ARTICLES - Routeship Logistics Corp

Outsourcing; An Inevitable function more than a strategy

The need of outsourcing is inevitable for all organizations that aim to grow by leaps and bounds. The benefits of outsourcing outweigh its costs to a significant extent. In this way, organizations stay focused on their core strategies and invest all their resources and time in improving their core competencies. However, the biggest challenge in this course faced by these organizations is the selection of business partners to carry these functions in their best interest.

A successful approach in this domain is to keep your business partner well informed with your corporate goals and strategies and to ensure strict control and measures in all day-to-day tactics and activities. Some organizations work on exclusive service agreements that restrict their vendors (business partners) to carry similar business or functions from their competition. But these rules vary greatly with nature of business and industry. i.e., it is hard to generalize an outsourcing strategy to an industry, but the purpose of outsourcing is to reap such benefits as cost savings, functional expertise, globalization, scalability, flexibility and growth.

With recent proliferation of technological advancement, it is becoming very difficult for organizations to keep abreast with changing trends while retaining all their functions inhouse. Hence these organizations are always in need of good service providers, well equipped with latest technology, capable of transforming their week performing elements. On the other end, the abundance of these service providing companies out beats its demand in such a way that these companies are always competing each other.

The organizations benefit from this demand-supply gap and find themselves at the dictating front. However, this is not the case if both the organization and service providing companies are of equal capabilities and it paves the inception of 4th Party outsourcing in which organizations fully outsource their functions to service firms. Although an organization can outsource any function, but we will confine our focus to Logistics and Transportation.

If we talk about consumer goods industry, almost all big companies have outsourced some part of their logistics to regional service providers and have exclusive agreements to restrict their vendors to carry competing brands. This strategy makes a lot of sense as their regional logistic demands can better addressed by local players, and it is almost impossible to follow and impose same global standards across the world.

These multinational giants always struggle to find good working partners capable of carrying fundamental elements of their global corporate philosophy. But overall, we hardly find any consumer good manufacturing company that is performing all its operations and functions inhouse while working overseas in different regions and countries.

The manufacturing industry is no different than consumer goods industry in terms of outsourcing. The most obvious example set by Automobile manufacturing giant is the introduction of Just in Time (JIT) inventory in which the inventory management is done by vendors. This approach of outsourcing inventory management has been adopted by several other manufacturing companies.

As far as retail industry is concerned, all well renowned retailers have partly or fully outsourced their logistics to different regional or national players. Carrefour have outsourced not only their private levels but also their distribution network to local vendors in different countries it operates. This enables Carrefour to address regional demands and preference without hampering its global corporate sanctity. IT industry serves the classical example of outsourcing. Almost all IT firms have used this strategy to reap the benefits discussed earlier.

It is quite evident that companies have gained significant benefits by outsourcing some or part of their functions. The need of outsourcing is pivotal for multinational organizations operating in different parts of world. Being a 4PL company, Route Ship Logistics is committed to provide innovative turnkey solutions in Logistics and Transportation to different business sectors in North America.

Opportunity in the time of Crisis - Small and Medium Enterprises

Logistics and Transportation serves as a backbone of manufacturing sector that drives the economy of any country. Their importance become more pronounced when we see a gap between demand and supply. By Large, Logistics and Transportation are the driving element of our value chain. In simple words, consumers demand for a product based on their needs and these needs are fulfilled by manufacturing companies through a network of logistics and supply chain management.

It is worth-mentioning fact that all companies in different business sectors consider supply chain management as the most critical and fundamental element in their success. Talking about these recent days, we all are going through a difficult time of uncertainty and chaos.

The economic experts in World’s leading consultancy firms have already speculated a big recession going ahead. However, the effects of this recession will be different on different companies working in a particular industry. We will discuss in length the available options for big and small Logistics & Transportations companies operating in this part of world. In addition, we will shed some light on how small and medium size companies can transform this crisis into an opportunity to partly offset the effects of this devastating stigma in the form of global recession. Lastly, we will provide a brief picture of the aftermaths of temporary suspension of businesses and their impact on industrial growth and economy.

