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Contract Logistics in a Just-In-Case Era: The Case for 3PLs

Aug 28, 2023 - Nicole Kofman
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Pre-pandemic, the logistics mantra revolved around leveraging the most cost-effective solution: just-in-time inventory. Businesses, aiming for lean operations and lower overhead, used this method which meant holding the minimum stock necessary. However, pandemic and post-pandemic buying practices revealed gaps in this approach when businesses began to lose significant revenue opportunities due to stock-outs and supply chain disruptions. The aftermath has uncovered a new trend that complements just-in-time inventory – the just-in-case inventory model.

In the business logistics landscape, 'just-in-case' is not just a buzzword but a paradigm shift. Instead of having all inventory or products centrally produced or stored, there's now a strategic dispersion, ensuring some excess inventory. This tactic protects businesses from unexpected disruptions and higher-than-expected demand. But with such an approach comes the question of space, inventory management, and efficient order fulfillment. Here is where partnering with 3PLs becomes invaluable to a commerce business’ model.

Case-in-point: businesses that did not have high-cost fixed infrastructure costs were better positioned to weather the storm of the pandemic. The companies relying on 3PLs were able to downsize rather than having to spend millions of dollars to maintain their warehouses.

Working with a 3PL means businesses can outsource logistics, without costly infrastructure investments. There's no need for million-dollar warehouses or elaborate supply chain management systems. By partnering with contract logistics companies instead, businesses can pay only for the space and services they use. This model also helps businesses to be nimble in light of unforeseen circumstances and market fluctuations. Think: force majeure, seasonality or sudden changes in demand for certain products.

For instance, suppose a B2B company has a sudden surge in orders. Instead of panicking about inventory shortages or scrambling for warehouse space, their 3PL services can handle the spike, ensuring efficient picking, packing, and shipping. These services make up a critical part of logistics, proving that 3PLs offer benefits that enhance the bottom line for businesses.

In practical terms, here's what businesses can expect when adopting a just-in-case model: 

  1. Flexibility: A key advantage of the just-in-case model with 3PLs is flexibility. Businesses can scale their storage and distribution needs based on industry or market trends, without being tied down by fixed infrastructure.
  2. Cost-effectiveness: With a 3PL, companies only pay for the space and logistics services they use. Seasonal businesses or those with fluctuations in demand will find this approach especially beneficial.
  3. Expertise: With expertise in inventory management, pick and pack processes and overall supply chain management, 3PLs specialize in logistics. By outsourcing, businesses can access this knowledge and focus in-house resources on product development, among other things. 
  4. Broad Network: Many 3PLs have extensive geographical networks that allow businesses to store inventory closer to their customers ensure faster delivery times and lower transportation costs.

Agility is key as the world of contract logistics evolves. Incorporating a just-in-case model into the just-in-time inventory strategy can lead to significant cost savings and addresses vulnerabilities businesses face in their logistics operations. More than just a change in inventory management, the addition of a just-in-case inventory strategy represents a shift in how operators do business. With 3PLs in their arsenal, companies can stay prepared, adaptive, and, above all, resilient.