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3 Main Advantages of Using Third Party Logistics

Third-Party Logistics in supply chain management refers to the use of third-parties to outsource components of a distribution, warehousing and fulfillment business to another company. The use of third parties in this context implies that the business has contracted to another firm to perform or complete a particular task instead of hiring a full-time staff for the task. In the past, third-party logistics was seen as a cost-effective alternative to employing full-time personnel to perform work such as storing and shipping goods. Today, third-party logistics has become an important part of many companies' supply chain solutions.


Many companies find that when they hire a third party logistics company to fulfill their logistics needs, they save money. One reason a third party logistics company may be more economical is that they do not charge an hourly wage, benefits, medical benefits, payroll taxes and other fees typically associated with full-time employees. These costs are absorbed by the fulfillment or distribution company who pays these expenses. In turn, the third party logistics company sends its employees who perform the work to the customer. The customer does not see any difference in what the third party logistics company charges for its shipping services or its shipping supplies because the costs have been eliminated.


Another advantage of using third-party logistics providers is that they can provide higher levels of service than some of the larger warehouses. Some warehouses may have the skills, equipment and expertise necessary to meet all of a company's logistics needs; however, these warehouses are typically located in remote areas. The advantage of having a warehouse located closer to the customers is that these warehouses can offer the same or even higher levels of service that large companies offer. These warehouses also have the benefit of providing on-site pickup and delivery services. Large scale companies often find it difficult to meet their delivery needs, especially in cases where the customer is located thousands of miles away.


Often, companies prefer to use third-party logistics services because they do not require the extra investment in property and real estate. In addition, third-party service providers offer their warehouses in multiple states. In addition, some logistics providers do not charge for their shipping services across state lines, which can be a very useful service to some companies.


When a company chooses to use third party logistics, there are several considerations to make before hiring a provider. First, the client must determine the level of service desired and determine which company will be the best choice to provide this service. Second, the company should identify the kind of relationship that will be best suited for establishing an agreement between the company and the warehousing provider. Third, a business owner must determine if they want to purchase their own in-house logistics provider, or if they will prefer to hire a third party logistics provider.


There are many benefits to using third-party logistics providers. For instance, third-party transportation services will allow logistics operators to improve their efficiency by improving their routing protocols and improving on the warehousing of goods. Furthermore, third-party transportation services will allow logistics operators to improve their onsite customer service by having access to onsite warehouses. Lastly, third-party transportation services can help companies save money by reducing the overhead associated with their shipping and freight forwarders.


When it comes to choosing between a third party and in-house supply chain logistics providers, there are many factors that should be considered. First, a business owner should consider the amount of freight that they need to handle. Depending on the number of shippers that a company has, the costs associated with the third party logistics provider will vary. As a result, businesses that have a smaller number of shippers will incur lower costs than those that have a larger number of shippers. However, a business owner should also take note that the price that is charged may be affected by the level of service that is provided by the third party logistics provider.


To save money while streamlining operations and improving supply chain management, many companies turn to third-party logistics providers. However, it is important for businesses to ensure that they are selecting a company that is experienced and that provides a high level of service. The benefits of third-party logistics outsourcing will depend on the experience of the third-party logistics provider as well as the level of service that are offered. For this reason, it is important to thoroughly review the services that a logistics provider offers before choosing to outsource.

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