Advantages of Third Party Logistics
3 Major Advantages of Third Party Logistics
A third party logistics provider is a firm to which companies can outsource all or some of their supply chain management functions. A good third party logistics provider is able to scale integrated operations, warehousing, and transportation services to a company’s particular needs. For many companies, outsourcing these functions to a third party logistics outfit is a wise choice for a number of reasons. Third party logistics can enhance efficiency, save money, and allow companies to focus on their primary areas of business.
What Kind of Value Do Third Party Logistics Companies Offer?
A third party logistics firm can offer your company a number of key services, including:
- Logistics expertise
- Network analysis
- Mode and load network optimization
- Cost containment strategization
- Managing vendor compliance
- Systems support
- Customized Services
The expertise in supply chain management, warehousing, and other operations that a third party logistics firm can offer is of substantial value to companies. Third party logistics can also be of benefit to shipping and carrying companies. A third party logistics firm will help a company to maximize efficiency, eliminate weak points that result in lost profits or revenue, and otherwise ensure maximal success and profitability.
The Three Key Advantages of Third Party Logistics
The following three key advantages make third party logistics outsourcing a smart and natural choice for all manner of businesses.
#1: Cost Savings
Clients of third party logistics firms nearly always save money overall. Since logistics is the core specialty of third-party outfits, their expertise in this area is nearly always superior to that of the shipping or production companies that hire them. While companies may not have the time or expertise to keep IT systems updated, third party logistics firms specialize in this, and are able to meet technical requirements more cost- and time-efficiently. Not only can a third party logistics firm strategize to decrease a company’s overall delivery costs, they can also help improve management to reduce inventory costs as well.
#2: Low Capital Commitment
When a company outsources logistics functions to a third party logistics firm, that company no longer needs to worry about maintaining and managing their own warehouses and transportation systems. Not only will the third party logistics firm manage warehousing, transportation, and other operations more efficiently and with more expertise than the client would on their own, but the amount of capital needed to hire the third party firm is generally less than would otherwise be needed for logistics operations.
#3: Freedom to Focus on Core Competencies
A third party logistics company specializes in logistics issues and operations. Business is complex, and it is difficult or impossible for a company to have expertise in every single sector or division. When hiring a third party logistics firm, you are hiring experts. This can free the client to focus time, energy, and resources on areas of core competency. Instead of diverting capital, personnel, and other assets to managing logistics operations, those resources can be used for the company’s actual business instead.
For many companies, the most efficient and cost-effective choice for supply chain management, warehousing, and other logistics operations, is to outsource those functions to a third party logistics company. By hiring specialists who will use their industry expertise to continuously optimize the supply chain for maximal efficiency and cost-effectiveness, companies can divert resources to core areas of their business instead.