While outsourcing transport and logistics functions to a seasoned third-party logistics (3PL) provider will lead to efficiencies and cost-savings, a decision to do so needs to be done responsibly to mitigate any potential risks.
Firstly, it is vital to ensure that control over the transport and logistics functions is handed over to a reputable and experienced third-party logistics (3PL) provider.
“Relinquishing direct control over such critical components of a business to a service provider is never a decision that can be taken lightly. This is considering the devastating impact that sub-standard performance by the nominated service provider can have on the end customer experience. Thorough due diligence will provide confidence in the skills and capabilities of the 3PL before it even starts delivering a transport and logistics solution,” Quinton de Villiers, managing director of Bridgewater Logistics, says.
Importantly, the commissioning company needs to ensure that its transport and logistics service provider has a sound understanding of its core business.
In some instances, the 3PL may only be motivated by profit. Focusing all of its efforts on meeting the terms of the contract at the lowest possible operating cost, it neglects the clients’ culture and ethos. This leads to a substantial lowering of standards at the expense of the end customer.
De Villiers says that another important consideration during the due diligence phases is the financial robustness of a potential service provider.
“Financial loss or bankruptcy of a 3PL could result in disruptions to a business. In extenuating circumstances, it has even brought transport and logistics to a grinding halt. This is especially the case if the entire operation has been outsourced to only one company, so I also strongly suggest that contingency planning be included in the outsourcing strategy,” he says.
Further risk can be reduced by negotiating clear operating principles, as well as an exit strategy on both fronts.
Just as importantly, the negotiated contract should also include the manner in which commercially-sensitive and confidential information, such as detailed records of end customers’ locations, order volumes, new products and planned growth, will be handled by the 3PL.
Bridgewater Logistics is one of the country’s foremost 3PLs, and specialises in distribution and line-haul transport, in addition to warehousing and cross-docking.
These have been harnessed by small, medium and large businesses to provide time and cost efficiencies, in addition to access to innovation, expertise and a vast network of resources.