Pros and Cons of Outsourcing Logistics for Mining Projects and Industry

January 17 2023
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The right logistics partner can be a business’ powerful ally in becoming more profitable and achieving success. This statement is especially true in mining, where, just like any industry, there is a constant search for inexpensive and efficient mining methods.

In the current environment where there’s intense competition whilst businesses suffer from financial crunch, many firms are compelled to create strategies that effectively help in redirecting focus on their core activities. One is through outsourcing logistics.

However, like any service, outsourcing logistics has its ups and downs. If you are considering going this path, this blog can help you decide whether it is suitable for you and your mining goals.

Outsourcing is mainly done to optimise non-core activities, which include logistics. That’s why many companies delegate tasks to third-party logistics (3PL). Currently, 3PL services are in great demand Pin Australia, but should you take advantage of outsourcing logistics or leave it to your in-house team? Let’s first explore the pros of outsourcing logistics for your mining projects:

Pros of Outsourcing Logistics for Your Mining Projects

1. Reduce Overall Logistics Costs

According to a 2021 3PL report, the majority of businesses have had success with their 3PL relationships. About 68% said the service contributed to lowering their overall logistics expenditures. That’s not surprising since outsourcing allows you to transform direct costs into variable costs.

It’s easy to see that a third-party logistics company can help save money. For one, you don’t have to invest in distribution infrastructure. The 3PL agency will take care of the buildings and systems, including software, maintenance, and programming required to run their own business. Sure, you pay for these costs as part of the overhead, but the amount is typically shared across the third party’s clients. Therefore, you benefit from the broad cost allocation, which is not present if you take care of your logistics with your in-house team.

2. No Need for Infrastructure Investments

Sometimes, mining projects require dedicated facilities, but that’s not a problem. Some 3PL companies will invest in infrastructure and other needed systems on your behalf as long as the long-term partnership is guaranteed.

One more thing you avoid is investing in fleet and vehicle maintenance. Owning trucks is a costly burden. You also have to ensure everything is in working order by following a strict vehicle inspection and upkeep schedule. Not only that, you have to hire and retain your drivers whilst ensuring the whole fleet operation is safe and compliant. It’s time-consuming and headache-inducing, which is why it is best to leave the task to the best 3PL business.

3. Scale Labour and Infrastructure

Outsourcing logistics lets you have a highly skilled team that can manage its workforce on its own. You don’t need to supervise everyone, so you focus on the goings-on in the mining site. 3PLs can assign temporary workers, when needed, to address demand spikes without adding costs. It’s a more economical option than hiring people for a permanent position.

You also scale infrastructure. Many 3PLs have a national distribution network, allowing you to expand your reach in a variable-cost setting.

4. Accommodate More and Bigger Products

The increased capacity is a welcome advantage in any mining project. Freight volume used to be an issue in the industry, but not anymore. 3PLs have helped mining businesses increase their capacity by offering a higher freight volume than what’s handled on their own.

5. Take Advantage of the Third Party’s Expertise and Know-How

You must assess the third party’s experience in mining, as this industry is more demanding than most. Urgency, safety, and precision are among the challenges towards achieving efficiency in the supply chain. For more information on industrial and manufacturing expertise in mining, visit Thermal Engineering.

Having the right 3PL partner means that you have logistics experts you can rely on. When you outsource logistics, you get a team with specialised knowledge in the mining industry. You gain the help needed in your mining operations at every step of the project.

6. You Get a Range of Mining Logistics Services

A third-party logistics company can offer their expertise through a variety of services that your mining project can benefit from. Some agencies can deliver consultancy and project supervision, whilst others include risk analysis, transport engineering, oversized cargo transport, and route studies. Whatever it may be, you can count on the 3PL service to make your project easier to handle from the get-go.

7. Improve Business Performance

Many businesses that use 3PL services in the mining industry agree that their customer support has improved. You can turn to 3PL to solve this issue if you have limited internal resources. For one, 3PLs can marshal resources to help you meet aggressive logistics deadlines. Even on short notice, you get more hands you need to maintain good relationships with your customers.

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With the pros out of the way, let us now talk about the cons that come with outsourcing logistics for the mining industry. Take a look at the disadvantages listed below to learn whether depending on other professionals is suitable for your project:

Cons of Outsourcing Logistics for Your Mining Projects

1. You Do Not Control the Logistics

Expect loss of control with any third-party dealings. This is true when you outsource logistics for your mining projects. It’s perhaps the most significant disadvantage, which is why selecting a responsible logistics provider is necessary. This way, you do not spend a lot of time worrying about the quality of services and whether the time frame meets your customers’ expectations.

2. Information Leaks May Happen

If you don’t intend to transfer confidential information, you don’t have to be concerned with this disadvantage. However, most businesses do share certain documents that should have been for the eyes of the in-house team only. There is a risk involved that you should understand. Once again, it helps to choose a reliable logistics partner to minimise the possibility of information leakage.

3. There’s a Risk of Getting Low-Quality Service

In a rush to outsource logistics, you might make the mistake of choosing a fly-by-night logistics agency. These groups seem to appear out of nowhere, offering very low prices for their service to gain customers. While saving on costs is great, you could end up with poor-quality logistics service that can affect your reputation and customer retention.

4. There May Be Additional Fees Involved

One advantage of outsourcing logistics is saving money on infrastructure, employee salaries, and operation costs. However, some 3PLs will put in extra fees for specific services. They may specify these additional fees in the contract terms but will hide them in small print. That’s why you should be wise in picking the logistics company.

Take enough time to study their background and experience in the mining industry. Also, make sure to read what their past clients are saying. If there are so many negative reviews, it is best to avoid that company, even if they provide the cheapest services you can find.

5. Roles and Responsibilities May Not Be Specified

As you may be aware, logistics is a subset of your supply chain management. It involves a series of micro-steps, further increasing its complexities, particularly in planning and implementation. The problem arises when tasks and responsibilities are not explicitly expressed in writing. Ensure that the Service Level Agreement contains these details to avoid serious complications for your business and your relationship with the 3PL provider.

Is Outsourcing Logistics Right for You?

As with any function you can outsource, logistics comes with merits and demerits. However, you may have noticed that most of the drawbacks of outsourcing logistics happen due to poor planning. Remember that you may be dealing with a knowledgeable salesperson from the 3PL provider, meaning they are capable of selling their organisation in the most attractive way possible. If you’re in need of the right talent for your project, talent recruitment agencies Origin Resources could also help you out.

But it doesn’t mean you cannot steer clear of those pitfalls. The challenge lies in choosing the right partner from the very start of your mining project. That way, you minimise issues as you take full advantage of outsourcing your logistics function. Post contract signing, it becomes the primary job of the 3PL’s operational team to deliver their promise and help you meet your targets.