Outsourcing Logistics: A Strategic Move for Online Retailers

Online retailers of all sizes are increasingly turning to outsourcing logistics to optimize operations and cut costs when looking to scale. Levi Strauss & Co. is the latest example, shifting to a hybrid logistics model that integrates third-party logistics (3PL) providers with their insourced operations, a strategy aimed at enhancing their direct-to-consumer (DTC) channels and reducing fulfillment expenses.

Levi Strauss & Co. announced the transition in June 2024 and emphasized the need for investment in their distribution networks to upgrade existing capacities with omni-channel capabilities. “As we continue our pivot to a DTC first company, our distribution networks need investment,” Financial and Growth Officer Harmit Singh said.

Making the Switch

The trend of re-evaluating fulfillment strategies is not unique to Levi’s. Many small to medium sized retailers are also exploring outsourcing their logistics once a production amount has been reached.

Outsourcing logistics allows businesses to scale more efficiently and respond to market volatility. For retailers with complex fulfillment needs, outsourcing to 3PL providers offers significant advantages.

Smaller companies face unique challenges when it comes to logistics and fulfillment. One of the most common pain points is scaling globally. Small and medium-sized enterprises (SMEs) often struggle to scale their operations globally due to limited resources and infrastructure. Outsourcing logistics provides access to a global network of distribution centers and expertise, enabling SMEs to expand their market reach without significant capital investment. This is particularly critical when a company hits its production threshold and needs to quickly ramp up distribution to meet growing demand.

What are the benefits?

Outsourcing logistics can offer numerous benefits to small and medium-sized retailers.

Access to Expertise

Holistic View: Logistics providers offer a comprehensive view of all logistics processes, ensuring that every aspect of the supply chain functions seamlessly and efficiently.

Industry Knowledge: They leverage their extensive experience to optimize routes, negotiate with carriers, and implement cost-saving measures throughout the supply chain.

Increased Efficiency

Streamlined Processes: Logistics providers can manage the entire supply chain for you, simplifying processes and reducing the risk of bottlenecks.

Cost Savings: By outsourcing logistics, retailers can reduce costs associated with transportation, labor, warehousing, and technology.

Enhanced Scalability

Rapid Adjustments: Experienced providers can quickly respond to surges or drops in demand, ensuring that logistics operations scale with the business.

Flexibility: They adapt to the unique needs of the businesses they work with, handling seasonal spikes in demand or expanding into new regions.

Improved Customer Satisfaction

Fast Delivery: Global logistics providers ensure that orders reach customers quickly, reducing missed delivery deadlines and inventory shortages.

Enhanced Customer Experience: They provide next-day and same-day fulfillment, meeting customer expectations and reducing negative signals from missed deadlines.

Access to Technology

Data Analytics: They use data analytics to keep track of, and optimize the entire supply chain, reducing the risk of human error and improving visibility.

Transparency: Retailers can benefit from enhanced transparency in technology, ensuring clear visibility across all touch points such as inbound and outbound fulfillment, shipping processes, and performance metrics, all of which are measured and tied to Service Level Agreements (SLAs) to maintain high standards and accountability.

Global Reach

Global Warehousing: Partnering with global logistics providers allows companies to leverage extensive infrastructure and networks, offering globally distributed warehousing and end-to-end services including freight forwarding, fulfillment, and shipping. This enables businesses to scale operations in days or weeks rather than months.

One Point of Contact: Logistics providers also provide retailers with streamlined communications by being the only point of contact for all logistics needs. When operating at economies of scale this enhances operational efficiency.

Save, Save, Save

As the logistics landscape continues to evolve, the choice between insourcing and outsourcing will depend on each company’s unique needs, growth trajectory, and customer service requirements. By leveraging global logistics providers, online retailers can focus on their core competencies while enjoying the scalability and cost-efficiency of outsourced logistics.

For online retailers, the decision to outsource logistics can lead to significant cost savings and operational efficiencies.

 

With Borderless360, you can achieve complete control over your global logistics network, while outsourcing the complexities. You can access end-to-end ecommerce logistics solutions and enjoy a single point of contact for all your global logistics needs. Let us simplify your logistics journey and empower your e-commerce success by getting in touch today. Contact us.