As international trade continues to evolve, logistics have followed a parallel path, evolving along with it. Which explains why we’re witnessing the almost inevitable rise of Contract Logistics. So what, exactly, is that?
Logistics used to mean simply moving goods from one place to another. Today, the market is demanding more wide-ranging services and more specific processes. Contract Logistics is the answer to that demand, the ideal solution for companies that want expert monitoring and managing of their operations.
Contract Logistics is the comprehensive process from production to distribution at the final point of sale. It’s a change that goes far beyond the movement of goods, all the way to an approach that manages the entire supply chain, from start to finish.
It’s a turbocharged edition of Third-Party Logistics (3PL). In the past. 3PL providers were focused mainly on shipping, warehousing, and distribution. Today, more and more companies are looking to efficiently outsource even more processes. So you now see 3PLs who manage nearly everything that makes up a supply chain: product manufacturing, warehousing, inventory management, distribution planning and implementation, shipping and even reverse logistics (post-sale and returns.)
More often, it’s flexibility. This is especially true for fast-moving consumer goods (FMCG) companies or retailers who need to prepare for volume fluctuations. Because a Contract Logistics partner is able to share facilities and labor, they can absorb volume increases and fluctuations better than an in-house operation. This has a strong appeal to FMCG companies during intense launch and promotional cycles—Black Friday sales come to mind.
When a distribution is in-house, inefficiency costs often negatively impact supply chain managers, who are then encouraged to lower their per order and share of revenue costs. Yet the drivers of those costs are behaviors that are outside the scope of a logistics manager. A Contract Logistics provider often can expose the practices that actually cause inefficiencies.
Building an in-house warehouse facility can take well over a year, but getting set up with a Contract Logistics provider can be done in weeks.
Yes, costs are always a factor. And there’s good news on this front, too. The costs of working with a Contract Logistics provider can be lower than running your own logistics operations.
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