Outsourcing logistics services has become a common practice among CPG brands. Shippers of all sizes can find advantages in their supply chains by working with expert firms with a thorough understanding of market conditions and best practices.
But as the industry continues to evolve, specialization is emerging as a differentiator that brands should use to evaluate their logistics services partnerships. Because of the advantages that specialized logistics can provide for CPG brands, bundled service providers have proven not to be as good a choice that they may seem.
Although it might be convenient to have one provider for your warehousing, transportation, and supply chain planning needs, these relationships often backfire on CPG suppliers. Instead, brands should secure a variety of partners for each part of their supply chain.
What a shipper can gain in ease of execution, it loses in other vital competencies. A bundled logistics provider often does not have the expertise or relationships in many supply chain industries.
While inventory control, warehousing, and transportation may seem related because they all fall into the logistics bucket, they are very different executions, and simply offering all three does not suggest that one company will do all three well.
Many CPG shippers often find out too late that their bundled providers’ shortcomings in key supply chain offerings are causing late, incomplete, or otherwise non-compliant orders at their most important retail customers.
When shopping providers, it is critical that you assess their capabilities. Among those competencies should be a synchronistic specialization that can help you excel at delivery to your most important customers.
Let’s explore why it is difficult to find that with a bundled logistics services provider.
Lack of Core Competencies
When comparing logistics service providers, the company’s core competencies are essential metrics to assess. They can provide the differentiation that will create a quality logistics partnership for CPG shippers. Often, these are achieved through a focus, specialization, or niche feature. But with a bundled provider, these are typically lacking due to their expansive service offerings.
Adding a new core competency is equivalent to entering a new logistics genre and is more of a high-risk pursuit than one of convenience. The core competency of a supply chain vendor takes time to build and refine.
And if a company’s success in an ancillary service depends on the goodwill created by their core service, it is unlikely they are the best option for CPG shippers’ needs.
Service Risks
Working with a singular, bundled provider for everything comes with service failure risk due to overconcentration. Most providers excel at one area of expertise, and the rest of the ancillary area offerings are typically not as strong.
Shippers working with turnkey providers are likely to deal with service failures consistently. Having several suppliers or contracts that deliver on a core competency diversifies your logistics portfolio and reduces risk across your supply chain.
Missing Price Transparency
When working with a bundled provider, your pricing often comes bundled as well. This process creates a lack of transparency as to your cost breakdown. In bundled pricing agreements, you have no clear understanding of what drives specific cost increases or decreases and are locked in for an extended period. If your volumes increase or market conditions change, you will be forced to renegotiate all your pricing.
However, by using several specialized supply chain partners, your organization can negotiate more favorable pricing and allocate costs correctly.
Loss of Control
By working with a single provider, your organization loses control over supply chain decision-making that can unlock synergies and growth potential.
A bundled service provider makes decisions about your operation that fit into their network and not necessarily the other way around. You lose the ability to find consolidation opportunities and network configurations to save your organization in logistics spend.
No Single Point of Contact
Turnkey providers commonly make the promise of a single point of contact; however, it is rarely delivered. Typically, the person managing inventory and orders is not the same person handing transportation or imports. You will still need to work with multiple contacts within a one-stop-shop, which negates the promise of simplicity.
Logistics Services Offering Bias
When shippers choose to work with a single provider for both warehousing and transportation, they may offer biased recommendations for network design. They will naturally recommend their facilities over others.
Ideally, you want a transportation partner that can work with any warehouse, not just the ones they own. This flexibility will open consolidation opportunities and other network advantages not found by using a singular provider.
Retail Compliance
Meeting retail compliance standards has become of significant importance to CPG brands. Not only to avoid non-compliance fines and fees but to differentiate their brands from those of their closest competitors.
The best way to achieve outstanding on-time delivery marks is to work with a specialized provider that is constructed around meeting OTIF standards.
Work with a Specialized Logistics Services Provider
Zipline Logistics is built to help CPG shippers master the world of retail compliance. We work with brands on the consultative level to strategize how to best deliver to their most important customers.
Want to give Zipline a try? Reach out today.
