Is in-house logistics hampering the growth of your business?

Logistics, which can be defined as the management of the flow of goods between the point of origin and the point of consumption is the backbone of every e-commerce business. Logistics can literally break or make a business. The present e-commerce market in India is blooming, which puts all the more stress on logistics operations. We all know what it is like to be a part of an e-commerce start-up. You have a team of a few people managing multiple things. At times the same people also work on the logistics and order fulfilment without necessarily having the prior experience. This sometimes results in grave mistakes that can cost the organization a lot of money. Although a few start-ups are able to handle in-house logistics when the demand is less, most of them opt for third-party logistics services. Let us further try to understand third-party logistics in detail.

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Third-party logistics also are known as 3PL, is a company’s use of third-party businesses to outsource certain elements of the company’s distribution and fulfilment services. Third-party logistics providers mainly specialize in the following areas – integrated operation, warehousing, and transportation services. The services provided by third-party logistics providers can be scaled and customized as per the requirements of the customers. By outsourcing the logistics and supply chain activities to a 3PL provider, the companies can concentrate on their core business and drive results.

The main function of 3PL players include the following:

-Management of overall logistics operations

-Spanning inventory management

-Supply-chain optimization and value-added services such as managing vendors and distributors

Why is 3PL better than in-house logistics?

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As already mentioned, logistics is very important to run a successful e-commerce business. The logistics team must be equipped with the required skills to get the boxes delivered to the customers every day, on time, and intact. The team also has to meet the customer’s expectations while optimizing performance and minimizing cost. Handling all these responsibilities requires skills and experience. In the current start-up market, many companies due to lack resources are giving these responsibilities to employees with no prior experience in the area. This can at times result in serious blunders. Therefore, to overcome such challenges and the losses resulting from them, many start-ups outsource their order fulfilment to a third-party logistics company.

When working with 3PL, a particular company is never more than 10% of the 3PL’s overall volume. This gives the company the ability to scale-up and scale-down operations as per the demand. 3PL’s have significantly larger warehouses, which means lower cost, they also have multiple locations from where the products can be shipped faster. Besides this, 3PL’ s allows you to concentrate on your core competencies, wherein the entire logistics such as warehousing, order fulfilment, and distribution is handled by specialized people that have the required resources.

Benefits of 3PL

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3PL providers give options that allow businesses to scale efficiently. Start-ups looking to establish a presence in the strategic market or large companies looking for an opportunity in new areas can utilize the services of 3PL providers. Let us further discuss why it makes sense to outsource warehousing and distribution to a 3PL provider?

Flexibility

You can easily set-up and scale your distribution model as the demand for the business shifts. You can expand to new markets and cater new customer base. Furthermore, you can offset the increase in the transportation cost by decentralizing the distribution process. Besides this, it offers flexibility with on-hand inventory levels.

Consolidation

You can avail inventory and transportation consolidation benefits with the help of 3PL. By storing the inventory under the roof of the 3PL provider multiple shipments can be shipped in a more economical manner than otherwise possible. Besides this, 3PL providers further have discounts schemes with transportation providers, and this helps in reducing the costs even more.

Expertise

Warehousing and distributing your products with the correct vs. incorrect process is the determining factor in whether you’ll be able to serve your customers effectively. Tying-up with a process-driven 3PL provider can help you cater the customers and as a result, form a strong customer base. 3PL providers offer value-added benefits that help reduce costs, drive efficiency, and allow you to focus on your core business.

Solutions

3PL providers have many solutions to meet a company growing business demands. These solutions include warehouse management systems, transportation management systems, radio frequency identification, and electronic data interchange. Leveraging these technological solutions can help you form a strong logistics front for your company.

Saves money

Outsourcing warehousing and distribution saves you from investing money in infrastructure and other capital expenditures. Acquiring a warehouse and then building it up can cost up to millions and can cripple cash flows. Therefore, the best solution is to outsource these services to a third party and concentrate on the core business.

3PL warehousing and distribution strategy allows you to take the help of an expert to manage your supply chain. A 3PL provider can build a road-map on how you can effectively build and maintain your supply chain. Further, they can help you optimize efficiency and reduce costs. Having a 3PL provider as a strategic business partner is the best decision a start-up or established company can make.

3PL in India

 In the last three years, the Indian e-commerce market has grown at a remarkable pace and has touched a GMV of $15 billion. This has given rise to a new category of e-commerce focused logistics companies. According to US-based global information and data firm, Nielson said the overall logistics sector in India would witness 48 percent CAGR to reach $2.2 billion by 2020 from 0.2 billion in 2014. It is expected that this figure will be attained by outsourcing, especially in retail and pharmaceutical industries. According to a research done by RNCOS, the 3PL market growth is mainly fuelled by outsourcing by many Indian companies and MNC’S particularly in retail, pharmaceutical, automobile, and FMCG sectors. The 3PL service providers are making use of technology to cater to the needs of their customers. E-commerce giants such as Amazon, Flipkart, and Snapdeal have their in-house logistics but they are also using the services of third-party logistics providers to reach out to their customers.

At present, there are quite a few 3PL service providers in India. A few 3PL companies in India include Delhivery, Ecom express, Holisol logistics, Safexpress, and Box My Space.

