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Guide to third-party logistics

The field of third-party logistics continues to grow in the Nordic market. Conventional storage service and transportation solutions are evolving at an accelerating pace with more flexible and efficient production solutions. At the same time, e-commerce creates new demands for efficient direct-to-consumer solutions.

1. What are the benefits of outsourcing logistics?

The first question to ask is, of course, how does the company benefit from outsourcing storage and transportation to a TPL provider? Achieving higher cost effectiveness is a basic requirement for anyone who outsources logistics to an external provider.
A TPL provider usually specializes in certain segments. For example, PostNord TPL specializes in:

  • Groceries
  • Building & garden
  • Health
  • Clothes and shoes
  • Electronics
  • E-commerce
  • Tires

TPL providers usually have a number of customers in each warehouse, which allows coordination and expenses can be allocated among the different clients for premises and handling equipment.

Many customers with in-house logistics solutions usually have permanent employees, which makes it difficult to handle volume fluctuations in production, while PostNord TPL and other players can shift their staff between different customer assignments, or bring in temporary employees to cope with large volume fluctuations.

Multi-channel flows have become increasingly common over the past five years and traditional businesses that previously had warehouses which only supplied wholesalers have gradually added flows to consumers in response to the growth of e-commerce. A TPL provider can more easily coordinate both flows. PostNord reaches about 25 million consumers and 2 million enterprises via 4,500 distribution centers through its Nordic distribution network.

The rapid growth of e-commerce companies is another reason to engage a TPL provider since warehouse volumes could grow substantially in a few years and the e-commerce company may have difficulty planning for equivalent capacity in its own warehouse.

2. Which companies do not need to use TPL?

It is difficult to give an exact lower limit for when TPL is no longer profitable, but there will always be a cut-off at a certain volume at which point an investment in a larger warehouse premises or outsourcing to a TPL provider must be considered. There could also be an increased need for larger production areas or larger areas for sales that would cause existing warehouse space to be inadequate.

3. Leave part of the processing to the TPL provider

A TPL provider can also add value by taking over certain processing steps in the flow chain. For example, when PostNord TPL handles alcoholic beverages, groceries and medicines, in addition to providing an efficient order process, it also applies labels and ensures that the labels comply with all regulations. In the case of tires, PostNord Logistics TPL may also take care of studding, mounting on rims and balancing the tires before distribution to recipients.

By virtue of their large volumes, TPL operators often have a higher degree of automation and use of modern technology. When picking and packing for certain jobs, PostNord TPL uses Pick by Voice to increase efficiency and better quality.

4. Set cost-control requirements

The trend today is clear. Companies want complete control of their costs, with no nasty surprises. Sign a contract that clearly states that the TPL provider cannot charge any additional charges unless there is a written request. The tough requirements encourage TPL providers to develop and identify more synergies in order to remain competitive.

5. Take advantage of the TPL provider's expertise

Don't just settle for letting the TPL provider take over existing flows and logistics solutions. Many TPL providers are skilled at making flows more cost effective. PostNord TPL analyzes the operations for all first-time outsourcing customers and subsequently makes various streamlining proposals. TPL providers have accumulated their broad experience over the years, during which time they could try things out, develop new technologies and improve efficiency for their customers.
Collaboration with a TPL provider should be characterized by continuous development of the assignment during the contract period.

6. Don't lose logistics expertise

Remember that by outsourcing logistics, the company faces the risk that it could lose its logistics expertise. The role as head of the company's logistics solution changes. Many companies are replacing the previous functions of warehouse manager and transport buyer with a logistics manager. The role of a logistics manager at a company that outsources the majority of its logistics needs to a TPL provider focuses more on clearly setting requirements.
The requirements that the logistics provider must meet add value to the logistics solution, which becomes more cost effective in the long term.

Continuously monitoring and developing collaboration at meetings between the parties establishes a partnership between supplier and customer that ensures security, stability and continuity for everyone involved.

For further information:

Riku Vuontisjärvi, Manager, Major Accounts
Tel. +358 50 3811 222