Future-Proofing Supply Chains: Why Companies are Turning to Contract Logistics Providers

Logistics has undergone significant transformation in the past five years; as the rate of change accelerates, the path to future-proofed supply chains increasingly involves third-party contract logistics providers.
Jan 30, 2024 9:00 AM ET

The world of logistics has undergone significant transformations in recent years, and the pace of change is only accelerating. Organizations in North America have had to navigate a range of challenges, from global pandemics to political instability, labor disruptions, and rising labor costs, all while contending with the emergence of new technologies like automation and artificial intelligence (AI). 

In this ever-evolving landscape, the path to future-proofing supply chains is increasingly leading to third-party contract logistics providers, according to a recent article in the AJOT

The article, “DP World Canada’s Expert Insights on Contract Logistics,” highlights several reasons why organizations are turning to contract logistics providers:

  • Complex and Unpredictable Changes: The recent years have witnessed a series of rapid and unpredictable changes, making supply chains more complex and challenging to manage. Outsourcing logistics to experts in the field offers a solution to navigate these uncertainties.
  • Cost Reduction and Efficiency Improvement: Contract logistics providers offer cost-effective solutions, improved operational efficiency, and inventory optimization. These benefits help organizations streamline their operations and reduce expenses.
  • Focus on Core Competencies: Many organizations, particularly in technology and fast fashion, are realizing that logistics is not their core competency. Instead, they prefer to concentrate on areas such as product development, manufacturing, marketing, and sales, leaving logistics to the experts.

Mike Valentine, Chief Commercial Officer, USA/Mexico at DP World, raises a crucial question: "Is it smarter to develop innovative capacity in artificial intelligence and automation and build distribution centers across the continent, or outsource those costs and risks to contract logistics providers?"

The article identifies five logistics trends that are shaping the future of supply chains and making outsourcing to contract logistics providers more appealing:

  • Innovation, Automation, and AI: As AI and automation become prevalent in warehouses, organizations have the opportunity to drive efficiencies and cost reductions. However, the investments required can be substantial. Contract logistics providers, such as DP World, offer access to technology without the risks and exposure.
  • Faster Deliveries: Consumer expectations for next-day and same-day deliveries have increased. Accessing additional distribution centers through contract logistics providers allows companies to meet these demands without significant upfront capital investments.
  • Friend-shoring and Multi-sourcing: Rather than establishing operations in near-shore countries or dealing with multiple suppliers directly, working with contract logistics providers that already operate efficiently in these regions can save time and resources.
  • Labor Costs and Talent Availability: The rise of labor movements and the competition for talent have led companies to reconsider whether they should manage these challenges in-house or outsource them to contract logistics providers, allowing them to focus on their core business.
  • Sustainability: Sustainability commitments and the scrutiny of supply chains for climate impacts are influencing logistics decisions. Contract logistics providers can help optimize transportation routes and reduce environmental impact.

In conclusion, contract logistics providers act as a relief valve for companies grappling with the complexities of the global economic, political, environmental, and technological landscape. This outsourcing allows organizations to concentrate on their core strengths, products, and brands while reducing risk, accessing innovation, and strengthening their supply chains. 

As Tabare Dominguez, Vice President Commercial at DP World Canada, notes, “Complexity is increasing. Change is accelerating. Companies aren't just looking for partners that can help them make smart decisions about logistics. They want to outsource that function.”

Access the full article here: DP World Canada’s Expert Insights on Contract Logistics.