Contract logistics – How to keep up with changes in business?
Are you expanding your business? If so, you know that as your company grows and the economic environment becomes more dynamic, it becomes increasingly difficult to maintain control over its processes. That is why solutions that combine operational efficiency, flexibility and security are becoming increasingly important.
Contract logistics is one of the solutions that supports these areas. Properly organised and managed logistics processes allow a company to focus entirely on its business activities. What exactly is contract logistics? How does it work and what are its benefits? And can you also benefit from it? We will discuss this in today's article.
What is contract logistics?
It is a strategic business partnership in which a specialised logistics operator takes responsibility for some or all of a company's organisational processes, often on a long-term basis and with full system integration.
Outsourcing logistics processes frees up internal resources, enables cost optimisation, increases operational efficiency and provides access to the latest technology. It also provides the company with broader know-how, as the operator can draw on its experience in other industries and apply it to the customer's processes.
What exactly does an operator do in contract logistics? The scope is tailored to the individual needs of the project and may include:
1. management and day-to-day execution of warehouse operations, including picking, packing and dispatching goods
2. handling returns and complaints
3. providing value-added services (VAS) such as special packaging, pre-assembly, quality control, order personalisation, adding promotional packages, co-packing, repackaging, testing, uploading or updating software/systems
4. management within the Control Tower, i.e. real-time monitoring, coordination and optimisation of deliveries in a distributed supplier system, improvement of financial liquidity with solutions integrating warehouse logistics, distribution and customs services.
This is not just ordinary outsourcing – it is a strategic partnership. It enables rapid adaptation and fluidity at the most critical moments. The logistics operator becomes jointly responsible for operational results, process quality and the security of the entire supply chain, helping to proactively influence strategic management.
How does outsourcing in contract logistics work step by step?
The entire process consists of four stages: analysis, design, implementation, and maintenance/improvement of processes. Let's discuss each of them now.
1. Needs analysis
The first stage is to gain a detailed understanding of the client's business and examine their needs. How is this done?
The logistics operator audits the company's main business activities in terms of operational, administrative and system flows to and from the company. They check whether and how sales are seasonal, what factors influence this and how it affects order fulfilment.
This approach allows us to identify areas where changes will bring the greatest value. We compare our findings with the company's short- and long-term plans to prepare an operationally and financially optimal model of cooperation.
It is not just numbers and data that matter here. First and foremost, it is necessary to understand the mechanisms and factors influencing the current state of logistics processes. Only then can we design a future solution that fits perfectly into the client's strategic plans.
2. Designing the solution
The second stage is to translate the collected information into a specific operational model.
We agree on the exact scope of services – from basic warehouse services to additional activities, the method of information/data exchange, selected technologies, infrastructure and tools. We also agree on the terms of cooperation, time frames, duration, commercial conditions and, finally, methods and indicators for measuring the effectiveness of the designed solutions.
This results in a transparent operating model that is consistent with the customer's requirements and tailored to their needs and business objectives. Such a model ensures transparency and the ability to monitor and control the quality of services.
3. Implementation – start of operations
The third stage is when the developed model, after testing, if required by the project, begins to work in practice. After signing the contract, the logistics operator takes over the implementation of specific logistics processes.
The customer has full insight into the course of operations through system solutions and reports showing key performance indicators (KPIs) in real time. This gives them the ability to control operations in real time and make any necessary adjustments to the actions taken.
Contract logistics is flexible and scalable, adapting to the seasonality of sales and the customer's production cycle. The company does not have to invest in its own infrastructure, people or systems at critical moments, as this role is taken over by the logistics operator. As a result, logistics develops alongside the business, ensuring the stability and efficiency of the supply chain.
4. Maintaining and improving processes
The final stage is the maintenance and improvement of logistics processes. After a period of implementation and learning, the logistics operator, thanks to its experience, IT support and knowledge of the product range, fulfils the role of a logistics partner.
In this phase, they focus on the continuous optimisation of the designed processes, looking for new opportunities to increase efficiency and reduce operating and storage costs.
This is an ongoing process which, through regular analysis, monitoring of key performance indicators (KPIs) and implementation of improvements, allows the company to remain competitive and flexible in a dynamic market.
What are the real benefits of contract logistics?
If you decide to work with a logistics operator, you will benefit both organisationally and financially. Below are 5 benefits that contract logistics will bring you.
1. You will optimise costs and resources
You do not need to build your own warehouses, hire a team or invest in technology. Everything is provided by the operator.
2. You operate flexibly
During periods of increased demand, you can quickly increase your operational capacity, and after the season, you can reduce costs.
3. You gain access to knowledge and the latest technology
Operators have WMS systems, automation solutions and know-how that will streamline your company's processes.
4. You increase safety and operational quality
Thanks to established SLA standards and KPI controls, your processes become transparent and repeatable, minimising the risk of errors.
5. You can focus on your business
Instead of diverting resources to logistics, you can focus on growing your business.
Who is contract logistics for?
Contract logistics is a solution for any type of business, regardless of the industry in which it operates, the scale of its operations, the complexity of its processes or its available budget.
Are you at a point where your existing logistics processes are causing more problems than benefits? Are there more questions than answers? Instead of pursuing the main mission of your business, you spend your time solving problems. Meanwhile, someone may already have a ready-made solution. That someone is a logistics operator.
At the solution development stage, after analysing the initial situation, they will work with you to define the optimal cooperation model, tailored to the individual needs, specifics and requirements of your industry.
It does not matter whether we are talking about a large corporation, a medium-sized family business or a start-up – the goal of contract logistics is to ensure that the end result of the product or service reaches the final recipient.
When is it worth implementing contract logistics?
Opt for contract logistics if your company cannot keep up with order fulfilment and logistics costs are starting to grow faster than sales.
When else should you choose it? When your company lacks storage space or people, and processes become too complex for you to manage on your own.
Or maybe you want to expand your business outside the UK without investing in another warehouse? Contract logistics can help you in this situation as well.
In summary, contract logistics is a way to build a stable and scalable operating model. It will allow you to reduce costs, increase efficiency and maintain the flexibility of your business.
It is becoming increasingly difficult for you to manage your company on your own. Choose contract logistics with ADECON. We will help you grow your business!
