How To Select Logistics Outsourcing For Small And Medium-Sized Enterprises?

Because logistics has great impact on the cost of enterprises, it is very important for enterprises to solve their logistics capabilities.

Whether logistics capability is built or outsourced is one of the most important and difficult decisions faced by enterprises.

A company with first-class logistics capability can gain competitive advantage by providing quality service to customers.

How to determine whether a company is self-employed or outsourcing is a strategic problem that requires an enterprise to define its core competencies, namely, those that distinguish themselves from others and remain invincible.

If we decide to outsource a product or service that is closely related to the most fundamental core competencies, we must carefully select suppliers, and we need to form a close strategic alliance.

Therefore, the outsourcing decisions of enterprises first consider the following aspects.

1.1, enterprise strategy

Enterprise strategy is the general program for the survival and development of enterprises in the market competition. It is a global, long-term and fundamental issue in the development of enterprises. It is also a concentrated expression of business ideas and business policies.

It is a correct answer to "what kind of organization do we want to be?"

Many enterprises in China are influenced by traditional management concepts, and there are many problems in their decision making process.

In fact, even big companies can not fully realize self-sufficiency.

For example, Ford had hoped to manufacture all the required parts in its vertically integrated manufacturing plant and build an inland port and an intricate railway and highway network.

But now Ford motor company has not been that way. 50% of its components need to be purchased from the outside, and according to the different circumstances of each branch, it is determined whether its logistics capability is built or outsourced.

The more enterprises pursue self-sufficiency, the larger the scale of enterprises will be, and the more complex and diversified management tasks will be.

This may lead to the effective management of management because of excessive decentralization.

Therefore, when deciding whether to build or outsource, the enterprise should eliminate such self-sufficient emotional factors.

In the strategic decision of an enterprise, the core competitiveness is an important factor.

Successful enterprises can focus their resources on one or a limited number of capabilities to surpass competitors and explore distinctive competitive advantages.

Moreover, these enterprises will set their core competency above the average level of the industry, and will focus their resources on non core competitiveness around their competitive edge.

Logistics capability is undoubtedly an important cornerstone for forming the competitive advantage of enterprises.

Enterprises must realize their business objectives through logistics, while meeting their own needs and customers' needs.

Therefore, whether the logistics capability is the core competency and whether the enterprise can actively utilize this capability to gain competitive advantage is the first thing that enterprises decide to "build or outsource".

1.2, enterprise scale

The size of an enterprise reflects the financial strength of a company and the complexity of its production.

Generally speaking, the larger the scale of an enterprise is, the more complex the production will be. It is closely related to suppliers and sellers.

If the logistics capability is outsourced, the production and operation structure of enterprises should be adjusted in a large scope, and this adjustment cost will be very high, and at the same time, it will affect the stability of the supply network and the sales network of the enterprise.

On the other hand, the scale of enterprises is relatively large, one of which is that logistics resources are relatively abundant, for example, having their own pport power and storage facilities. If enterprises themselves can effectively utilize and manage these resources, self logistics may only need to invest a small amount of cost to update technology, so that it can satisfy both the needs of consumers and themselves.

Under such circumstances, the same level of service can be achieved at a lower cost than outsourcing.

In addition, the surplus logistics network resources can also be used to expand external businesses, gradually accumulate logistics service experience, technology and funds needed, develop specialized logistics, and open up the way for the long-term development of enterprises.

For small and medium-sized enterprises, the scale of the funds is small and the production changes are large. On the one hand, they can not invest large amounts of funds to build their own logistics facilities, and because of the risk of internal business process reengineering, they may also be resisted by internal staff and waste of resources.

Therefore, outsourcing of logistics capabilities can be used to break through the "bottleneck" of resources, so that the development of enterprises can achieve a higher growth rate.

1.3, cost

How to make the lowest total cost? Is the first consideration for enterprises in formulating logistics strategy, and is also one of the goals pursued by enterprises.

