Should your SME Outsource its Logistics Operations?

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The global logistics market represents a huge growth market, and one that is set to achieve a cumulative value of $15.5 trillion by 2023.

This is an interesting point for SMEs to bear in mind, particularly those that are product-oriented and determining the best way to deliver their goods to customers. More specifically, entrepreneurs must choose whether to manage this process in-house or outsource this to a specialist service provider, in order to achieve their objectives going forward.

In the article below, we'll look at the key considerations when making this decision and ask which option is the best for your SME.

1. What is the Scope of your Business?

When making this decision, one of the most important considerations is the size and scope of your venture. Remember, any business that employs up to 250 people may be considered as an SME, and it's fair to say that not all companies within this category are created equal.

Make no mistake; the size and scope of your SME and its core objectives will have a significant bearing on the logistics model that you use.

Smaller firms may find it more cost-effective to create an in-house fleet of vehicles and manage their delivers independently, while larger SMEs with a broad and geographically diverse consumer base would benefit from the expertise of a third-party logistics specialist.

The key is to measure the cost and viability of these options against your financial resources and core business objectives, as this will help you to make an informed decision that suits your commercial circumstances.

2. The Hidden Costs of In-house Logistics

On the subject of costs, you also need to consider the hidden expenses that may be incurred when you build an in-house fleet.

Not only would you need to purchase the vehicles, for example, but there would also be a requirement to invest in both planned and unscheduled maintenance. These costs can mount quickly for SMEs, particularly in instances where your fleet includes multiple vehicles and is likely to expand over time.

It's also imperative that you purchase insurance to safeguard your investment and protect each individual vehicle, with outlets such as ALA offering customisable products to small businesses.

Similarly, you'll need to consider investing in haulage insurance, which will also protect your products when they're in transit (either between warehouses or on the way to final delivery destinations).

3. Do you have the Infrastructure to Manage in-house Logistics

When it comes to logistics, many business-owners also underestimate the back-office resources required to plot routes, optimise efficiency and meet deadlines. You'll also need to simultaneously manage the associated cost of maintaining an in-house logistics operation, and this can place a huge strain in your administration staff.

So, if you lack the infrastructure to manage this wealth of back-office tasks, outsourcing your firms logistical requirements may be the best and most efficient option.

Make no mistake; logistics professionals will manage your deliveries within an existing network, simplifying the process of coordinating routes and minimising costs in the process.

Not only does this make sense from an administration perspective, but it may also prove crucial when attempting to honour specified delivery options and maintain a satisfied consumer base.

 

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Tuesday, 18 September 2018
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