Third Party Logistics free essay sample

Third Party Logistics An Overview A third-party logistics firm is a firm that provides outsourced or third party logistics services to companies for some portion or all of their supply chain management functions. Typically, a core company providing services or products is considered the first party; the customer (or customers) the second party. A third-party, then, is a firm hired to do that which neither the first or second party desires to do. 3PL typically specializes in integrated warehousing and transportation services that can be scaled and customized to customer needs based on market conditions and the demand and elivery service requirements for their products and materials. 3PL is evolving from a predominately transactional role to one that is more strategic in nature. Characteristics Some of the characteristics of 3PLs are that they perform a variety of outsourced logistics matters, provide customized services, and handle multiple activities. These may involve transportation, distribution, warehousing, material handling, inventory control, packaging and inspection. We will write a custom essay sample on Third Party Logistics or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Some of the services offered by BPLs in the current market are: Dedicated contract transportation and transportation procurement. Inventory management Logistics management and consulting Freight audit and consulting Shipment tracking and tracing Reverse logistics and value added services Advantages Cost reduction Improved efficiency, service and flexibility Focus on core competency Freeing up resources Elimination of infrastructure resources Risk- sharing Better cash flow Access to resources not available at ones own organization Disadvantages Loss of control over the logistics function Impact on in-house workforce More distance from clients- loss of personal touch Discontinuity of services of a 3PL provider Differences of opinion or perception of the service level of the 3PL provider Companies have different options to consider in handling their logistics activities effectively and efficiently. They can (1) provide the functions in-house, (2) own logistics subsidiaries, or (3) outsource the function and buy the service. Traditionally, logistics activities like distribution, inventory management, order processing, or materials management were handled internally by firms as support functions and were given low priority compared to other business functions. One can divide the principles underlying organizations decision to outsource into two groups, the internal and the external. The internal principle refers to recognizing a lack of in- house resource availability. The external principle puts emphasis on a firms external competitive environment. Accordingly, trends like globalization, lead time reductions, and emerging technology contribute to the interest in outsourcing. Globalization increases the complexity of supply chains, given that the best supplier may be found halfway around the world, and customer needs are often as diverse as the countries in which they live. Lead time reductions, incorporating the shift to Just-in-time production schemes, add to the increasing complexity and cause inventory and ogistics control to be crucial to manufacturing and distribution operations. As a consequence of these trends, the tasks of logistics providers are increasing in content and complexity. With the increasing focus of business expansion into the global market, companies need to have an extremely lean, efficient supply chain to achieve successful integration into new markets. In the end, the need for developing a sustainable competitive advantage resulted in increased outsourcing and the evolution of contract logistics or third-party logistics. 3PL providers can help provide ervices to these companies, but also assist the more localized companies looking to cut operational costs or focus on core competencies. There are many advantages to outsourcing logistics services to third parties. The amount of services being offered by these logistics providers continues to grow each year. Today, BPLs are more than just transportation providers; they are becoming involved in the long-term strategic direction of their client companies. The key to successful outsourcing of logistics services lies in finding a 3PL provider that has the most strategic fit with the companys goals.