Can managed logistics impact your bottom line?
Managed Logistics involves outsourcing the planning, execution and optimization of your logistics operations to a third-party provider. Because managed providers can do everything, from overseeing transportation operations to optimizing inventory levels, there's a common misconception that it's more costly than building and managing your logistics operations in-house. For many companies, that isn't the case. The primary goal of managed services is to improve transportation efficiency, reduce costs and enhance overall supply chain performance — all things that can positively impact the bottom line.
Ways managed contributes to a positive return
Managed Logistics providers are known for their ability to scale. When you leverage this with industry expertise, you can see efficiencies and savings show up in places like transportation, warehousing, inventory management and order fulfillment. While the exact ROI for managed varies depending on your specific needs, the nature of your supply chain and the level of optimization achieved, there are multiple ways managed can contribute to a positive ROI, including:
Improved operational efficiency
Advanced technologies such as transportation management systems (TMS), warehouse management systems (WMS) and inventory management, combined with logistics expertise, enable you to streamline processes, reduce transportation lead times, minimize empty miles and improve overall efficiency. With this increased efficiency comes improved customer service levels, reduced inventory carrying costs and better asset utilization.
Scalability and flexibility
With the ability to scale operations up or down based on demand fluctuations during peak seasons or sudden spikes in demand, logistics providers can quickly allocate additional resources, such as transportation capacity or warehouse space. Conversely, during periods of low demand, you can scale back your logistics operations to avoid unnecessary costs. Managed also offers flexibility by designing customized solutions tailored to the specific needs of your business.
Managed logistics providers have expertise in optimizing transportation networks. They can consolidate shipments, select the most cost-effective routes and minimize empty backhauls. For example, your provider may review your current strategy and determine that Truckload is more efficient than shipping multiple LTL lanes. Or you may be shipping Truckload but missing deadlines, resulting in fees and unhappy customers. Your managed provider may utilize a service like expedite to guarantee on-time delivery, saving you money in the end.
Improved inventory management
Managed logistics services can help optimize inventory levels by implementing strategies such as just-in-time (JIT) inventory management or utilizing data and analytics to forecast demand accurately — reducing inventory carrying costs and preventing lost sales due to stockouts.
Added warehousing and storage capabilities
Managed logistics services often include warehousing and storage solutions. These providers can offer shared warehousing facilities, allowing you to only pay for the space you use. This eliminates the need for maintaining large, dedicated warehouses and reduces costs associated with storage, handling and maintenance.
Geographic expansion capabilities
Managed's scalable logistics services can support your business as it expands into new geographies. Whether entering a new market or setting up additional distribution centers, managed gives you access to the necessary infrastructure, transportation network and expertise to allow your business to grow — without being limited by logistical constraints.
Advanced technology and enhanced visibility
Managed logistics services employ advanced technology platforms and automation tools to streamline operations. These technologies enhance visibility, allowing you to track shipments in real-time, automate documentation processes, monitor success and proactively identify and address any issues along the way. With improved visibility and control, you can make data-driven decisions, optimize your operations and respond quickly to disruptions or changes in customer demands. And by reducing manual tasks and human errors, you can save time and resources.
Added expertise and resources
Managed logistics providers possess specialized knowledge, experience and infrastructure to manage your operations effectively. They stay current with industry trends, regulations and best practices, enabling them to implement efficient processes and handle your complex logistics challenges. Leveraging the provider's expertise allows you to benefit from industry-leading best practices without investing heavily in your own logistics capabilities.
Ability to focus on your core competencies
Outsourcing your managed logistics operations allows you to concentrate on your core competencies and strategic initiatives. You can rely on the provider's expertise rather than investing in building and managing logistics capabilities in-house, such as procuring transportation, running quotes and reports, and handling billing and recovery.
Read more about why shippers use managed logistics services
Using a cost-benefit analysis to determine the ROI of managed
As you consider how managed can reduce costs and evaluate whether it’s the right solution for your business, the first step is to complete a cost-benefit analysis. An experienced logistics company can perform a free analysis to quantify potential cost savings, performance improvements and efficiency gains. This type of analysis involves evaluating your existing logistics costs, including transportation, warehousing, inventory carrying costs, labor, technology and administrative expenses, and comparing them to the projected costs of outsourcing to determine potential savings.
Your logistics partner should also be able to establish key performance indicators (KPIs) that align with your business goals and objectives — such as on-time delivery, order accuracy, inventory turnover, transportation costs, order cycle time and customer satisfaction. Tracking and measuring these metrics before and after implanting managed services gives you clear insights into the performance improvements achieved, enabling you to correlate them to ROI.
Getting started with a fully managed solution
ArcBest’s Managed Logistics solutions are designed to help your business thrive. With 100 years of logistics experience, we partner with you to understand your goals; then, we can complete a free supply chain analysis — looking at your current logistics strategy and tapping into our technology, capacity network and nationwide warehousing and distribution network to move freight more efficiently, manage inventory, fulfill seasonal projects and meet distribution demands.
Connect with us today to conduct a cost-benefit analysis for your supply chain.
Learn more about ArcBest's Managed Logistics solutions and see how we’re helping customers make their supply chain a competitive advantage.