The commercial freight activity has greatly decrease owing to recent lockdowns and other measure taken by Federal and Provincial Govt. in different States in North America. All non-essential business activities are put on hold by the Law Enforcement Agencies. Since logistics and transportation are directly linked to these businesses, we see a significant decrease in the demand of transportation in the last few weeks. Knowing that, all such suspensions are temporal but with no definite timeline for businesses to resume their operations as normal, the planning and forecasting managers find themselves at a very odd spot.

As my conversation with the planning team of large Transportation Companies, the management has already speculated the stagnant or negative growth in the coming months, a condition which will result in layoffs and big cuts in payrolls. However, Federal, and Provincial Govts are trying every possible way to urge businesses to retain their employees by offering different compensation packages and subsidies. Despite this huge support to keep the wheel running, it is quite evident that companies are going for reducing head counts in time to come resulting in thousands of people losing their jobs.

On one side, the ongoing situation projects a gloomy future for most businesses, on the other side, there are plenty of opportunities for small and medium enterprises to plan, interpret and react to turn the wheel in their favour.

If we are to talk about Logistics and Transportation in particular, small and medium companies find themselves at a very safe spot as compared to their bigger counterparts. Small companies with low overheads and operating costs can offer most competitive prices for similar services to help manufacturing companies in reducing their transportation budgets. In addition, small companies are more adaptive and flexible to react to the changing dynamics in the industry. In this way, they can address the changing needs and demands of their customers. In contrast, large companies with multi-layered functions are less prone to adapt the change as quickly as do by small companies.

A recent research conducted by a global consultancy firm illustrates the susceptibility of different sized companies with varying degrees of economic downturns as shown in annexure A. The study concludes that small and mid-sized companies are going to be in a far better position to survive and grow in coming years as compared to big companies in Supply Chain Management industry. The study considers different factors of business functions which are directly or indirectly correlated with economic activity. The research also identifies some key strategies small companies can adopt to keep their competitive edge over large players in their industry.

Economic Activity is effected by recent crisis due to COVID Pandemic

Companies need to adopt either an aggressive or a scrupulous approach in defining their short term and long terms goals. Large organizations will be inclined more towards the former approach as it is becoming increasingly difficult for them to fulfill their double-digit growths and expansion. These companies will try to nullify effects of this slowdown in economic activity and keep their business up and running by curtailing costs, suspending expansion, halting non-essential projects, and retaining customers.

On the other end, small businesses can proactively adopt an aggressive approach to gain the most of it. Their small size and adaptability allow them to fill the gap and grow exponentially. These companies can better adjust to the changing dynamics and react to the changing requirements of customers. In an interview with a CEO of a mid-sized Logistics company in North America, we came to know that small companies don’t require approval from multi-layered board members and management committee.
In addition, small companies are better able to offer low-cost customized solutions to customer and small companies are more flexible to adapt and response to rapid changing trends and circumstances. In short, the running year 2022 is an opportunity for small companies to grow by adopting aggressive strategies in the best interest of their businesses.

In the end, we have briefly discussed the steps small businesses need to take to maintain the accelerating graph of their growth. The aftermath of this economic crisis will have long lasting effects on all business sectors, but small companies need to shift their focus from aggressive to a defensive approach after gaining a percentage of market share. To achieve this, they will be required to exhibit the best-in-class customer service and product offering far better than their competition. It is worth mentioned that this is time when the businesses have survived the trough and they are gaining momentum to regain their lost share. Hence small companies need not only to be competitive but also maintain their Unique Prepositions in all facets of businesses.

Being a mid-sized company, Route Ship Logistics finds itself in a much better position to serve commercial freight industry and offer best in class services to its customers. However, this road to success will demand a combination of strategies in different times carefully adopted by Company’s Management.