Outsourcing in the supply chain of logistics teams may sound farfetched. After all, outsourcing typically refers to sending jobs overseas. Yet in outsourced logistics simply refers to hiring a third-party logistics service, 3PL, to handle the logistics services. From securing inventory to transporting goods from Point A to Point B, 3PL are taking over as in-house logistics teams fall flat. Two of the most prominent businesses in the USA are following this movement—Target and Justin Brand.
It has been a frightening few years for Target investors. First the massive data breach in which thousands of American shoppers’ financial information was jeopardized. Then the Canadian expansion has been deemed a total failure, resulting in a loss of $5.4 billion. However, the company’s latest move might be the saving grace this globally recognized brand needs to survive.
According to Supply Chain 24/7, Target is taking a cost cutting plan to the extreme, setting the company to save $2 billion while increasing their supply chain capabilities. While Target has been utilizing outsourced logistics for some functions of the supply chain since 1997 via GENCO, as noted by Supply Chain Brain, corporate is now focused on streamlining the supply chain to provide more:
Overall Target is set to invest $1 million, and by some estimates even more, in supply chain and technology to boost the department store’s target reach and sales capabilities.
Another leading brand taking the outsourced logistics lead is Justin Brands, a prominent Western style boot supplier with the brands of:
As the distributor for these popular cowboy boot brands, Justin Brands is looking to outsource logistics functions to 3PL services in order to streamline their logistics system. According to CEO of Justin Brands, Randy Watson, “[Justin Brands Inc.] examined all possible solutions and determined getting out of the distribution business and engaging a third party company to manage the distribution center would be the best option. The new distribution center will enable JBI to better manage our current volume and position us for future growth.” The new focus for Justin Brands will be in providing the best product for their target customers. Meanwhile the experts of a 3PL will handle the distribution.
The main reason that using a 3PL service for a brand, big or small, is that outsourced logistics frees up a business to focus on what they know best. After all, unless a business is in the business of logistics, then it is not a forte that comes naturally. As organizations grow and expand the reality is that they are unable to keep up with the constant changes and evolutions of the logistics world. The same goes for the marketing sector and IT departments. While in-house departments were once sufficient to handle the tech, marketing and distribution needs of a company, the expansion created by globalization and the Internet has changed all of that.
Benefits of a 3PL
According to Supply Chain 24/7 the four main reasons why businesses are turning to 3PL are:
For businesses, such as Target and Justin Brands, that have a global reach there is the vital necessity to make the supply chain a success. As noted in the recent supply chain catastrophe of the Canadian Target stores, a supply chain with a kink will break a business in a very short period of time. By outsourcing the logistics of a supply chain a company can turn to the professionals for tackling the ins and outs of inventory, warehousing, transportation and distribution. Having an expert team of logistics providers working for a business can be the boost it needs to advance to the next level.
As noted by Inbound Logistics more and more businesses are moving toward outsourced logistics and the use of third-party logistics companies to handle their supply chain needs. In a IL survey the results showed that 93 percent of businesses utilized inbound logistics services. Warehousing was another popular category of 3PL usage with 86 percent noting they also used this service. The trucking industry is another faction that responds well to 3PL, given the increase of freight opportunities from LTL to long haul due to 3PL. Having a 3PL provider handling logistics and transportation functions streamlines the efficiency for both shippers who move thousands of pounds of freight every day. Overall, the benefits of going 3PL are exponentially increasing thanks to the growth of globalization and the increased supply and demand of consumer goods in the US.
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