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Should warehouses consider supply chain as a service?

3/31/2022

Should warehouses consider supply chain as a service?

As the e-commerce market continues its accelerated growth, many smaller warehousing companies find themselves struggling to keep up with the increasing demand. This has resulted in a shift toward an emerging trend in the logistics landscape: the supply chain as a service (SCaaS) model.

While this service model is relatively new, many companies staying ahead of industry trends are already enjoying the benefits. According to a report from MarketWatch, the North American SCaaS market is expected to reach nearly $8 billion by 2025, compared to just $4.5 billion in 2017. But what is the SCaaS model, and should logistics leaders embrace this change?

What is supply chain as a service?

The "supply chain as a service" model leverages cloud-based technology and end-to-end supply chain management solutions to help companies seamlessly partner with other logistics service providers. This highly flexible model enables you to outsource responsibilities like procurement, production control, manufacturing, inventory tracking. As a result, you're able to reduce logistics costs, find fulfillment solutions and improve efficiency and visibility across your supply chain.

Potential pitfalls

Before we get into the benefits of the SCaaS model, it's important to cover the downsides of integrating this system. Implementing the actual technology is often the easiest part. Rather, it's gaining support and buy-in from across your organization that poses the most significant problem.

Everybody's an expert
SCaaS models are often initially shot down because companies believe they can do the job better than anyone else. While this might be true in some cases, it's vital to recognize your own limitations. For many companies, outsourcing certain work allows them to focus on what they do best.

Resisting to change
The thought of outsourcing potentially critical components of a company can sound scary to anyone. Some might think it's better to just keep doing things the way they've always done them, but the comfortability of routine isn't always best for the business. Despite how simple the issue is, resistance to change is one of the biggest hurdles in implementing new company models and technologies.

Letting go of the reins
For supply chain managers, it can be difficult to relinquish control of business operations. This is completely understandable, as the uncertainty can be stressful. However, while SCaaS models might not offer the same amount of control, they do enhance visibility and give managers more time to focus on streamlining critical business processes.

The benefits of SCaaS

Outside of human-centered obstacles, a SCaaS system can offer numerous benefits to warehousing companies.

Reduce expenses
Warehouses that switch to a SCaaS model can expect decreased costs as they don't have to keep as many full-time employees on staff. This can also alleviate labor shortage issues faced by the logistics industry.

Expand your company
By expanding your third-party network, you gain access to industry connections, enabling your company to fill market openings as soon as they become available. This, in turn, can grow your company as it finds new opportunities and niches.

Utilize cutting-edge tech
Third-party SCaaS connections also allow you to expand your tech platforms by using theirs. These mutually beneficial partnerships can boost both your visibility and financial benefits, leading to successful relationships and companies.