Of course, the cost to be reduced here is not the functional cost of logistics, but the total cost of operation of the entire enterprise.

Enterprises need to have a comprehensive understanding of the composition of logistics cost and have the ability to analyze and calculate dynamic cost.

Of course, the total cost calculation of effective logistics process is still difficult in practice.

However, enterprises can analyze and compare the cost of self run and the potential cost after outsourcing, which is a more effective way to prove whether outsourcing is beneficial to enterprises.

In addition, because there is a non-linear relationship between logistics cost and increased logistics performance, a company that maintains high inventory in order to provide fast delivery may have to double the cost of logistics than those with less obligations.

Therefore, the key to enterprises is to master the art of matching their logistics capabilities with customers' expectations and needs. The commitment to customers is the core of logistics strategy.

Accordingly, the total cost of enterprise logistics is determined, and the logistics capability is determined to be self built or outsourced.

1.4, service quality

In today's business environment, if an enterprise is willing to shoulder the necessary resources, almost any desired logistics service can be achieved.

For example, the establishment of a special warehouse near the location of the customer can keep a convoy at any time.

This logistics service can respond to customers' needs almost immediately after the order is placed, but the cost of doing so is high.

In essence, logistics service is a balance between service superiority and service cost.

Enterprises need to understand the depth and scope of strategic management of logistics service providers, and to see whether suppliers' services can meet the needs of the enterprises. In particular, suppliers' development strategies should match or match with demand enterprises.

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Generally speaking, the supplier's basic logistics service level can be measured from three aspects:

1. Availability

2. Operational efficiency

3, service reliability

Availability means having stock and consistently satisfying customers' demand for materials or products.

According to the traditional method, the higher the availability of inventory, the greater the inventory investment will be required.

Although science and technology are reducing the correlation between inventory availability and high inventory investment, we still need to focus on the development of inventory availability.

The efficiency is the process from order to delivery.

The efficiency of operations relates to the consistency of delivery speed and delivery.

Enterprises will generally seek to achieve consistency of logistics services, and then increase the delivery speed.

The performance of logistics can also be inspected from its flexibility in adapting to the usual and unusual customer needs and the recovery of failures.

Service reliability relates to the availability of logistics and the accurate measurement of operational efficiency.

Only by comprehensive measurement can it be possible to determine whether the total logistics operation meets the desired service goals.

From the point of view of enterprises, logistics capability should be measured by the above three points.

2. Choose logistics service providers correctly.

When enterprises are going to outsource logistics and need to find third party logistics providers and negotiate with them, what is the enterprise's first need to do to make the process go smoothly? The answer is "preparation".

The ultimate goal of negotiations with any third party logistics provider is to establish a fair, stable and efficient partnership.

This preparation includes four main parts: (1) determining whether outsourcing can play a role in the company; (2) clearly defining the operation and system requirements of the company; (3) finding and selecting third party logistics service providers; (4) understanding the negotiation standard.

Outsourcing decisions of enterprises need support from all sectors of the company. Although it is usually difficult for the company's leaders and employees to believe that the outsourcing companies can represent the quality and customer service of the company to the same degree, there are many ways to improve this internal satisfaction.

One way is to get the parameters of the third party suppliers, so it is very important to investigate the past work records of the future partners.

The consistent recognition of outsourcing at various levels of the company will strengthen the status of negotiations with suppliers.

In addition, enterprises need to invest a lot of time and money to obtain important data (such as inventory and production sales demand), which are the basis for negotiations with the third party logistics.

2.1, clear service needs.

In order to effectively carry out contract negotiations, the company must clearly determine its own service needs.

First of all, accurately list the items to be outsourced. The company may need the services provided by the supplier including warehousing, pportation, inventory management, enhancing the added value function (packaging, labeling, assembling, etc.), information support (product tracking, electronic payment, settlement, etc.), and after that, the parameters of these operations are determined in detail.

These are the reference standards needed to select suppliers.

