outsourcing to a logistics operator industrial engineering management chapter ix e-book

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Industrial Engineering Management Systems Approach to the Enterprise Vision L | C | LOGISTICS ENTERPRISE SUPPLY CHAIN MANUFACTURING & COMMERCIAL LOGISTICS OPERATIONS …. _____ _ PROCESS INNOVATION-OPTIMIZATION & ENGINEERING PROJECTS MANAGEMENT…. Industrial Engineering Management E-Book INDUSTRIAL ENGINEERING MANAGEMENT FUNDAMENTALS AND HOW IT WORKS February 2015 Expertise in Process Engineering Optimization Solutions & Industrial Engineering Projects Management Supply Chain Manufacturing & DC Facilities Logistics Operations Planning Management Chapter IX OUTSOURCING TO A LOGISTICS OPERATOR

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Page 1: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Industrial Engineering Management Systems Approach to the Enterprise Vision

L | C | LOGISTICS ENTERPRISE SUPPLY CHAIN MANUFACTURING & COMMERCIAL LOGISTICS OPERATIONS …._____ _ PROCESS INNOVATION-OPTIMIZATION & ENGINEERING PROJECTS MANAGEMENT….

Industrial Engineering Management E-Book

INDUSTRIAL ENGINEERING MANAGEMENT FUNDAMENTALS AND HOW IT WORKS

February 2015

Expertise in Process Engineering Optimization Solutions & Industrial Engineering Projects Management

Supply Chain Manufacturing & DC Facilities Logistics Operations Planning Management

Chapter IX OUTSOURCING TO A LOGISTICS OPERATOR

Page 2: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Manufacturing and Marketing Services companies, once they reach a size where their operational management becomes complex,

will normally change their management strategy to outsource their operations management,

transfer their staff and assets,

closing a deal with a service contract for several years, based on an open book accounting base plus a margin

Page 3: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

This deal allow them to focus on their Manufacturing and Marketing services of trading and distribution, with the support of an inter-link manager and a few supervisors to manage the logistics operator performance and track costs

Page 4: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

The added values provided by the logistics contractor are the efficiencies and productivity gains from their professional management, operational performance and financial strength to invest in needed assets, systems and human resources

Page 5: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

The way the 3rd party logistics operator works is:

Open book accounting + a fixed % management service fee, which ranges between 6% and 10%

Fix assets investments bring down costs below the average industry service provider prices, such as a transporter, and a warehouse operator as their net margins are much higher

Cost of capital is also lower from the contractor

Page 6: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Consultants and project manager required to evaluate the operational systems are made available to explore specific functions and implement required changes

and to introduce new technologies at reasonable professional fees in line with the company senior managers income level

Productivity and efficiency gains are measured by Key Performance Indicators and reviewed weekly

Page 7: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Most companies normally have all the human resources to achieve the same results or even superior results given the support from the upper management levels to the company middle management and supervisor’s level But the fact remains that; the company real gains are in the focus of their business, to achieve greater urban numeric distribution, market share and higher net profit margins

Page 8: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

The logistics operator business is to manage their client operation, absorbing their head count, making fixed asset investments in delivery trucks and other warehousing storage equipment's and materials handling vehicles, as well as in IT hardware and software systems.

All charged at cost plus a profit margin under the open book concept

Page 9: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Their marketing strategy is based on their quality to map and evaluate their client’s customer services, warehousing, delivery and transport operational status, define threats and opportunities to upgrade their client’s competitiveness and reduce waste through out these basic operations

Page 10: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Most contractors normally service a few dedicated clients in their portfolio, although logistics consultancies are provided to a great number of companies, with the final aim to service their account and get a contract to manage their warehouse and delivery operations In this respect everyone gain, as their consultancy services are of high quality standards, made by professionals and logistic specialists within a relative short period of time, and an accurate understanding of the company’s priority needs

Page 11: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

The typical Industry service provider, such as a transporter looses to the logistics operator because it does not price its services under the open book concept and

their overall net margins are much higher,

also they normally fail to have an in-house logistics specialist and project manager who can help the company to improve overall their logistics

Page 12: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Bidding for a contract should always involve one or two above average Industry service providers, and one or two logistics operators to balance the contract price proposal

However, the company must do their own analysis and case study before it opens a bid for a logistics contract

Page 13: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Systems Approach to the Enterprise Vision

Chapter IXOUTSOURCING TO A LOGISTICS OPERATOR

Transportation is the main cost-saving service in the 3rd party logistics services,

followed by an increase in inventory turns due to the introduction of an accurate demand plan process,

optimal procurement planning mechanisms, MRPI, production plan schedules and MRPII systems, and finally standard warehousing and customer service operations Warehousing alone and customer services operations will never bring enough financial benefits to the company to justify the 3rd party logistics operator management fees

Page 14: Outsourcing to a Logistics Operator Industrial engineering management chapter ix e-book

Industrial Engineering Management Systems Approach to the Enterprise Vision

L | C | LOGISTICS ENTERPRISE SUPPLY CHAIN MANUFACTURING & COMMERCIAL LOGISTICS OPERATIONS ….

_____ _ PROCESS INNOVATION-OPTIMIZATION & ENGINEERING PROJECTS MANAGEMENT….

Industrial Engineering Management E-Book

INDUSTRIAL ENGINEERING MANAGEMENT FUNDAMENTALS AND HOW IT WORKS

February 2015

Expertise in Process Engineering Optimization Solutions & Industrial Engineering Projects Management

Supply Chain Manufacturing & DC Facilities Logistics Operations Planning Management

THANK YOU

Chapter IX OUTSOURCING TO A LOGISTICS OPERATOR