In our first column from the newly formed All Ireland Warehousing Association, the association’s chief executive officer Roger Williams looks at how supply chain management, once seen as something of an add-on with no real bearing on a business’s ultimate success, has been elevated to a key board-level discipline considered vital for any business
The approach to supply chain optimisation has traditionally focused on one piece of the puzzle at a time. These can include sourcing goods and services strategically to strike a balance between lowest material and transportation costs; maintaining the right mix and location of factories and warehouses to serve customer markets; and using traditional logistics techniques.
However, since the 1980s there has a been a sharp upturn in the number of companies that choose to outsource logistics and supply chain management functions to third party logistics service providers – or 3PLs.
Typically, 3PLs specialise in integrated warehousing and transportation services that can be scaled and customised to a customer’s needs. The kind of service offered will be based on a client company’s unique market conditions and the demands and delivery service requirements for the goods that company produces and sells.
In today’s price sensitive market, the need to drive cost out of the supply chain is often cited as a major reason for using 3PL service providers.
However, perhaps a better reason for engaging outside experts is the in-depth knowledge, flexibility and added value that a specialist contractor can provide. In short, as well as helping companies to achieve significant cost savings, a good 3PL will enable a business to enjoy shorter order cycles, better customer service and improved business efficiency.
There is no question that an effectively managed supply chain can positively influence business performance and, if companies are going to succeed in an increasingly competitive and unpredictable environment, every link in the chain must operate at optimum efficiency. That’s why any company that finds its fixed logistics costs are having a negative impact on its balance sheet simply has to consider outsourcing to a 3PL.
What to look for in a 3PL agreement
A healthier balance sheet – Capital investment is removed so financial resources can be concentrated on core business.
Operational flexibility – a 3PL will have resources to meet changing needs and be able to respond quickly to changes in the market place.
Cost savings – from economies of scale, more direct routing, additional expertise, stricter inventory control and, with improved technology, a reduction in emergency shipments at premium prices.
Freedom to focus on core activities – a 3PL provider helps develop a a long-term strategy to improve customer services, reduce costs and improve efficiency leaving the company to focus on its core business.