The global business environment has become more competitive due to companies’ proliferation and increased use of information technology (IT) in the bid to meet the ever-changing customer needs. In such a setup, the businesses need not only to improve the quality of goods and services they offer and increase the efficiency of their operations but also to reduce direct costs (Ecer, 2016). According to a study by Ecer (2016), one way of lowering business costs is through outsourcing of logistics, commonly referred to as third-party logistics (3PLs). Ecer (2016) defines the 3PLs as
…the individualized service offered by an intermediary between the consigner and the consignee at a stated price within a stated period based on modern information technology, such as timely delivery and combining orders, to realize quicker reaction to the clients’ needs and more profit with less cost (p. 615).
Over time, logistics outsourcing has become an essential item in corporate strategy since it focuses on necessary logistic activities such as transport and advanced ones such as purchasing and financial services.
Currently, several enterprises are contemplating outsourcing various operations in their supply chain management (SCM). A report by Armstrong & Associates (as cited in Berman, 2017) states that about 90% of Fortune 500 companies depend on at least one 3PLs for outsourced logistics, representing a 46% increase since 2001. Forrester Research (as cited in Ecer, 2016) indicates that 78% of Fortune 500 companies have outsourced transportation services while 54% and 46% of them have outsourced distribution and manufacturing activities, respectively. From this and other similar trends, this paper seeks to identify the advantages of outsourcing logistics in improving the environmental credentials of a business.
Impact of Logistics Outsourcing on the Environmental Aspects of a Business
Reduction of Transportation Emissions and Other Waste Products
An organization needs to minimize carbon emissions produced by burning fuels while shipping goods from one location to another. When a business outsources the transport operations to a 3PLs partner, the latter implements measures that aim at reducing environmental pollution to remain effective (Evangelista et al., 2018). Policies such as reducing the number of miles driven and the number of harmful gases released. The company can also be saved from hefty fines for violating environmental guidelines.
Resolutions such as electric vehicles, ocean, or sea transport may enable the 3PLs provider to efficient and sustainable transport of large volumes of goods over long distances. On the other hand, when a manufacturing company outsources some of its activities in the production line, the burden of managing the by-products is transferred to the 3PLs partner. According to Evangelista et al. (2018), 3PLs undertake most roles in recycling waste materials, packaging, and dirt reduction. This leaves the client firm with less responsibility in terms of waste management, hence, promoting environmental conservation.
Compliance with Environmental Regulations and Goals
Depending on the business location, the production and distribution of goods are guided by governmental regulations which should be observed. Failure to adhere to these guidelines can result in fines, penalties, and other consequences. An organization that delegates some of the activities which could have an impact on the environment, to a professional logistics provider will remain compliant in managing the few activities it is left with. The 3PLs provider can also arrange for the certification of the client business. One common environmental standard is the ISO 14001 certification (Evangelista et al., 2018). Similarly, research by Evangelista et al. (2018) reports that some 3PLs are using Environmental Management Systems (EMS) and green certifications in a bid to achieve compliance.
Other Benefits of Outsourcing Logistics
Improvement of Efficiency and Cost Savings
When assigned core business activities, 3PLs incorporate knowledge, experience, technology, scale, and best practices to increase effectiveness and cost reduction. According to Zhu et al. (2017), 3PLs enable companies to forego investing in equipment, software, and personnel if they can pay for services on-demand. Outsourced logistics enable businesses to acquire expert assistance in operations without hiring professionals full-time or training a new employee, thus increasing the overall organization’s efficiency (Zhu et al., 2017). After outsourcing tasks, an enterprise can focus on developing the talents of the local workforce.
Focusing on Core Business Activities
Mastering the intricacies and complexities of logistics can be difficult for an enterprise’s management. When coupled with fundamental processes such as developing new products, widening markets, and expanding the company, the leadership can be overwhelmed, hence outsourcing the logistics operations. Outsourcing delegates daily execution, strategic endorsements, and logistics procedures to a trusted 3PLs partner. As a result, the internal workers are left to focus on core activities such as handling customers and business growth.
References
Berman, J. (2017). Armstrong’s report points to the continued increase in 3PL usage by shippers. Logistics Management. Web.
Ecer, F. (2018). Third-party logistics (3PLs) provider selection via Fuzzy AHP and EDAS integrated model.Technological and Economic Development of Economy, 24(2), 615-634. Web.
Evangelista, P., Santoro, L., & Thomas, A. (2018). Environmental sustainability in third-party logistics service providers: A systematic literature review from 2000–2016.Sustainability, 10(5), 1627. Web.
Zhu, W., Ng, S. C., Wang, Z., & Zhao, X. (2017). The role of the outsourcing management process in improving the effectiveness of logistics outsourcing. International Journal of Production Economics, 188, 29-40. Web.