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Third-Party Logistics Services: What Companies Should Consider
As any business with multiple stock keeping units (SKUs) and multiple orders per day knows, logistics is more complex than just putting up some shelving and making a few trips to the post office. From the local tee-shirt company to the multi-billion dollar pharmaceutical company and companies of all sizes in between, managing inventory is a major business challenge.
Why Companies Should Consider a Third Party Logistics Provider
Long before the current economic situation, smart businesses looked for ways to streamline operations and keep costs under control. To that end, many companies have outsourced as much infrastructure as possible in an attempt to focus on core competencies. Outsourced logistics, or third party logistics (3PL), as it is often called, has grown as an industry because of its ability to offer ever more finely tuned supply chain solutions.
What to Look for in a Third Party Logistics Provider
Third party logistics is a combination of storage, transportation, and services that enable businesses to deliver goods to customers. It may seem that warehousing is the most important component of this trio of services, but the services offered inside the warehouse are what trigger the decision to go with one vendor over another. For example, an ice cream company needs a logistics provider that guarantees inside temperatures well below freezing and that offers docks with insulation between trailer and conveyor. Warehouse location is important too, but if the logistics company cannot guarantee this critical service, the location is irrelevant.
Other services offered by third party logistics companies that are less dramatic--but just as important--are the ability to cross dock (receive merchandise and immediately route it to the consignee), kit, label, poly-bag, co-pack, RFID tag, and integrate with customized computer systems. Ultra-clean, ultra-secure, and bonded warehouses are required by some businesses, with location of these facilities an important but secondary consideration.
Logistics Companies: Speaking of Location
The location of warehouse facilities is important. First, the cost of moving goods from one place to another is determined in large part by the cost of fuel, which does not seem likely to decrease, so the shortest routes between manufacturing and customer are desirable.
Second, speed of delivery can be a competitive advantage with commodities. Being located near a customer who demands just-in-time inventory may be a deciding factor in where merchandise is warehoused. Proximity to ports and rail lines, along with the ability of the facility to handle intermodal containers is a consideration for high volume shippers.
Many third party logistics companies have their own fleets of trucks, and all work with common carriers. Some offer drayage service between ports and rail terminals and their facilities.
Logistics is a highly competitive business. Companies should negotiate for the best deal, but cant forget that relationship matters, especially when something goes awry. Checking references when selecting a logistics company is a always a good idea.