World Trade - January 2009 - (Page 47)

TR A N S P O RTATI O N & LOGISTICS Outsourcing Without Fear How a strong 3PL-Client relationship takes the risk out of outsourcing. BY RON CAIN T he thought of outsourcing can be a concern for any business. Companies and their CEOs have often achieved success through meticulous attention to detail and extensive control over every aspect of business operations. Many companies take the “if it ain’t broke, don’t ﬁx it” approach, assuming their internal operations are “good enough,” and improving them is not worth the perceived risk of outsourcing. Outsourcing, defined by Rob Handfield of North Carolina State University as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources,” often has the connotation of a loss of control, transparency, and security for CEOs and operations managers. Unfortunately, this reputation has been perpetuated by poor outsourcing providers and bad 3PL contracts. Find the right partnership with the right 3PL, however, and you can be free to outsource without fear. The criteria that should be used when considering if outsourcing is right for your company includes: 1. Is the task highly complex? 2. Is there a risk to the business while performing the task in house? 3. Does the task require more than the available resources? 4. Does the task require highly specialized training or tools? 5. Is the task outside of your core competencies? 6. Could outsourcing cut costs and improve service levels? More and more companies are asking these questions, and drawing the same conclusions: it’s time to outsource. According to a study by Georgia Tech University and Capgemini LLC, transportation and warehousing continue to be the functions that are most commonly and successfully executed through outsourcing. Other frequently outsourced functions include customs clearing and brokerage, forwarding, shipment consolidation, reverse logistics, cross docking, and many others. The trend towards outsourcing is steadily increasing, as the study reports that ﬁfty percent of businesses that currently do not outsource logistics plan on outsourcing at least some of their operations in the future. There are several factors that allow companies to outsource without fear. Creating strong personal relationships on an operational level, and having carefully drafted and signed contracts, have been cited as two of the most important elements in a successful outsourcing plan. A 3PL-client contract should include detailed descriptions of services, performance tracking criteria, clearly measured improvements in service levels, peer-to-peer relationships that provide guidance and sponsorship, and clearly measured cost reductions. With the right 3PL partner, an outsourcing plan can have significant results: companies who outsource reported an average reduction of 18 percent in ﬁxed logistics assets, a savings of 13 percent on logistics cost, and a reduction in the average order cycle length of almost four full days. Once the decision to outsource has been made, a company must find the right 3PL that reflects its culture and values, and is able to enter into a productive relationship. First, a company should choose whether its needs are best suited by an asset-based or non-asset based 3PL. An assetbased 3PL is a logistics provider that owns many or all of the assets necessary to run its clients’ supply chains. This allows the provider to leverage internal strengths and infrastructures to provide direct, immediate solutions; however, an asset-based 3PL may be internally focused rather than customer focused, can have internal biases, or may falsely overemphasize its ﬂexibility. Also, a customer will often pay for all or part of the assets, resources, and tools owned by an asset-based 3PL. WWW.WORLDTRADEMAG.COM 47 http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - January 2009

World Trade - January 2009 Contents Supply Chain Finance Conference: The Right Stuff at the Right Time! Is the Dollar's 'Exorbitant Privelege' as the Global Standard at Risk? Supply Chain Watch Tradewinds The Rise of the 4PL An Evolving Tech Backbone Makes 4PL Service More Effective The Changing Landscape of U.S. Railroads Intermodal Grows Up Port of Hamburg Grows as Distribution Point to Eastern Europe Outsourcing Without Fear Measuring the Carbon Footprint

World Trade - January 2009

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