Over the past several decades, the trend has been to outsource “non-essential” business functions. Examples of outsourced functions include logistics and information technology, but many more functions have been outsourced. Outsourcing is a now a tricky and debatable subject with some of the world’s most successful companies looking to insource. A lot of today’s most profitable companies are bucking the outsourcing trend and are finding ways to own more operations that contribute to the full product life cycle. Amazon is an example of a company doing more and more insourcing. It appears that Amazon believes that all aspects of business that touch the customer are critically essential. Amazon looks at all of their outsourced operations and searches for ways to bring them in house to improve the customer experience and reduce costs.
Many larger, legacy manufacturing companies find themselves in a tough position when trying to bring their logistics operations back in-house. They have given up so much expertise and removed so many important positions that even the thought of bringing logistics back in-house is scary. Like any big undertaking, getting started can be the most difficult part of this transformation. The good news is that in 2020, there are many affordable (SaaS) transportation management system software (TMS) products that can smooth the transition and provide teams the tools needed to be successful.
UROUTE has developed and implemented a blueprint to assist companies that want to bring their logistics operations back in-house. UROUTE takes a look at each company’s individual circumstance and then customizes a strategy to fit their corporate footprint and specific logistics goal. This can include bringing all logistics operations in-house or just the portions that make sense and save money.
There are two main reasons to bring your logistics in-house: 1) provide a better, more complete experience for your customer 2) Reduce cost and save money. If these two fundamental goals cannot be achieved, UROUTE would never encourage changing for the sake of change.
Better Customer Experience
How can managing your own logistics create a better experience for your customer? Today, everybody wants to know where their product is and when will it arrive. By taking ownership of the logistics process, visibility gaps disappear. Full ownership of logistics operations may include procurement, choosing the right carriers, or partnering with the best brokers, using analytics for continual improvement and freight payment bill audit. Implementing technology to fully integrate with those partners to provide customers more accurate, deeper visibility, which makes for a better customer experience. Do you have the technology to offer a visibility tool to your customers? Do you have a system that can place customers, venders and carriers on the same platform? When all these participants can electronically and virtually play in the same sandbox, it eliminates uncertainty, problems are quickly identified and corrective actions take place so solutions can be found and enacted.
Reducing Transportation Costs
There are many factors that contribute to fluctuating freight rates, and honestly, most of those factors are macro in nature and out of your control; however, the first objective necessary to reduce your logistics costs is to ensure that at any given point in time, regardless if rates are high or low, that your team is procuring freight at the lowest possible market rate from quality providers. How do you do that when freight markets change so quickly? The key is to have a tool that allows flexibility to quickly maneuver between contract and spot freight. Carrier management is also key component to freight cost reduction and containment as well as receiving quality service. There is nothing more important to receiving favorable rates then to be considered a “shipper of choice” amongst carriers.
Shipper of choice factors include: 1) Respecting carriers’ time. Carriers make money when they can efficiently manage and predict time (loading time, driving time and unloading time). Make sure you have a system that can efficiently manage carrier appointments to eliminate time wasted in the yard. 2) IT – Provide carriers system integration options to reduce their data entry and other manual tasks to operate your business.
For companies that are willing to take a critical look at their current outsourced logistics structure and make an educated determination if insourcing would improve their overall competitive advantage, UROUTE is here to help.