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Building value into logistics outsourcing

By Gary Whittle, Commercial Manager, LinQ Alliance

The concept of the supply chain has evolved over the past 10 years, whereby the movement of goods from one location to another has become only a part of the services provided by logistics companies. Now 3PL companies are building a wide range of services into the portfolio of supply chain processes, which can generate greater value across the entire supply chain because the companies performing the selected processes now have expertise in a wide range of value added services including but no limited to kitting and final assembly; polybagging and shrink wrapping; pick and pack, labelling and return logistics.
As well as these added value services, 3PL service providers carry out physical logistics operations, provide warehousing and manage complex operational handling, administration, information management systems, customer broker services and international freight forwarding.
In the last decade, developments have taken place that has influenced global manufacturing. Many of the manufacturing activities have become more complex and knowledge-intensive. In parallel to the development of these so-called high value product-manufacturing activities an increase of outsourcing of light production and assembly activities to logistics companies can be observed. These activities are often classified as value-added logistics.
As a consequence of globalisation, intercontinental product flow is expanding. The flourishing economy in China and some other Asian countries and the expansion of the EU is causing a shift in manufacturing with many companies choosing to buy from abroad, ship in bulk and then assemble, package, pick and pack and label in the UK. The main thinking behind such moves is to keep the company competitive by keeping it lean, owning fewer assets and by reducing its head count.
At the same time, as third-party logistics providers reach deeper into their customers' core business, their role will evolve from that of a support service to that of a strategic partner. All of this has one overarching objective – to work towards a seamless, cost-effective method for the movement and delivery of goods.
3PL is evolving from a predominantly transactional-based enterprise to one that is more strategic in nature to allow companies to focus on their core competences. They are delivering end-to-end supply chain integration, visibility, synchronisation and broad-based business process capabilities for global customers. This end-to-end process can include supplier management, procurement, contract manufacturing, logistics services, global trade, financial and tax management and customer service. Such solutions can be scalable enabling customers to 'plug and play' responses to growth opportunities or changes.
Looking to capture a slice of this market many 3PL companies have begun to increase the scope of their services to include IT applications (for ex freight billing), transportation planning and optimisation applications. Companies that can provide a diverse range of services to include export shipping, documentation requirements, packaging and labelling considerations, warehousing and inland transit options and compliance management are now sought after for these specialist trade routes. With continuous improvement of technology, systems and processes, 3PL logistics providers are better able to constantly evaluate and implement best practices in its field. As this is their core business, logistics players can concentrate their resources on developing and implementing value-added services.
With the growth in demand for their services, 3PL providers are keeping abreast with IT developments to capitalise on the many e-business solutions available. Given the complexity of transportation and warehousing, the Internet offers a suitable platform on which communication among the parties involved can be better managed.
Most manufacturers cannot justify the investment costs in setting up a warehouse or the operational costs involved in the distribution process. Such high capital expenditure is a burden for most. Having an outsourced logistics partner, an organisation is positioned to cut its costs and manage its resources more efficiently.
Recent developments show that there's an increased professionalism of logistic services companies in the field of warehousing, transport and distribution with a European and global scope. Most of these logistic companies tend to take a growing share in supply chain management. The fact that logistic companies play a more important role in the production process has partially to do with the growing importance of safety and more strict safety and quality regulations. In efforts to satisfy customer needs and manage costs, the outsourcing of logistics services should be part of an overall business strategy, and when seen from a macro perspective, it is a means to achieve an edge over competitors. This ensures a sustainable business and customer value in the longer term.

Issued on behalf of: LinQ Alliance Ltd, Units 1-6 Eastside Park, East Service Road, Raynesway, Derby, DE21 7BF Tel: 01332 666663 www.linqalliance.com

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