Pain, growth and change drive outsourcing

Pain, growth and change drive outsourcing

In many mid-sized companies, senior managers are very close to distribution. They can see it, touch it, feel it, says Mark Rhoney, vice president of strategy and marketing for UPS Supply Chain Solutions. They see it as a key to the organization’s survival, and they’re reluctant to give up the feeling of comfort and sense of control.

In addition, most companies don’t measure the cost or contribution of logistics. They may know the cost of outbound transportation, but they don’t have a complete picture. What can break the logjam and drive the move to a 3PL?

Pain drives many companies to outsource logistics. It may not be a logistics problem; the pain could come from financial concerns elsewhere in the organization and a need to deliver cost savings and results.

Growth can also push a company to outsource. Not only would a growing market drive a company to a 3PL for help, but logistics capacity could be a constraint on growth.

Change is another major factor behind outsourcing. Mergers and acquisitions often render existing network structures sub-optimal and require coordination and reconfiguration.

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October, 2003

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