The third party contractor takes on the responsibility of the functions outsourced. These contractors may help in warehousing raw materials, or products in transit, or finished products or transportation of goods from one place to another.
Parameters to check while deciding on the third party contractor
- Range of services: If one contractor provides various services then it is better to hire one party for all functions than to hire many and then manage them, but at the same time it is important to not dependent completely on one party.
- Market experience: A contractor might be old in the industry and know the tactics of the trade. Such a contractor is better as his experience and knowhow can be an asset to the company
- Quality of management: The products that are being stored should be taken care of and not mishandled. Eg. Fruits need cold storage and if the temperature drops from the specified temperature, the product might get damaged. In the similar way, many fragile products have to be handled with care. Thus, quality has to be ensured for the performance of the business.
- Health and safety records: The tools and machines managing the consignment should be of latest and high on technology and value. This will ensure safety and health of the people around. There are various certifications in the industry which ensure that the warehousing contractor is appropriate for a particular function.
- Total cost: The company has to bear costs of outsourcing the processes. In case the third party contracting is expensive and the company cannot afford , it should make appropriate decision in the beginning while hiring the party.
- Strategy: Though an outsourcing partner is the best in the field but is located very far from the company, then it is not advisable to hire it. Feasibility studies should be carried out as to which partner to hire for the best performance at lowest costs.
- Information Technology: These days technology drives the processes, whether it is warehouse management system or the tools to lift and place products, sorting and stacking, counting etc through computerized machines, technology has to be up to date and efficient. At the same time some corporate might take up old technology for not so critical functions to reduce costs. This decision is taken by the manager according to the need of the company.
- Financial Stability: The partner should be not just high words and big false promises, they should deliver at time and should show financial stability to carry out the required tasks.
- Reputation: Experienced companies get more work than the new entrants. Any bad word about past performances can hamper new contracts and loss of trust. Thus, building reputation doesn’t come in a day , it comes over years of hard work and trust.
- Shared user / public warehouses: It is important to find out which services, the partner is providing. One might take up share user, to reduce costs and time, while some would want exclusive area for warehousing.