The logistics function in some major PLCs supply chain management has been responsible solely for multi million revenue boosts through efficiency enhancements.
For businesses to achieve substantial logistics savings, it requires time investment into:
- Planning delivery processes
- Sometimes rigorous change management and its application
- Selecting the right logistics partners
Operational advantages can be gained through outsourced logistics contracts. Contractors need to have an in-depth understanding of the sector, but also of economies of scale, because increased production levels can bring proportionate savings to the distribution.
Key savings lay within outsourced warehousing and distribution where performance incentives are used based on KPIs.
These can dramatically enhance efficiencies.
Where things go wrong
Logistics contracts are largely based either on cost plus or open book management. These are complex agreements. Furthermore, when used with a large quantity of throughput (which many 3PL contracts are) accounting and allocation errors can occur.
Errors omit some benefits to outsourcing.
Is Your Business Overpaying?
Based on previous contract cost allocation reviews, we have discovered some customers with excessive costs under the outsourced logistics contracts.
The Procurement Group has a comprehensive review service, which includes:
- An analysis of financial reports prepared by the contractor
- Cross-referencing those to the legal agreements
- Establishing that costs charged to you are actually costs related to you specifically
- Analysis of contractor central overhead costs built into your contract for HR, finance and IT as these can be excessive
- Assessing whether insurance rebates, group discounts and sundry credits are correctly allocated to the contract
What we can do
The Procurement Group have experts on the team who have a solid understanding of the logistics sector. We can identify the frequent errors and those one-off errors that wind up costing the customer.
- We know the sector
- We know the contracts
- We know what works to outsource logistics cost efficiently
For users of 3PL contracts, we’ll provide you the peace of mind that your contract is being administered appropriately.
What we won’t do
We won’t interfere with your operations. We will always maintain good relationships with contractors.
Our intent is not to identify methods of accruing costs agreed between clients and contractors, however, we can cover this separately if that’s something you want us to assist with.
Talk to us
Call us on 0800 0193 244. Alternatively, send an email to new@procurementgroup.co.uk and one of our advisors will get back to you.
Checking KPI Performance / Service Level Agreements
Setting appropriate KPI and Service Level targets are the cornerstone of driving value from the logistics function. The problem is they’re notoriously difficult to monitor. As such, we do perform an independent check in these areas as part of our service.
Our best procurement advice on logistics
Don’t underestimate! There’s fierce competition among contractors sourcing new clients on 3PL contracts, so much so that there’s often a stark difference in costs and service levels.
In all cases of outsourcing logistics, it is a big commitment, and not one you can break off easily.
The logistics experts at The Procurement Group can help you select a suitable partner based on the size of your business, the regions you cover and your products whilst ensuring your 3PL contract is appropriate to what your business needs.
