Seeking supply chain efficiency

Published:  05 August, 2010

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 to maximize distribution efficiency.

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 own 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 third party logistics 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 all-round 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.

3PL

What advantages should a company expect and look for when considering entering into a third party logistics agreement?

A healthier balance sheet - switching to a 3PL removes the requirement for capital investment in warehouses, materials handling equipment and transport fleets, and the up-keep and maintenance of these assets allowing financial resources to be concentrated on other core business areas.

Operational flexibility - a 3PL will have the resources to meet changing needs and the ability 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 will help to develop a company's long-term strategy to improve customer services, reduce costs and improve efficiency leaving the company to concentrate on it what it does best.

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The United Kingdom Warehousing Association

With nearly 700 member companies, UKWA is the UK’s only trade association dedicated to serving the vitally important warehousing and logistics sector. Established in 1944, the Association’s members control nearly 100 million square feet of warehousing space from nearly 1300 locations across the UK. Although originally established as a trade body for the third party warehousing sector, the Association now embraces all companies that operate a warehousing or distribution facility. Membership is not restricted to those companies based within the borders of the United Kingdom.

Members of UKWA undertake an wide range of warehousing and added value services, from animal feed storage through bonded warehousing to e-fulfilment but, regardless of the areas in which they specialise, the Association’s members all share a determination to drive up professional standards in the warehousing sector. For further information please visit the UKWA site: www.ukwa.org.uk

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*Roger Williams is chief executive officer of UKWA – a trade association representing the interests of 700 third party logistics services operators

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