Advantages and Disadvantages of Third Party Logistics ProvidersPosted by Alvarez Hart on July 12th, 2021 In supply chain management, third-party logistics is the use of third-parties to outsource specific parts of its logistics, manufacturing, and warehousing processes. Third-party logistics can be defined as the integration of external entities such as vendors, transport providers, or factories with the business itself. A key part of third party logistics is its use in supply chain improvement. By automating certain functions, third party logistics can save time for the operations of any business. This is because instead of spending precious time searching for items that are in stock, they can immediately locate them using a single GPS device. They can also improve inventory accuracy as well as save time as they do not have to manually place and drop off products in their physical locations. Furthermore, they can speed up distribution and production processes as they do not have to travel to the location of the product to pick it or place an order. Instead, they can place the order on the spot with minimal delay. In addition, third party logistics services provide visibility into the supply chain. This helps prevent the occurrence of inefficiencies in the processes of the companies. The lack of visibility into the supply chain can result to poor decision-making, which may lead to mismanagement of the company's resources. It can also result to increased costs and breakdowns in the processes. The use of visibility into the supply chain through the use of third party logistics services allows companies to easily identify problems in their processes and make immediate improvements. One way to ensure pure cost savings is by having a third party logistics provider that provides customer orientation services. The advantage of having a customer-oriented logistics provider is that the provider will take charge of locating the products of the clients and send them to the customers. On the other hand, providers that do not offer customer orientation services will require the companies to locate the products and deliver them to the customers. On the other hand, a provider that offers value-added services should be chosen based on the extent of these services. Value-added services are those that allow for more efficient transportation, packaging, and warehousing activities. fulfillment include services such as container packing that allows for the safe packaging of the product as well as the transport of the same through the shipping carrier. Likewise, fulfillment warehousing activities include the warehousing of finished goods and raw materials. fulfillment include the transportation of raw materials directly from the production facilities to the clients. Many companies have failed because they do not have the right warehousing or transportation services. It is important that the companies identify the needs of their customers and then seek to provide them with the solutions. Some of the companies that fail to capitalize on the advantages of third-party logistics providers include beverage companies that cannot afford to purchase raw materials on their own. Also, some companies that cannot afford to buy their own trucks find it cheaper to contract with a provider instead of buying their trucks. Some of the advantages of using these service providers include the reduction in cost of operation, improvement in productivity, improvement in customer service, and reduction in the waste of resources. However, there are also some disadvantages to using these service providers. The biggest disadvantage of using second-party logistics services is that the client may be charged for services that he or she has not actually received. Another drawback is that the warehouses that are managed by these service providers may not be fully staffed, which means that the delivery of goods may take longer. Some third-party logistics providers can offer delivery services such as air freight services, ocean freight services, land freight services, and courier services. Air freight forwarding involves the sending of shipments by cargo ships to another location other than the one where the shipper wants to ship his goods. Ocean freight forwarding is used when shippers want to send their items to another destination besides the one where they live. Land freight services involve the sending of goods and materials by trucks or tractor-trailers to another location other than the one where the shipper wants to ship his or her items. The third type of shipping service is courier services, which are mostly used by large companies that have offices and branches all over the country and even to other parts of the world.Like it? Share it! More by this author |