The Resource Group

To Outsource or Not to Outsource – That is the Question

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When analyzing profitability, the question of outsourcing is bound to come up.  Should you outsource functions such as order fulfillment and shipping to third party providers?  Well, that depends on your need for control versus your need to cut costs, as well as the ability to keep customers happy at the end of the day.

Distributors (http://www.resgroup.com/distribution) that have been around the block a few times are more likely to have their own fleet of vehicles, drivers, and the know-how to distribute their products to customers quickly and affordably.  However, there seems to be a trend where some, or all, of the shipping and transportation responsibilities are shifting to third-party providers (3PLs).  The reason behind this trend is that a 3PL also has their own fleet of vehicles and drivers and that’s it.  They know shipping better than most businesses because that is their focus, not products or trends, just getting items from point A to point B.  In fact, a good 3PL is likely to know more about goods transportation than the distributor or manufacturer themselves.

If you outsource transportation activities to the pros ̶ a 3PL̶ ̶̶ you may see cost savings and time savings.  You could reduce shipping costs and pass on those cost savings to your customers.  You may also improve cash flow since carriers tend to work on a 15-day payment schedule for businesses, but allow a 30-day payment schedule for 3PLs.  It may not seem like a big deal, but the added control and time within cash flow can prove to be helpful for most businesses.  Finally, by spending less time on transportation issues, you will have more time to spend on other important business functions and with customers.

In order to make a switch to using a 3PL service for your shipping activities, you will want to scrutinize potential 3PL business to make sure they have a good reputation, reasonable prices, and can ship products to your customers in accordance with your specifications.  Check references and make sure that your 3PL options are financially stable, competent, and have a good customer service record.  Outsourcing only works if the 3PL can save you money, and deliver your products to customers safely and on time.

Outsourcing has a potential to reduce transportation costs and improve your productivity and profitability.  The key is to have a reliable 3PL that can deliver your products to your customers efficiently and affordably.  Contact The Resource Group for more information about streamlining transportation management: http://www.resgroup.com/contact.

 

By The Resource Group, a Microsoft Dynamics GP Partner out of Washington

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