The Pros and Cons of Third Party Logistics

Many companies that import, export or distribute products will turn to third party logistics providers to assist with their warehousing and logistics needs. Third party logistics providers specialize in managing and organizing the logistics requirements of other businesses. Both small and large companies can utilize the services of third party logistics providers. Some of the different services that these providers are able to offer businesses can include warehousing, freight forwarding, picking up orders, packaging orders, and delivering orders to clients. A third party logistics professional can even handle inventory management for your company.

When you are making plans for how to handle supply chain management for your business, there are a lot of reasons why you should strongly consider working with a third party logistics provider.  You should carefully consider the pros and cons so that you can make the best choice for your business operations.

When you make decisions on business operations and supply chain management, consider these pros and cons of third party logistics.

Some of the pros or advantages include:

• Flexibility. You only pay for the services that you require from your third party logistics provider. You do not need to make a more permanent commitment like leasing a warehouse and hiring staff to handle the transport or goods or management of inventory. You can also choose to use the third party logistics provider for either some or all of your supply chain management and freight forwarding.
• Expertise. Third party logistics providers are in the business of warehousing and handling freight. This is what they do and they have developed effective systems, processes and protocols. Your company is not an expert in logistics. By trusting a professional service that does this type of work all the time, you can benefit from their expertise.
• Better transport rates. Third party logistics providers are generally able to negotiate volume discounts from freight carriers, which can result in better transportation rates than your company would likely be able to get on its own.

Some of the disadvantages of third party logistics may include the following if you choose the wrong provider:

• Potential damage to your company’s reputation. You are entrusting a third party logistics provider with making sure that your customers get their goods on time. If the logistics provider fails in its job, then your clients could end up not getting a delivery that they are expecting or not getting a delivery in acceptable condition. This can have an adverse impact on your company reputation.
• Loss of control. You need to put your logistics in the hands of someone else, so you lose direct control over the process.

These disadvantages can largely be mitigated by choosing a third party logistics provider that has been in the business for a long time and that is good at what it does. If the third party logistics provider is effective and keeps your deliveries on track, then your clients will receive their items on time and your company reputation will stay strong.