Third Party Logistics versus In-House Logistics
Businesses that want to avoid or are unable to handle supply chain management functions within their organization can partner with third party logistic companies. A logistics provider can take care of operations such as procuring raw materials, manufacturing and distribution of goods, allowing the business to focus on growth and on developing its core competency.
A business can take an informed decision by comparing the costs of producing and distributing products versus the cost of partnering with a logistics provider. Consider the savings because of not having to hire personnel, setting up a manufacturing plant, storage and distribution center. Logistics companies leverage economies of scale allowing them to charge competitive rates for their services.
Save time and money with a logistics management company
Efficient logistics management demands investment of money, time, experience and expertise. With a third party logistics company, a business can take advantage of its established knowledge base, resource pool and time tested processes. They can save the business valuable dollars and time as they already have a manufacturing, storage and distribution center and are associated with various supply vendors.
Supplement order fulfillment with additional services
Logistics companies are not just fulfillment providers. They offer myriad services that can help an organization meet market demands, reduce expenses and increase revenue. Some of these services are:
Managing supplier and quality checks: Logistics companies have professionals in their employ who can get the business the best deals on raw materials needed for manufacturing goods. They also conduct thorough quality assurance checks on the manufactured goods.
Forecasting demand: Demand forecasting is a very useful tool used by logistics companies to meet spikes or slumps in product demand. The business saves on storage costs and reduces waste by ensuring the inventory replenishment rate matches market demand.
Warehousing and shipping: The work of a logistics company does not end with providing a first-rate warehouse facility to the business. It also takes care of distribution of goods – picking and packing, assembling, finishing, receiving orders, shipping, and managing inventory.
Administrative services: Logistic companies handle all the administrative tasks associated with manufacturing and distribution such as:
- coding products
- customer billing
- reporting orders, returns, sales, product issues and more
- order tracking services
- export management and quality checks
- web-based applications for tracking inventory
- project management
What to verify before hiring a logistics company
A business must invite quotes from multiple logistics companies before partnering with one. Business needs vary and the provider should have the necessary skills and facilities to satisfy them. Some factors that should be considered are:
- longevity of the company in the logistics business
- experience in manufacturing and distribution for your industry
- experience in international export
- references from previous clients, awards, recognition and affiliations
- details of the warehouse – temperature control, location, etc.
- training of telephone representatives for customer service calls
- turnover rate at the call center
- timely delivery and track records
- distribution rates
As third party logistic companies have the advantage of volume, they can be a much more economical solution than an in-house department. Apart from the savings of time and money, logistics providers also introduce efficiency and professionalism into business processes.