How Outsourcing Logistics Can Be A Key Differentiator Of Success For Modern Businesses

Aditya Vazirani, Founder Director, Robinsons Global LogisticsHaving completed the Executive Program in General Management from the Massachusetts Institute of Technology, Aditya has over a decade experience in the Logistics industry, during which he was also the Commodity Manager ­ Global Purchasing & Transportation for Federal-Mogul.

The era of global marketplaces that are driven by speed, innovations, and customer centricity, have demanded that modern businesses enhance their focus on core competencies in order to survive and flourish. Typically, competency can be defined as one of the traditional functions such as production, engineering, sales, or finance, around which organizations were formed in the past. However today, competencies tend to be a set of skills that cut across traditional functions and drive the key differentiators for successful businesses. Logistics and Supply Chain is one of the core traditional Business Functions that not only demands huge resources for management and co-ordination, but also incurs heavy costs.

However, in the last few years, the Indian Logistics sector has undergone a rapid transformation and growth, driven by effective policy changes like GST implementation, the move to grant infrastructure status to the logistics sector, country's positive economic policies, and growth across major industries such as auto-mobiles, food, agriculture, pharmaceuticals, FMCG, and the emergence of organized retail & e-Commerce. The sector is estimated to grow from the current $160 billion to $215 billion by 2020 and is set to be dominated by a new, emerging set of organized, integrated logistics players, driven by innovation and technology- enabled processes.

With the global competition and the need to reach far-flung destinations within stipulated timeframes, modern businesses today are seeking to adopt an integrated and organized logistics approach. As a result, the need to outsource their logistics activity has become vital for the evolution of most sectors, especially considering the presence of an organized and integrated ecosystem of contract logistics service providers that are now available.

Worldwide, since the early 21st century, there has been a large shift in outsourcing logistics and, just in the U.S., spend on Outsourced Logistics Services have grown 800 percent, from $10 billion in 2003 to $80 billion in recent times. Commonly referred to as third party (3PL) or fourth party logistics (4PL)
players, the contract logistics services in India today has evolved from the traditional transport and storage facilitators to modern consultants for end-to-end supply chain engineering for business.

Some key benefits of outsourcing to external Logistics partners can be understood, as under:

With the global competition and the need to reach far-flung destinations within stipulated timeframes, modern businesses today are seeking to adopt an integrated and organized logistics approach

Improved Logistic Functions:
• Reduced Burden on Resources: With a well-trained and specialized team of experts, outsourced logistics teams ensure in-house employees can be relieved on specialized functions, reducing the burden of time and performance on them.

• Reduced Costs: With standardized and tech-enabled infrastructure, 3PL providers offer integrated and superior logistics services at a relatively reduced cost, compared to the cost incurred with in-house logistics department.

• Ease of Managing Services: Having an external logistic partner ensures easier and focused management of the logistic flow, through automated reports and transparent processes.

• Enhanced Logistic Effectiveness: Outsourced services that are professionally managed ensure larger effectiveness in terms of timely shipments and desired results that drive overall business growth.

• Enhanced Logistic Efficiency: Modern, standardized and professionally managed networks ensure efficient logistics processes that are result oriented and impactful.

• Extended Global Reach: With a pre-established global network through an established 3PL partner, businesses can have ready access to international markets, facilitating enhanced reach and expansion of services.

Improves Business Focus:
• Reduced Expenses: Outsourcing to organized 3PL players helps businesses to cut costs by eliminating the duplication of efforts, reducing paper-work, optimising resource, and enhancing efficiency.

• Renewed Customer Focus: Outsourcing frees-up re-sources so businesses can re-align their focus and growth strategy to mirror customer demands, meeting their needs proactively.

• Enhanced Competitive Advantage: Focus on core competency enhances performance, thus offering businesses to have a discernable edge, relative to competition.

• Improved Performance Indicators: With renewed focus key growth drivers and customer focussed strategies, key performance indicators can be improved, including sales, market share & profitability.

• Increased Product/Service Quality: Resources previously engaged in logistics can now be focused on quality management, research, and innovation, leading to improved core offerings, thus driving growth and overall expansion of business.

3PL firms today have developed competencies in the modern management of logistics processes, along with an extensive network of information and communication. Several 3PL and 4PL players are well equipped to offer extensive service to clients, including access to a pre-existing supply network which can be used across industries, along with automated supply chain offering services from inventory management to loading goods in the transporting vehicles for last-mile deliveries.