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5 Strategies for Successfully Outsourcing Shipping Logistics

Successful Logistics Outsource

Often in my work in the C.H. Robinson Green Bay office, customers will ask us how they can improve the odds that their logistics outsource will be a success. Over the 15 years this office has been open, I have developed expertise in how to best outsource businesses’ logistics. In this post, I outline five key tactics you should follow to ensure your outsourcing is smooth and successful.

5 Strategies for a Successful Logistics Outsource

For starters, a logistics outsource engagement depends on a number of factors. Some items are within your control, and some are not. Here are five outsource logistics best practices that hopefully can help you bypass the school of hard knocks.

1. Understand expectations from multiple influences within your company.

Basically, this helps the team work together instead of pointing fingers. The supply chain touches almost all departments, and each looks at the business through its own lens. Include strategic team members from all of these functional areas for a 360-degree view of the supply chain. At the same time, each team member will gain a first-hand understanding of your supply chain strategy, and will be able to implement their portion of the plan and measure outcomes. Companies with the best success tend to choose team members based on strategic inclination, as opposed to title or seniority.

2. Measure outcomes, not activities.

Measuring the provider for activities—such as the number of shipments executed, quantities of pallets moved, or total miles traveled—won’t get you very far. Instead, measure the outsource provider on how they perform the activity against key performance indicators (KPIs) that improve productivity and increase efficiencies. Outsource models and solutions may look similar on the surface, but the level and quality of the activities performed will have an impact on other parts of the organization beyond transportation.

3. Grade your current technology against emerging needs.

This is particularly important for companies that rely on IT staff to lead the innovation process. Be prepared to discuss your desired metrics and future expansion plans. This helps you know what will be needed for smooth integration with the provider. You can evaluate your existing transportation technology with these three measures:

  • Does your current technology provide you with the real-time dashboards or reporting capabilities you need to monitor the KPIs you select?
  • Are you willing and able to provide accurate data to your provider?
  • Does your current technology offer the scalability, accessibility, and low deployment and maintenance costs of cloud computing?

4. Carefully choose what to outsource and what to retain.

You can retain strategic control and still have a successful logistics outsource. In traditional outsource relationships, you typically turn over an entire process or department to a third party, which manages “activity.” But successful outsources can also bring talent and technology inside your company, leaving your organization in strategic control of its transportation network. If your provider has a cloud computing model, your internal team can monitor real-time dashboards and receive customized reports based on KPIs.

5. Build an informed risk profile.

There are a number of built-in risk factors shippers face in transportation and logistics. Each area has associated costs.

Not all risk is equal. And not all providers have the ability to fulfill all obligations related to risk. How you assess these risks can impact a logistics outsource. Understand that not every organization takes on risk the same way—and the cost of assuming, or passing along, these risk factors could make a difference in the outsource relationship you have with your selected provider. Make sure you evaluate the operational, financial/legal, and brand reputation/service risk.

Final Thoughts

How you approach these factors and vet potential outsource providers can make or break the outsourcing engagement. In a more global world, success requires both cost reduction and value creation. This makes outsourcing—with its low- or no-cost integration of talent and technology—an appealing transformational strategy for shippers of all sizes.

Outsourcing your logistics requires expertise from an expert. Learn how outsourcing consultants can further streamline the processes. 

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Comments

Henry

Hi James, Thanks for your information. I’d like to know more about the business model of truck business management. I am from China, and here a lot of road transportation business are by individual truck owner (also the driver). There shall be a big room form us to improve, so I just want to understand how your business runs, then I can use as benmark and best practice. Thanks a lot! Henry

8.5.12

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