Outsourcing Supply Chain Management: Lead Logistics Provider Benefits
Most industry within North America (and the world) rely on the logistics function; some manufacturers may rely on a third-party logistics (3PL) relationship to accurately manage the movement of their product. A more nuanced approach is taken on by manufacturers who enter into a relationship with a fourth-party logistics provider (4PL), which entails an almost full-service management of some aspects of the manufacturer’s supply chain.
For those manufacturers that prefer to focus on their core processes and strategies, and completely outsource the supply chain function to the experts, a lead logistics provider (LLP) is the best option. An LLP combines logistics engineers and supply chain experts who manage and execute all aspects of the supply chain function within your business. One source describes LLP’s as a business that “…takes what most companies think of as back office operations and manages them as a commercial proposition, delivering economies of scale and expertise that comes from managing multiple customers’ supply chains.”
When working with an LLP, you need to understand the core goals of your business, the supply chain strategy and many times, develop a gain-share relationship to motivate the right behavior; when your LLP reduces costs and increases the efficiency of your supply chain, your business benefits, as does your LLP. This relationship encourages constant communication, a hyper-focused attention to supply chain management detail, and a common goal benefitting both manufacturer and LLP.
Competitive Advantages/Benefits of an Lead Logistics Provider
Assessing your business’ level of maturity is key when deciding whether the partnership between you and a lead logistics provider will provide the best return for your business. Thoroughly assessing your logistics outsourcing needs – has your supply chain grown beyond your knowledge and expertise? Are there financial and/or personnel restrictions that prevent you from expanding your internal supply chain management function? – will help you determine if you’re ready to partner with an LLP.
Utilizing the services of an LLP presents a number of competitive advantages for businesses who are ready to enter into this partnership.
1. Economies of scale
As the manager of the logistics and supply chain within your organization, the cost that accompanies the transportation and storage of your product can be significant. When working with an LLP, their ability to negotiate and leverage their influence with suppliers and vendors can have a significant impact on your business’ bottom line. This is especially true for SME’s who simply don’t have the budget to match what large corporations are doing.
An LLP can bring economies of scale to you; if your logistics spend is $1 million, for example, and your partner LLP is managing $400 million, their leveraging power can give you access to the best supply chain partners, at a cost that your business can handle. This creates a competitive advantage for your business by reducing costs and increasing the efficiency of your supply chain.
2. Preferred supply chain system technology
Technology is advancing at lighting speed, and upgrades within the supply chain management sector are no exception. When you partner with a lead logistics provider, they typically have the most updated systems already in place to effectively manage the full supply chain. Warehouse management systems, outbound/inbound freight management, and invoicing and payment management are a few of the areas where your LLP partner should be providing the latest technology resources for your business.
The use of this technology helps to appropriately manage your supply chain data, and in turn allows you to use that data standardize and assess possible issues or exceptions within the supply chain. This again allows for increased efficiencies and saves your business from the capital investment required to install these systems internally.
3. Full visibility into the supply chain
The most significant advantage that an LLP offers is the ability to provide full visibility and management of your company’s supply chain; from raw material to the time the product leaves the production floor, through to its final delivery destination. LLP’s can effectively manage multiple locations, assets, and other 3PL’s or 4PL’s who work for you, creating a seamless, efficient supply chain process.
The LLP is able to proactively address potential supply chain problems, eliminate redundancies and increase communication to both stakeholders and customers. Increased visibility into the overall supply chain, provided by your partner LLP, can create opportunities for increased cost savings and control over your logistics function, while enhancing communication and feedback on supply chain efficiencies.
Utilizing the services of a lead logistics provider can give your business the competitive advantage that is needed, by increasing supply chain optimization and reducing overall company costs. Determine what fits best with your business, research the relationship and ensure that company culture and values merge, and then work to develop the supply chain management plan and attached systems that work best for your business. Review the above benefits of an LLP and pick your LLP partner based on their quality, capability, cultural fit and then price, to ensure you are receiving the best benefit and return from working with a lead logistics provider.