Outsourced vs In-House Transportation: A Guide

All companies at some point have to make a decision on what aspect of a business to keep in-house, and what should be outsourced. Transportation is such a critical part of a supply chain that many companies leave it to specialist third party logistics (3PL), but depending on the type of company and the trajectory of the business, insourcing could be a valuable investment.

The three main options for transportation are:

1. Contract Carriage: An agreement between an established carrier and another party for transportation. This is the most popular option as it is the most well-known and the most flexible. The upside to this option is that there is no transportation management other than scheduling pickups and deliveries for products as they are ready to ship. The downside is that the transportation is at the mercy of big trucking companies and if there are emergency shipments it’s not always possible to schedule last-minute transportation.

2. Private Fleet: Owning tractors and trailers and employing drivers to run transportation operations. A private fleet enables a company to have complete ownership of the transportation network. The benefit to this is that there is total control over the operation, but this comes with the burden of managing a separate entity that is likely not the company’s specialty. It requires capital to invest in trucks and trailers, as well as hiring and retaining drivers and adhering to regulations for these truck drivers. Very consistent demand and shipments would be required to justify this option.

3. Dedicated Fleet: Assigning a group of tractors, trailers, and drivers exclusively to fulfill transportation needs. This option is essentially a private fleet but is managed by experienced companies, so is somewhere in the middle of insourcing and outsourcing. This is a desirable option often because companies do not want to deal with the intricacies of owning a private fleet, but they want the flexibility and service levels that come with owning it. Dedicated fleets are usually run through 3PLs.

Declining Business: 3 Key Ways to Save in Warehousing Costs

A financially stable business with declining demand is a situation in which. Do not be alarmed as there are many ways to help cut warehousing costs to prolong your positive cash flow. Here are 3 key ways:

1: Data-Driven Forecasting

Completely accurate forecasting is hard to achieve, but frequent, data-driven forecasts with informed strategic adjustments are the key to determine how much product nee on-hand inventory is needed. Being able to plan for While this seems basic, there are other areas where accurate forecast can help save money in the future. For example, if you are using a 3PL and can say that your inventory levels will drop x amount each year, your footprint in their warehouse should drop as well allowing the 3PL to fill that space with other clients thus saving you money.

2: Inventory Analysis

In a business that’s losing demand, there’s a good chance that the are certain items that maintain the demand while most others are being phased out. It is very important to keep track of the demand for each individual SKU in the warehouse. An ideal situation would be to set up all the slow-moving SKUs as direct shipments from the manufacturer while keeping only the high moving SKUs in the warehouse. While the shipment costs directly from manufacturer to customer will likely be higher, the savings from not keeping the inventory in stock will outweigh the increased shipping costs. Another option to look into would be to separate slow-moving SKUs in one smaller and centralized warehouse. You can keep the inventory levels low allowing you to lower the footprint. Staffing needs will also be reduced since the handling of these SKUs is much less than in the faster moving warehouse.

3: Inventory and Staffing Management

Proper inventory management is important for all businesses, but it is especially important in declining ones. Start by looking into any trends that might be developing in the orders. It is important to think of outside the box methods for optimizing your warehouse strategy. Instead of looking at storing the SKUs by size or product line, look to see if there are certain items that are usually part of the same order. Group these items close together in your warehouse to save on the handling costs. Instead of storing 1 small SKU per bin, store 3 in each by adding in dividers to the bins. There is also a greater need for cross training of the staff in a slower moving warehouse. There will be much more down time and you cannot afford to have employees not being productive. There will be a slight learning curve at the beginning when the employees are learning the other job functions of the warehouse, so productivity might go down. This is fine as the returns once the cross training is complete will be much greater than the lost production early on.