Business & Services

What is third-party logistics and what are its purposes?

Supply chain management is rapidly changing with the advent of internet technology, mobile communications, and social media. The supply chain has gone from a series of sequential steps to an intricate network that involves various business partners. The current trend is towards shorter lead times, more collaboration between buyers and vendors, transparent pricing models, and real-time visibility into where goods are in transit. It’s no surprise that companies are turning to technology to improve their supply chains while also making them more efficient and effective.

In this article, we will see everything about third-party logistics and its purposes.

What is Third-party Logistics?

Third-party logistics providers are critical in the supply chain environment. Third-party logistics companies focus on managing all aspects of the supply chain except for product manufacturing. They are responsible for storage, transportation, quality control and other tasks. They focus on the movement of goods from the point of origin to the point of consumption. These companies offer services at lower costs than most manufacturers can provide them on their own. By using third-party providers, manufacturers can free up their time to concentrate on core competencies that help them maintain a competitive edge in the market place.

Third-party logistics services are usually outsourced by companies because they face problems with their internal resources. For example, manufacturing companies might outsource shipping because they need additional capacity or expertise in this area. Companies also use 3PLs when they want to focus on core competencies or are having difficulty attracting qualified staff.

The third-party logistics (3PL) industry has grown by leaps and bounds over the past few years, with the majority of growth coming from companies with less than $5 million in annual revenue. This is largely due to the advent of e-commerce, which is estimated to reach $2.57 trillion globally by 2021. 3PLs are able to handle everything from warehousing and shipping to delivery services for these small businesses, allowing them to focus on what they do best – selling their products online.

Who is involved in third-party logistics?

Third party logistics (3PL) is a business model in which the customer has its goods transported, warehoused and/or distributed by a service provider. The service provider can be an independent company or part of another organization. Fundamentally, 3PL is the practice of outsourcing the entire supply chain to another business entity. They are also known as Freight Forwarders, Logistics Service Providers (LSP), Supply Chain Management (SCM).

How does third-party logistics work?

Third-party logistics services have been around for a long time, but they’re far from common knowledge. A third party logistics provider will assess your business needs and then suggest solutions to meet those needs.

The 3PL industry has been growing steadily since the 1980s as businesses have sought to reduce costs by outsourcing some or all of their supply chains. In addition to those companies that outsource those functions entirely, many other businesses engage in strategic sourcing, which involves “selectively outsourcing transportation and logistics activities to best support core business objectives and ensure service levels desired by customers.” Strategic sourcing may apply at any level of the supply chain – from manufacturing through distribution.

Purpose of Third-party Logistics

This question asked by many scholars and businesses alike. Third-party logistics providers have been in the industry for a long time now, but there are still some people who don’t know what they do or what kind of services they offer. Focusing on the broad idea, rather than getting lost in the terminology, will help you understand how these services work and why they’re useful.

Third-party logistics is a company that provides services to other companies. In the supply chain industry, third-party logistics is all about managing demand and distributing goods from the point of origin to their destination.

The primary function of a third-party logistics provider is to help control costs for its customers and ensure that their products arrive worldwide within certain time frames. The providers can handle every aspect of the process, including:

  • Warehousing and storage
  • Transportation (trucking and air freight)
  • Customs clearance
  • Inventory management
  • Shipping documentation preparation

Third-party logistics companies help to make the supply chain more efficient, especially when it comes to complex international shipments. In addition, third-party logistic firms provide added value when it comes to warehousing and shipping options, which means that you can save money on storage fees when working with third-party logistics providers.

The value of a good relationship between your company and its 3PL provider

You have probably heard the old saying that “a chain is only as strong as its weakest link.” It is particularly true in the supply chain world. The relationship between your company and its third-party logistics provider (3PL) is the critical connection within your supply chain. Strategic partnerships are a must, they give you a competitive advantage otherwise impossible to achieve. A good alliance is one of the most important aspects for all companies.

A 3PL can be both your ally and your competitor, so it’s crucial to develop a strong relationship with them. The best way to do this is by building long-term relationships built on trust and transparency. If you feel that your 3PL isn’t treating you fairly, then you should talk about it and find solutions together that will allow you to reach mutual goals in an efficient way.

The better the relationship, the more likely they will take care of you and your company’s supply chain needs as efficiently as possible. This includes finding the best carrier to ship your freight, selecting an efficient route, and finding ways to reduce shipping costs through volume discounts and other incentives. A good provider also wants to help you grow by making sure that shipments arrive on time and damage-free so your customers stay happy and keep ordering from you.

AWL India is India’s leading logistics provider and power by cutting edge technology. They help businesses grow with their efficient services in storage, warehousing, shipping and inventory management.

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