Is receiving supplies on time an issue for your business? Do you really have control over your procurement transportation costs? Do you get the impression that supply management hampers your competitiveness or your growth?
If so, you’re not alone. For many businesses, managing the flow of raw materials is bafflingly complex, and getting more difficult as time goes on. The burden is becoming too great for growing businesses, who face challenges that go beyond their expertise or their capacities.
What is the solution? Outsourcing! By contracting out your transportation logistics, you can greatly improve your procurement management.
Here’s a summary of how it works and the benefits you stand to gain.
A crucial component of your business’ profitability
Transportation logistics have changed greatly in recent years. In 2019 it’s an industry worth close to $200 billion in the United States alone.
Why is this figure so high? Simply because, on average, transportation costs represent between 14% and 20% of the cost of purchasing factors of production. This means that a business can cut costs by improving the logistics of shipping supplies.
The benefits of efficient transportation logistics will also be felt on a number of other levels:
- Smooth-running logistics give a business the ability to meet customers’ needs
- They enable the business to stay competitive, giving it the capacity to adapt to changing conditions in its market
- They increase the control a business has over its costs.
And naturally, all this benefits the bottom line.
Although many big businesses have succeeded in modernizing their transportation logistics, this poses a challenge for many others, from SMEs to major companies.
Outsourcing provides a tailor-made solution to the current complexity of supply chain management.
Why outsource?
Handing over your transportation logistics and your entire supply chain to a subcontractor lets you concentrate on what’s most important for your business. You can focus on creating value for your customers.
You will gain peace of mind and a guarantee of efficiency. The subcontractor takes complete responsibility for the supply chain and transportation, so you no longer need to concern yourself with these aspects. You can rely on the subcontractor’s expertise to supply you with the inputs you need when you need them.
Because the subcontractor’s business depends on its accountability to you, you can be sure that it will be efficient. And you gain the advantage of its expertise.
What is involved in outsourcing the supply chain and transportation logistics?
When you outsource responsibility for supplies and their transportation, you fully delegate:
- Relations with suppliers
- Delivery of raw materials and other supplies
- Inventory management
- Optimization of costs and international transportation.
This approach is called third-party logistics (3PL). It gives excellent results: according to the 2017 21st Annual Third-Party Logistics Study, over 75% of shippers indicated that 3PL services allowed them to reduce their logistics costs.
Specialized supply-chain transportation logistics services will improve the planning, tracking, speed, traceability and fluidity of your operations.
With transportation logistics properly implemented in your organization by a specialist, you will gain better control over your inventory, avoid customs holdups, and consolidate your transportation modes.
What’s more, in combining transportation logistics with supply-chain management, you will adopt an agile, adaptable operational mode that minimizes the number of actors involved.
In this way you will keep your production line well supplied while generating savings and meeting deadlines set and budgets allocated.
Choosing the right subcontractor
“The first step is an accurate assessment of your needs,” says Réal Julien, J2 President. “You need to understand the benefits of outsourcing your transportation logistics and supply-chain management. “
Next, advises Louis-Philippe Langlois, Vice-President, Distribution Centres at Groupe Robert, ask yourself the following questions:
- Does the subcontractor own the required equipment? Groupe Robert, for example, owns the major part of its truck fleet. This gives you an assurance that the subcontractor has the capacity to “deliver the goods”
- Is the company innovative? Is it able to adjust rapidly to new market conditions? A subcontractor that uses leading-edge technology, with the ability to adapt quickly to changes in the market, will be better able to support your business’ success.
- Can the subcontractor offer you an integrated logistics service (3PL)? Can it take responsibility for supply, intermodal exchanges, distribution and delivery?
To these criteria, Réal Julien adds your presence or reach in the market you occupy or are aiming at. If your market extends beyond Québec, you must make sure that the subcontractor you choose is present where you want to go. It must know the industry concerned and have good relations there.
“Transportation logistics is too important to handle alone,” Réal Julien stresses. Better logistics management translates into better cost management!”
An innovative alliance in Québec
Three companies specializing in logistics have recently formed a consortium to offer Québec businesses transportation logistics integrated with supply-chain management.
J2 Procurement Management, Groupe Robert and Bolloré Logistics Canada have joined forces to offer Québec companies turnkey, integrated logistics support.
This alliance represents a first in Québec.
In the consortium’s integrated solution, J2 handles the procurement portion, Bolloré is responsible for international transportation logistics, and Groupe Robert takes care of domestic transportation logistics and warehousing.
Results are very positive: customers save an average of 60% of their transportation and distribution costs within the first 12 months.
Are your transportation logistics up to the mark? Talk with J2’s experts
Sources:
Ibis World: https://www.ibisworld.com/united-states/market-research-reports/third-party-logistics-industry/
2017 21st Annual Third-Party Logistics Study: https://www.capgemini.com/news/2017-global-state-of-logistics-outsourcing-study-reveals-evolving-role-of-shippers-and/
Bain & Company: https://www.bain.com/insights/turn-your-supply-chain-into-a-competitive-weapon/