The Pros and Cons of Outsourcing Food Distribution
Food products continue to be of great importance as it is well established that food is every man’s basic need. This natural factor itself boost the demand for food products across the globe. Reports have it that the global food retail sales hits about $4 Trillion per annum. And beyond the natural need for food, the increasing populations and advancements in technology are crucial to this successful record.
However, we are focused on the availability of food products to meet consumers’ demands. This is influenced by the seamless nature of the food distribution strategy implemented in the supply chain. Food distribution involves the movement of food products from the producers to the consumers.
Over time, several brands in the food industry have adopted in-house food distribution, which has yielded a fair share of positives and negatives. However, other brands prefer to outsource the food distribution to a third-party logistics company. Outsourcing food distribution pros cons has then become a vital subject. Brands seek to weigh their options and pick the best strategy suitable for their business model.
The Pros of Outsourcing Food Distribution
No doubt outsourcing food distribution contributes immense benefits to brands and the food industry at large. This can be associated with the benefits of outsourcing warehousing as it is a part of the distribution line. Outsourcing brings to light the contributions of third-party logistics companies, and let’s review the benefits.
Let go the Responsibility for Warehousing and Transportation
Distribution entails several stages, strategies, players, and infrastructures. Examples are warehouses and transportation. The warehouse plays a huge role in food distribution as it is a place where food products are stored and processed(fulfillment) for further movement or delivery. On their end, transportation is inevitable as products keep moving from the point of production to the consumer.
Hence, outsourcing food distribution to a third-party logistics company takes off this burden from brands as they take charge of warehousing and transportation. Now you understand how the benefits of outsourcing warehousing connects with food distribution.
Third-party logistics companies are reputable players in the industry; hence their networks and connections should not be underestimated. Outsourcing food distribution to a reputable and efficient third-party company will help your products reach a variety of consumers in traditional trade, modern trade and also online trade. This can also help food products break into newer markets and retail units.
So, there is a marketing advantage when partnering with a third-party logistics company as they know the routes, structure of the market, and changing behavior of the consumers.
It is impossible to take costs out of this mix. For every stage in the supply chain, different measures of finances go into it. And several food brands yearn to achieve the best results at a reduced cost. Then, outsourcing food distribution is a possible avenue. When food distribution is outsourced, the third-party logistics companies charge a flat rate. This is much reasonable compared to a company putting all infrastructures together, such as warehouses, transportation fleets, and more.
Therefore, outsourcing food distribution is a way of boycotting the high expenses of infrastructure and other resources, and brands save costs.
There comes a time when the need for growth and expansion becomes inevitable. This can be due to breakthroughs into newer markets or an increase in consumer demand. As a result, operations and volumes of produced food products will shoot. This will naturally require more sophistication, labor, inventory spaces, fleets, and more. To scale at this point may be challenging if the company has been pulling through in-house.
In the case of outsourcing, food brands can leverage the resources and infrastructure of the third-party partners and scale easily.
There is no doubt that in-house distribution can yield excellent results. However, outsourcing can bring more efficiency to the table. The following factors are responsible for the improved efficiency.
- A higher level of expertise as the third-party distributor brings a wealth of experience and helps avoid pitfalls.
- Advanced technological implementation along the distribution chain becomes a reality. The influence of technology boosts efficiency, and saves time and cost.
- Well-integrated management systems.
- Effective transport routing system.
Demand Flexibility and Adjustment
The food market demand changes at different times with some seasons experiencing volatile demand. Peak season also in view when discussing consumer demand. So, there is a need to always be in sync with the current market to always provide the required volume of food products to the customers.
Third-party logistics companies can help adjust to the ever-changing consumer demands.
The Cons of Outsourcing Food Distribution
It’s ideal to look at the few downsides of outsourcing food distribution. This creates a better framework for effective decision-making.
Product Handling and Control
There are several types of food products, and there are situations where the third-party company isn’t well experienced with the product. This could lead to poor handling during order fulfillment and transportation. However, this can be avoided by setting up proper SLA and KPI to follow through and reporting controls.
The case of strict contracts, especially long-term ones, can be problematic. It becomes a problem when there is a breach of agreement or services are not rendered with the expected quality.
Outsourcing food distribution tends to reduce the control of brands. Brands get limited in several marketing aspects and areas of the supply chain. This is because the food distributor takes charge of a part of the operations.
How Al Sharqi can Help you in Food Distribution
Al Sharqi is undoubtedly one of the best logistics partners for food distributors especially in the UAE. Al Sharqi possesses the required traits of a cutting-edge food distribution partner, a cutting-edge WMS, assets infrastructure and fleet of vehicles and vans to get the job done.. In terms of food distribution, Al Sharqi brings to existence the outlined benefits above and mitigates the risk and downsides of outsourcing food distribution to give brands the best service.
- High-level expertise with several active years in the food industry.
- No problem with demands as Al Sharqi takes care of demand forecast, estimation, and analysis.
- Optimized warehousing solution.
- Well-structured and optimized transport network.
- Cutting-edge technology and management system.
- Wider market reach.
Al Sharqi works around outsourcing food distribution pros and cons and creates the most optimized strategies for better results.
Our customer service team is happy to assist you with planing your next booking.