About Box My Space

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Box My Space is a 3PL company that provides a unique supply chain value to its clients enabled through technology and process. At Box My Space, we provide world-class logistics solution by providing real-time communication at each step of the operation. We understand our client’s current supply chain challenges and build solutions to increase efficiency and reduce costs. We have helped our clients tackle issues such as –

  • No track of current inventory levels across locations
  • Delay in order dispatches and on-time delivery
  • Handling large number of SKUs and multiple variations
  • Reverse logistics on order cancellation
  • Different kitting and labeling process

We empower our operations through technology to provide on-time delivery of the orders. Our systems have been built to provide the clients complete visibility with real-time update of their inventory and movement of goods.

Our warehouse design is GST based, which means that are warehouses are strategically located PAN India so that the clients can avail distribution advantages. We help our clients analyze where to store the goods, from which warehouse to distribute the goods, and how to improve their order dispatch time to maximize customer satisfaction.

We cater to all the major industries and our facilities are located in all the key metro hubs across India. Apart from this, we also have partner warehouses in Tier-2&3 cities to provide a wider reach of logistics to our clients.

If you too are looking for a 3PL service provider to help your business grow, contact us today!

 

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GST and its powerful impact on logistics and warehousing

The year 2017 has been a year of major economic reforms for our nation. At first, demonetization shook the nation for good and then the passing of GST bill unified the taxation system in the country. The history of GST goes back to the year 2000 when it was first brought into light by PM Atal Bihari Vajpayee. Although it took a good no. of years to implement GST, it has finally nullified the cascading effect caused by the previous indirect taxation structure. You’ll be surprised to know that our neighboring nations of Indonesia, Thailand, Singapore, and the Philippines implemented GST in their countries in the early 1980’s and 1990’s, and thus gave birth to a very effective tax system.

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Pic credits: lawctopus.com

Before we jump into the details of the Goods and Service tax (GST), it is important to have a look at the previous taxation system implemented in the country.  Before GST was implemented, VAT was prevalent in the country, and it caused a cascading effect under which tax on tax was calculated and was paid by every purchaser involved in the supply chain. In this taxation system, the tax liability was passed-on at each stage of the supply chain and finally fell on the shoulders of the end user. This is defined as the cascading effect of the tax, wherein the tax is paid on tax, and the value of the good increases each time it happens.

Now, in the case of Goods and Service tax (GST), there is an option to claim credit for the tax already paid during acquiring the input product. This means that each time an individual claimed input tax credit, the sales price for him reduced, and the cost price for the person buying the product is reduced because of lower tax liability. As a result of this, the tax burden on the final customer is also reduced substantially.

Now that we have understood the basic difference between the previous taxation system and GST, we can say that GST is a multi-stage tax that is levied on each value addition. Besides this, GST is also destination based, it is levied at the point of consumption. For instance, if goods are manufactured in Uttar Pradesh and sold in Tamil Nadu, the entire tax revenue will go to Tamil Nadu. Let us further have a look at the components of GST –

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CGST: CGST is collected by the central government on intra-state sale

SGST: SGST is collected by the state government on intra-state sale

IGST: IGST is collected by the central government on inter-state sale

This means that when the sale happens within the state, both CGST and SGST (9% each and a total of 18%) will be charged, whereas, if the sale happens between states, only IGST (18%) will be charged. GST brings a unified taxation system to the country, wherein only one tax must be paid in the case of inter-state sales. This replaces the old regime where two different taxes had to be paid (central sales tax + excise/service tax).

GST has boosted the economy of India by removing the indirect tax barriers in-between the states and establishing a uniform tax rate throughout the country. This also means that the business sector in India is booming with the implementation of GST.

Now let us understand how GST positively impacts the logistics and warehousing sector.

Reduction in the number of warehouses

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Until now, the companies had a big warehouse in each state due to the different taxes imposed in the states. This led to increase in storage costs and poor infrastructure. Besides this, disorganization could be seen in the warehouses. But now that GST is implemented, there is uniformity in the tax rate throughout the country. This means that the companies no longer have to pay different taxes in different states. Companies can now have a single, big, warehouse at a central location. This big warehouse can be used to supply goods to the other states and thus decrease the number of warehouses. Companies can now choose or book the warehouses based on the hub and spoke model (A distribution model arranged like a wheel in which the traffic moves along the spokes connected to the hub at the center)

Better control on inventory

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The taxation system that was followed by the implementation of GST leads to a lot of complications when it came to warehousing. Many times huge inventory was set up and at other times the warehouses ran out of inventory when the demand rose. But with GST in the picture, inventory efficiency will be impacted positively. As there will be fewer stocking points, there will be fewer chances of stock-outs. Using economies of scales, the companies would be able to make better forecasts about the future demands, and thus keep the supply chain process up and running.

Implementation of technology

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As discussed above, GST will reduce the number of warehouses. This means that the consolidated warehouses would be at a central location and would also be larger in size to accommodate the inventory. Thus, properly planned warehousing systems can be implemented in these warehouses. State of art planning is not possible in the small and scattered warehouse but can definitely be implemented in a bigger warehouse. The use of latest technology in the warehouses shall ensure improved service and will also lower the overall cost of operations.

Organized warehouses

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The current setup of warehouses in India is quite unorganized. Research suggests that companies have between 20 to 30 warehouses in each state of the country. With GST in the picture, the companies will reduce the no. of warehouses, which will automatically lead to a more organized structure. Further, it will also result in an increase in overall efficiency.

Cost saving

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As the warehouses will become more organized, the cost of logistics shall also come down. As a result of this, both – the logistic service providers as well as the end customers, shall be able to save money.

Want to experience a unique supply chance experience, powered by technology + process, to build value for your business? If yes, then contact BoxMySpace today!