Advantages & Disadvantages of Using Logistics Services

The logistics process, at its most simple, is moving goods from point A to point B. However, with the rise of globalised distribution and complicated production schedules, many companies have chosen to outsource logistics to a specialised company. There are advantages and disadvantages to outsourcing logistics services, so you should consider carefully whether it is the right decision for your particular business.

The Advantages of Using Logistics Services

Enhanced Distribution Network – The logistics company will have built up a solid network with different long term partners to be used for different needs. They will be able to optimise timings all the way along a logistics chain. You can choose the parts that would be most useful to you, from simple freight delivery to warehousing fulfilment.

Reduced Costs – You will be able to take advantage of automated facilities and already existing systems and so benefit from a costs reduction. There is also greater visibility in supply chains which can lead to better inventory management with cash flow benefits.

Expertise – The world of logistic management is full of changing technology and fluctuating government regulations. This can be confusing to a business that does not specialise in this area, but a logistics company will be able to deal with changes and unexpected problems easily, working on logistics solutions that benefit you and your customer. They will also have access to all the latest technology so that you can get these benefits without investing in it yourself.

Delivery Fulfilment – Over the last decade, delivery times have been dramatically reduced thanks to the rise in logistics companies. Customers now demand quick delivery no matter what they are buying, and a logistics company can help with this. It is also much easier to scale your operation as customer demand goes up and down when using a specialist company.

Improve Customer Satisfaction – As mentioned above, there is high customer demand for quick delivery times. When you can provide this, you increase customer satisfaction in your business. As your company grows, the logistics also become more complex, and the risk of falling service levels will be higher if you undertake the logistics yourself.  

The Disadvantages of Using Logistics Services

Larger Companies – Logistics operators are larger companies with many customers – it is much harder for smaller companies to compete due to the costs involved. This means that you may not have many options when choosing which company to partner with.

Loss of Control – By using third party logistics, you are relinquishing control of part of your interaction with a customer. However, delivery is also a very important part of customer satisfaction, so you need confidence that your logistics partner is the right one for you.

Communication – Communication between all parties must be high to avoid any confusion or potential problem. This includes the need to ensure that all IT programs or systems are able to communicate properly with each other.

Cost – Although it may help you to save money elsewhere, outsourcing is still an additional cost to your business. You will need to judge the exchange on the return on investment or the value that it gives you.