Why 3PL companies must consider outsourcing to logistics partners

Have you ever wondered why a company should outsource its core competency? Nishith Rastogi argues the reasons.

Third-Party Logistics or 3PL sector is all set to reach the Rs 580 billion mark by 2020 from the current level of Rs 325 billion. The sector is headed towards an unprecedented growth rate of 19-20 percent CAGR. When you consider the number of shipments in India over the last few years, the total is baffling!

Even though everything is a click away today, it doesn’t change the ground reality that it is incredibly challenging to manage supply chain logistics. Logistics companies, over the years, have handled the routing, workforce, and cost accounting for shipments. However, in the last few years, the requirements of the consumers have changed drastically, and satisfying them has become the primary concern for every e-commerce player in the world.

If you are a 3PL company and you’re taking care of the logistics of even a giant e-commerce store, you already understand most of these intricacies. You handle the manpower required, track the deliverables and ensure the goods are delivered or picked up on time. But have you considered a better way to figure out a transportation budget with fluctuating operational data, to manage overheads and depreciation, to account for cost per mile regarding fuel for all modes of transportation and all nature of goods, as well as to leave a margin for return delivery logistics? Not only can it save you cost, it can also affect your bottom line results with the impact it has on operations and business.

While you’re reading this, 3PL companies around the world are outsourcing to companies that can harvest their data to provide valuable insights and solve operational glitches in real-time. A company that is choosing to outsource is predominantly backing a business strategy that not only deals with efficient transportation and distribution but also with warehousing and optimization of inventory.

If you’re wondering “Why would a company outsource its core competency?” here’s why:

To perform better today than how you were performing yesterday. To optimize your cost, be more flexible, predict the inventory needs and ultimately, provide the best logistics support system. For example, factoring in the volatile data might seem trivial at first, but optimizing the route or the vehicle allocation, or getting better proof of delivery, amount to increased productivity.

Nishith Rastogi, CEO and co-founder, Locus

Some logistic partners have created algorithms that will solve your real-time issues in a jiffy. It’s because they take into account intricacies such as estimated traffic en route, item volume, vehicle type, stop durations and also have a way to indicate how to dispatch your load smartly based on priority, rider’s skills, schedule, costs and availability.

So fundamentally, if your logistics partner is technologically sound, your route planning will no longer be dependent only on previous experiences but also on real-time traffic data. A digitally enabled logistics partner can help 3PL companies with automating their sorting process, remove the ambiguity in addresses with geocoding and provide automated routes to their riders for delivery. All of this will not only lead to increase in efficiency and reduction of costs for 3PL companies, but more importantly, it will reduce the dependency on human intelligence and manual labour.

Just like this, there are several nodes along the supply chain system that need maximum optimisation all at once.

Logistic partners in today’s world are especially valuable in taking the load off your shoulders, making everyday decisions involving routing and packaging, based on the changing variables at ground level. As the size of the company gets bigger, the insights become the eyes, ears and feet for long distance and even international deliveries that require live tracking and constant monitoring. Just the volume of activity is sufficient to knock out an army of seasoned experts in the field.

Automating the process of overseeing supply chain management would ensure that 3PL companies focus more into conquering India’s untapped market, rather than competing with their digital counterparts.

This is the time for collaboration. Embrace it.

Nishith Rastogi is the chief executive officer and co-founder of Locus, a Bengaluru-based logistics management platform that optimises logistics operations to help boost business efficiency. Rastogi is responsible for strategy and innovation at Locus. He leads business expansion across geographies.