The ABCs of Contract Logistics
April 30, 2021
Now, more than ever, the importance of having an effective contract logistics provider can be realized by companies running various operational functions.
Study this. The 2019 Labor Market Intelligence Report projects a market size growth of over USD 357 billion by 2022 in the Transportation and Logistics sector. Considered a central component of the world economy, it generates employment not only within its sector but also supports other sectors thru supplies and product distribution both locally and globally. In our country alone, the gross income of the Philippine Transportation, Storage, and Communication (TSC) increased by 5.5% during the second quarter of 2019. The Gross Domestic Product (GDP) from the Transport sector grew by 10.7% in the second quarter as well. In all consideration of the current pandemic, the sector still sees a silver lining as it can adapt to the changing market demands. With the growing demand for delivery services, the transport sector sees a green light for expanded economic share.
Let us explore the ABCs of contract logistics:
Not all companies need contract logistics, but it indeed pays off well once utilized. Start with identifying if there is an opportunity within the company’s operations to improve logistics. Say, a global food manufacturing company will see the importance of having a trusted company handling the logistics of transporting raw materials from the commissary to the retail outlets for distribution compared to the local coffee shop catering to a single city only.
According to Investopedia, contract logistics is the outsourcing of resource management tasks to a third-party company. It includes activities such as supply chain designing and planning, facilities design, warehousing, goods transport and distribution, orders processing, payments collection, inventory management, also including certain aspects of customer service. In a nutshell, a contract logistics provider is a third-party partner handling all possible logistics processes to ensure smooth operations.
Once the need for contract logistics is recognized, building the process comes next. The scheme working for a pharmaceutical company is not the same as what will work with a textile depot. Even companies under the same industry would not have exactly the same applicable system, no matter how elaborate and successful the said logistics plan is for the other. Different strokes for different folks, as they say. The significance of building the contract comes into this part of the process. Clauses for liability and consequential damages, contract term and termination obligations, warehouse lein, rates and compensation are just some of the contract items that must be smoothed out internally before selecting a contract logistics provider. Since the provider will be one’s partner in ensuring quality is maintained from point A to point B of the company’s operations, all items of interest must be spelled out and clearly understood by both parties.
Once the process and contract must-haves have been sorted out, choosing the best candidate comes next. Choose a company with qualified professionals dedicated to providing a comprehensive process that ensures the efficiency of production, management, distribution, and transportation of goods at the final point of sale. The company must show flexibility, innovation, and accountability. The contract logistics provider must meet the company’s needs, adhere to the contract items, and deliver accordingly.
The Philippines is a growing country, and its transport industry shows great potential. The opportunity for growth becomes exponential if companies are able to partner with an effective contract logistics provider.