If the service demand is not quantified or unclear, it will lead to a misunderstanding between the supplier and the buyer. Suppliers often think that the demand providers are too demanding, and the suppliers do not think the supplier has fulfilled the contract terms seriously.

In addition, it is necessary to determine whether suppliers can cope with unexpected changes in actual operation, such as changes in product numbers, sales volume and customer changes.

2.2. Screen candidates.

Once the company's service needs are identified, the list of the most suitable third party logistics can be listed.

At this time, there are many choices, and we need to spend some resources to make the right choice, so that we can significantly reduce future problems.

You can summarize the company's service needs on an assessment form and reduce the list of candidates to three to four.

It is satisfying to measure the needs of each service to ensure the most important reference standards.

A simple measure is to identify these requirements with A or B. A means absolutely necessary, B indicates what is needed, but it is not necessary.

After such an assessment, the list of candidates is further considered, and the number of places is reduced to the most promising one to two.

2.3. Visit the workplace.

The last step to choose suppliers is to visit their workplaces to find out how they work.

Listen carefully to the introduction of the supplier, giving each candidate a fair opportunity to describe how he can meet the needs of the company.

Second, ensure the operability and flexibility of every device of the supplier.

The company can avoid some common problems by understanding the difficulties experienced by the actual users.

Because the supplier selection process may be longer, the company will try to skip unnecessary sightseeing and meetings.

However, visiting the supplier's workplace is a decisive step for the right choice of the third party logistics providers.

2.4. Cost estimate

Apply logistics requirements to contract entries to calculate outsourcing costs.

In general, the cost of outsourced ordinary warehousing services includes the area needed, the activities necessary for mobile products in warehouses, and the added value added functions.

The typical method to determine the cost of third party logistics warehousing service includes the cost per square meter site, the paction cost of each product, and the cost of each loading.

The third party logistics providers should explain these items in detail.

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(1) plus cost pricing.

When suppliers can not provide accurate information, they can make a better budget to determine what profits the supplier will get.

Usually, customers will pay all the costs associated with the plan.

(2) fixed price method.

The two sides agree on a constant rate (for example, the third party logistics operates a warehouse and charges 20 million yuan a year).

(3) variable pricing method.

This method is based on the quantity of services and is more risky for suppliers.

2.5. Setting up assessment criteria.

The third party logistics should have a strong understanding of the system needs of the supplier, and the supplier should confirm that all the main points are included in the contract and clearly understand the solution of the logistics.

In fact, the content of the two agreements will become complicated.

The third party logistics providers usually hope to independently decide the starting point, terminal and route of the commodity pportation, and at the same time, they also stipulate the price of pportation, storage and management.

For demand providers, the corresponding items can be determined according to the price they are willing to pay, such as arranging the delivery time.

Another important problem is to make some explanations in the contract so that the contract can be modified to prevent the dissolution of the partnership when circumstances change.

There are also legal penalties for breach of contract in negotiations.

If the company does not have its own legal adviser to consult lawyers, this is a more effective way.

No matter what the nature of the alliance is, it is essential to establish a performance appraisal standard to supervise the two sides to fulfill the final performance of the contract, and make detailed instructions in the contract so as to avoid mutual accusation when the problem arises.

Once the outsourcing relationship is established, it means that the interests of both sides are tied together rather than independent. A good partnership will benefit both sides, and any side's bad performance will damage both sides.

Self evaluation and positioning, behavior ethics, mutual trust and loyalty and commitment are the key factors for establishing good outsourcing cooperation relationship.

3. Conclusion

Logistics outsourcing is a long and tortuous process. The signing of contracts is only the beginning of outsourcing. In this process, we need to constantly assess the finished activities, even outsourcing decisions, so that each step can achieve the desired purpose.

We believe that even if there is a conflict in cooperation, we can find a way to solve it and make it happen again.

Self evaluation and positioning, behavior ethics, mutual trust and loyalty and commitment are the key factors for establishing good outsourcing cooperation relationship.