19 Advantages of Logistics Outsourcing

The right partners can be powerful allies in a business’s quest to become bigger, better and more profitable. Nowhere is that more true than logistics management, where logistics outsourcing continues to grow, and 62% of shippers who currently outsource say they are actually stepping up their use of third party logistics providers (3PLs).

Wondering if outsourcing is right for your company? Here are 19 advantages of outsourcing logistics services to consider.

Logistics Outsourcing Cost Savings

1. Reduce overall logistics costs. According to the 2021 State of Logistics Outsourcing Report, 91% of 3PL users agree that their 3PL relationships have been successful, and 68% say that the use of 3PLs has contributed to reducing overall logistics costs.

2. Avoid distribution infrastructure investments. 3PLs have already invested in buildings and systems so you don’t have to. Those costs are part of the overhead you pay but are shared across many clients, so you benefit from this broad allocation of costs. For deals involving dedicated facilities, the right 3PL may invest in infrastructure on your behalf as part of a long-term partnership agreement.

3. Avoid systems investments. 3PLs with advanced systems for warehouse and transportation management allow you avoid major investments in software purchases, programming and maintenance. The technology is not free, but again 3PLs allocate these costs across many customers and you share that cost.

4. Avoid fleet investments and maintenance. Options like dedicated contract carriage give you a private fleet without the costly burden of owning the trucks, maintaining equipment, hiring & retaining drivers, and managing safety, compliance and liability issues.

5. Leverage freight buying power. 3PLs are able to achieve much lower operating costs per load by leveraging their aggregate freight spend for substantial discounts with carriers.

6. Share freight costs. By matching your freight with that of other shippers going to the same locations, 3PLs can consolidate loads into full truckloads for savings of 25% compared to LTL shipments.

7. Reduce liability in freight operations. Liability is assumed by the carrier, who is responsible for the drivers, including workers’ compensation, liability & physical damages related to incidents.

Flexibility and Agility

8. Transform fixed to variable costs. It’s hard to constantly adjust internal space and labor to align with distribution volumes. 3PLs can ramp space and labor up and down based on need. In this way, your logistics costs parallel your revenue stream.

9. Quickly access new markets. Building and upfitting your own distribution capability in a new market takes time that you may not have. In contrast, the right 3PL can bring in inventory, interface with your systems, and have you ready to ship within 30-60 days.

10. Scale labor. 3PLs are highly skilled at managing a virtual workforce, using temporary workers, as needed, to economically address volume spikes without adding a permanent cost burden.

11. Scale infrastructure. Many 3PLs have a national or even global distribution network. This allows you to quickly expand your network in a variable cost environment.

Customer Service

12. Increase capacity. Fewer trucks and fewer drivers is threatening the ability of shippers to source freight capacity. Unlike many shippers, 3PLs and brokers can offer their carrier partners a high volume of steady, predictable freight. This makes them more attractive shipping partners than a small company negotiating on its own behalf.

13. Improve performance. 88% of current 3PL users report that their use of 3PLs has contributed to improving service to customers (source: 2021 State of Logistics Outsourcing Report).

14. Increase speed to market. Your internal resources are limited. 3PLs, on short notice, can marshal resources from across their operations to meet aggressive deadlines dictated by the demands of your customers.

15. Improve visibility. 3PLs are able to integrate tracking into shipper IT systems, provide integration into ERP and WMS systems, and provide immediate notice of exceptions. This helps you keep your end customers informed.

Company Performance and Focus

16. Gain perspective. 3PLs are exposed to challenges across different customers and many different industries. As a result, they bring best practices to bear for your organization.

17. Gain control. That’s right. Shippers report that they actual gain more control through use of logistics outsourcing, mostly due to enhanced systems that provide real time visibility and sophisticated reporting capabilities. This allows for earlier and improved planning.

18. Improve continuously. Continuous improvement in cost and service is a core value of 3PLs, who have dedicated teams of engineers and operators that constantly analyze and optimize processes.

19. Focus on your core business. Supply chain management is a highly sophisticated discipline that requires experts to do well. You can invest money, time and people to develop this expertise internally, or partner with the right 3PL/s and focus those internal resources on what you do best.