logical Solution for Your Business

Your company is growing and so are your logistical needs. You’ve run out of space for your inventory. It’s taking a long time to pick, package, and ship orders.

How do you reduce costs and streamline processes, so you can continue to grow? The answer is outsourcing and more than 30% of companies are already doing it & it’s not slowing down.

Third party logistics is the growing trend for companies looking to reduce logistics costs and grow their business. Use our guide to help decide if it’s time for you to make the switch to outsourced logistics functions.

In-House Freight Logistics

In-house logistics will require you to hire more employees to manage your system. They will need to track inventory and maintain adequate levels available for fulfillment.

You will need to create an entire system for your fulfillment so that your orders are stocked, packed, shipped and tracked on time. Finally, they will need to manage shipping so that the most-cost effective methods are being utilized at all times for your company.

1. Cons

As your business grows you have to continually reassess your logistics processes. You can expect the process to become more time consuming and complicated as the number of orders and shipments grow.

2. Use More Resources

As your needs grow, you will have to dedicate more resources, which takes them away from other areas of your business. One of the biggest resources used will be physical space.

3. Space Needs

You will need more room to manage your inventory. You will have to invest in larger warehousing for both inventory and process housing. These extra costs can inhibit your business to scale more effectively.

4. Mistake Costs

If you are not experienced, you have a large learning curve ahead of you. You risk wasting precious financial resources by investing in the wrong methods for handling growth.

Outsourcing Freight Logistics

Outsourcing your logistics needs means you will have a 3PL (third party logistics) company like ATS Logistics help you inventory, picking, packing, or shipping. Depending on your business, they can manage every part of the fulfillment process.

1. Pros

Outsourcing your logistics and freight operations can reduce your operating and capital costs. Managing your expenses becomes simplified with one 3PL expense.

2. Adapt Quickly

It also makes your company better able to adapt and adjust for changing markets and needs. Your 3PL will have larger logistic resources to adapt and change with you.

3. Space Problems Handled

Consider the amount of space needed to store inventory as the busiest time of the year. Then compare that space to the amount needed during the slowest time of the year. 3PL companies have the capability to adjust for this instead of you paying for unused storage space for half the year.

4. Focus on Your Strengths

Your 3PL provider can focus on their core strength of logistics functions while you focus on your company’s core strengths. This adjustment of responsibility gives your customers better service.

5. Take Advantage of Experience and Technology

Instead of learning as you grow you can leverage the 3Pl’s knowledge and technology. This reduces costly mistakes as your company grows.

6. More Resources

You take +advantage of the available warehouse space. This lets you reduce product costs by ordering supply in larger quantities.

7. Reduced Risk

By outsourcing you transfer liability and reduce risk. This includes compliance with state and federal DOT regulations.

8. Reduced HR Costs

By outsourcing, you eliminate employee positions. This will reduce your hiring, training, and insurance costs.

Which One Is Right for Your Business?

Deciding whether a 3rd party logistics company is right for your business comes down to size, demand, and costs. If you are a manufacturer doing business over a $1million in products then you should be using a 3PL.

1. Economies of Scale

At this point, businesses need to invest carefully to continue growth. This is the point at which it becomes more effective to pay for outside services.

You also need to evaluate the increasing costs of trying to scale your logistics infrastructure. Using a 3PL lets you take advantage of their size without the investment costs from you.

2. Production vs Shipment

Consider a 3PL if you find your ability to produce goods outpaces your ability to store and ship them. You need to monitor your growth of both production and logistics to ensure they grow at an equal pace.

3. Expertise

Perform a critical evaluation of the knowledge and expertise of your company. If you don’t have the knowledge base, outsourcing helps you avoid costly mistakes.

Third-Party Logistics is Necessary

Third-party logistics becomes the logical choice as your company grows. The larger your company, the more inventory you’ll carry and shipments you will make.

An in-house logistics department gives you full control. This isn’t always a good thing though. You will have increased financial, time, and space costs which can slow your business growth significantly.

Outsourcing makes the most sense if you want to free up your company’s resources to devote them to other efforts. With these available resources, you can take your company to the next level of growth.

Contact us today to find out how we can help you manage your logistics and shipping!

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