Outsourcing leads to agility in transportation?

November 10, 2011: In supply chain, agility and flexibility are means to attain competitive advantage. In modern supply chain, what works today won’t work tomorrow. In today’s information age which is characterized by consumerism and globalization, the product lifecycles are getting shorter. Customers are more informed than they were a few years back and are more demanding. Demand cycles are becoming more volatile and the time for the product to reach the market from the R&D is reduced to record time. This has become a source of competitive advantage for the companies which fight for their share in the market.

In the present day supply chains, the first function to be outsourced by the companies is the transportation function. This has reduced the huge investments in terms of vehicles for companies, but has presented problems with communication which has resulted in serious problems of responsiveness which is critical to any supply chain. Such problems with communication have resulted in a trend that integrates all the logistics functions. The logistics functions include freight forwarding, warehousing, inventory management, and transportation which are areas of concern for any supply chain practitioners for the past 10 years.

Recently outsourcing the logistics functions and optimizing them has profound impact on the revenue and profit of any firms. It not only reduces risk, but also lowers the capital investment required to carry on operations, improve profitability and service delivery.

While integrating the supply chain brings in savings that amount to 85 per cent of the savings, optimization also has a positive impact on the cash cycles, customer service, customer loyalty and sales. In addition to savings in terms of cost, the ability to react quickly is also an added advantage.

Operational risk is considerably reduced by outsourcing logistics function where fixed overheads are turned into variable costs and fixed assets are turned into cash.

Partnering with the right outsourcing provider will help in changing the logistics operation with respect to changes in the demand. In any supply chain agility is referred to as the capability of the company to produce and market broad range of low cost goods with short lead times. Flexibility is referred to as the ability of the company to respond quickly and efficiently to changing customer and customer demand.

In order to reach the market in short time, the information should be quick, reliable and accurate. Information helps the managers in forecasting the demand, plan the level of inventory and achieve agility and flexibility. The level of inventory is an indicator of agility, flexibility and responsiveness.

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