If you could outsource in-house operations and, at the same time, drive growth, reduce costs, improve workflows and gross profit margins – wouldn’t you take advantage of it? Welcome to the world of value added logistics services.
What is the Value of Added Logistics Services?
Value added logistics services are those additional distribution and warehousing services, such as custom packing, cross-docking and quality controls offered by 3PL partners. These services allow businesses to outsource what would normally be in-house operations and offset associated costs. By taking advantage of value added options, businesses free up resources which can then be used to strengthen core competencies.
In a highly competitive industry such as the supply chain, many SMB companies realize that partnering with a robust logistics provider who provides solutions beyond transportation and warehousing is a top criteria in a growth strategy.
“Modern logistics starts in the customer’s plant, not afterward. Manufacturers have realized that it makes economic sense to transfer certain in-house tasks to a logistics company.”
Dirk Bütow, Global Key Account Manager at BLG LOGISTICS
Types of Value Added Logistics Services
Just as there are many different types of businesses, there are a host of value added services designed to enable the logistical needs of those businesses. From industrial to pharmaceutical, the food industry and cold chain requirements, customers in the supply chain rely on the specialty and expertise of their 3PL partners to extend their workbench.
For logistics companies that provide value added services, supply chains may focus on more discrete characteristics such as time sensitivities, price or warehousing capabilities depending on the value chain they serve.
A few examples of value-added services offered by logistics companies include:
- Cross Docking
- Co-packing & Assembly
- Product Rework/ Sorting
- Reverse Logistics
- Quality Checks
- Container De-stuffing
- Shrink Wrapping
- Custom Packing
- Labelling (UPC & Barcode printing)
- E-Commerce Drop Shipping Services
- Providing EDI to Customers (Standard or Customized solutions)
- Detailed management reports
Value Added Services Make Customers More Flexible
In order to provide a higher level of service to clients, 3PL and logistics companies tailor their services to meet the specific needs of their customers. The benefit of value added services to the customer is in a more efficient supply chain. The benefit to the logistics provider is in more business through diversification.
Value added activities in logistics enable customers to offload in-house operations that are restricting growth thereby allowing them to reallocate resources that improve or maintain market competitiveness.
For instance, pre-assembly is a typical value-added service in logistics. If you employ a JIT strategy in your business, partnering with the right 3PL provider can facilitate a cost effective method of forwarding partially assembled goods through the supply chain without having to switch carriers.
Furthermore, workers that specialize in pre-assembly are employed within the managerial sphere of the logistics provider. For your business, this further removes the burdens attached to human resources by not having to maintain staffing for these outward services.
Value Added Services and the Supply Chain
The globalization of sourcing and manufacturing has facilitated the need for more diversity in logistics. Just as early freight forwarding evolved into logistics, value-added services became a natural extension of evolving supply chain opportunities.
Where value creation was traditionally held as an internal control by the customer, the availability of cost effective outsourcing shifted value creation into becoming a collaborative effort with an external 3PL partner.
Businesses with optimal supply chains have 15% lower supply chain costs, less than 50% of the inventory holdings, and cash-to-cash cycles at least three times faster than those not focused on supply chain optimization.
Depending on the nature of your business, key activities may require optimized trucks and container loads. Or you may require co-packing, repacking or custom packaging from your logistics relationship.
One value added service for instance, may involve re-packing goods that arrive in large batches from a distant location. The repacked goods are then sold in smaller batches at their final destination.
Another value added service may involve true diversity in customer fulfillment. For instance, a 3PL partner can both manage and fulfill B2B and B2C orders from a single pool of inventory. In a market where space is at a premium, avoiding the expense of warehousing for what would otherwise be distinct inventory sets provides an essential advantage.
Value Added Services and Sustainability
By combining transportation routes that would otherwise involve another service company, a logistics provider that offers a value added service solution can streamline an entire leg of a supply chain. For instance, by eliminating product transports, customers enjoy the benefits of more efficient transport and add to the sustainability of the supply chain itself.
Trust and Information
Like any partnership, a 3PL-client relationship works like marriage, therefor there must be a high degree of trust and the sharing of information between the two parties.
It would be fair to say a high level of trust is not only the anchor of the relationship, it’s also a prerequisite for the creation of value-added services. Meeting deadlines and expectations ensures success and facilitates the easy sharing of sensitive information. For instance, customer information may be required by a logistics provider to customize services and improve process efficiencies.
Nobody can predict the future with absolute certainty. Take the Pandemic for example. We would like to think our existing infrastructures and supply chains are robust enough to weather minor hiccups, and perhaps they are, but these are evolving technologies in a world currently experience a bullwhip effect after a near dead-stop.
The shortage of truckers and the start-stop jerkiness of the availability of products has been working its way through the supply chain for a number of years now.
Yet, according to a recent report from Statistics Canada on rental space in commercial markets:
Compared with the fourth quarter of 2020, commercial rents were up 3.3%, supported by increases across all building types: industrial buildings and warehouses (+4.2%), retail buildings (+3.8%), and office buildings (+1.8%).
These positive growth numbers would seem to reflect a continuous and expected demand. As for the supply chain hiccups, they may just be growing pains.
Will the wrinkles smooth out eventually? Hard to say. But being able to share the load of value creation for your customers through good logistics partnerships makes sense. Plus, partnering with a reliable, environmentally responsible 3PL provider who offers value added services tailored to your needs has the added benefit of increasing sustainability.
To find out how Brimich Logistics and Packaging can help your business grow through value added services, contact us today!