Third-party Logistics - Case Study Example

Third-party logistics Third-party logistics Thesis ment The paper will focus on what is meant by Third-party logistics in the modern economy as well as further illustrating its use to the economy as well as its utilization in Supply chain management. As we will know by the end of this study is that, there are four different types of Third-party logistics which are based according to the customer’s preferences. Like any other services offered in the business faculty Third-party logistics has its pros and cons which influences the running of the company’s day to day activities. The phrase third-party logistics also abbreviated as 3PL is referred to as a company that works with shippers in managing of their logistics operations (Berglund et.al 1999). Logistics may be comprised of factor of warehousing, transportation management software, freight rate negotiation, in-depth reporting, forecasting, freight bill auditing and much more. There are accurately various 3PLs currently in the market that contain the variety of models and execute various tasks. Some 3PLs are specialized in particular industries; freeze up food such as fish. While others may concentrate on a single specific area of logistics like auditing of freight bills, warehousing or even provision of software’s that are logistic related. A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that offers service to its clients of outsourced or sometime known as (or "third party"). The Logistics services that are assumed to be part or rather their entire supply chain management operations (Sheffi, 1990). Types of Third-party logistics Third-party logistics providers may comprise of freight forwarders, courier companies, and other companies that integrates and providing delegated logistics and transportation assistance. Hertz and Alfredsson (2003) explain the four categories of 3PL that are being provided. Which include:- Standard 3PL Provider; it is the generally basic kind provider of 3PL.. They carry out services like, pick and pack services, warehousing services, and distribution (business) which are the most basic purpose of logistics (Berglund et.al 1999). Service Developer: the provider of this kind of 3PL services kind give their customers advanced value-added services like: tracking and tracing services, cross-docking services, specific packaging services, or also provision of a unique security system. A firm IT foundation and a focus on economies of scale and scope will allow this kind of 3PL provider in performing of these types of services. The Customer Adapter: this form of 3PL provider is used at the customer request and generally covers total control of the firm’s logistics services. The 3PL giver enhances the logistics radically, but doesn’t develop a different service. The basis of the customer for this kind of 3PL services is normally too small. The Customer Developer; this is the greatest level that a 3PL provider can reach with reference to its processes and services. It takes place at the time when the 3PL provider incorporating with the client, and taking over their whole logistics work. The providers will obtain a small number of customers; however they will carry out broad and detailed tasks for them. Advantages of Third-party logistics Save Time and Money It saves time that could have been wasted together with the money for the company. The use of 3PL removes the reason for investing in warehouse space, technology, transportation and staff to perform the logistics process. 3PLs facilitates a business in building a universal logistical network that has lower risk as well as higher return. In addition, 3PLs helps in saving of time spent in operation and transaction by handling of paperwork, customs documentation, billing, audits, staffing, among others. That is required in transferring of the goods where they are required to go (Lieb & Randall 1996). Industry Expertise 3PLs must be conversant to the industry best activities and stay until time with the newest happening in technology, manufacturing and logistics. They must make use of state-of-the-art software in supply chain visibility, transportation management, inventory control, and so on. Outsourcing logistics to a dependable, seasoned 3PL allows firms in focusing on its main competencies whilst leaving the rest to the experts (Hertz & Alfredsson 2003). Scalability and Flexibility The importance of using a 3PL provider is the capability of scaling space, labor, and transportation depending to the needs of an inventory. Businesses that have seasonal periods can benefit from stress free transitions that are between the industries ups and downs, being able to utilize more space and resources when required (Sink & Langley,1997). The use of 3PL provider makes your business to expand into new areas without obstacle. The strategically stationed distribution centers and warehouses which has been set up by 3PL providers facilitates fast shipping of goods to anywhere around the world. Decentralized distribution promotes reduction of costs and facilitates prompt delivery times. In supporting the growth into new markets 3PL providers have the resources to do that (Hertz, S., & Alfredsson, 2003). Continuous Optimization 3PL providers have the resources in place for making amendment as well as improving every link in the supply chain. 3PL professionals always ensure that your needs are covered, through the use of the fastest, most efficient, and cost effective ways (Lai, 2004). 3PLs have the mechanism to streamline the supply chain and using technology that guarantee the exact amount of goods arrive when as well as at the time that you need them. The software for sophisticated management can analyze and monitor practices in the elimination of inefficiencies, as well as restructuring of the supply chain. Outsourcing 3PL services can ensure constant enhancement is formed in logistics process. Third Party Logistics providers can offer the maximization of profits; minimize time for waiting and improving customer service (Hertz, S., & Alfredsson, 2003). Resource Network Third party logistics providers have a variety of resource network that are available that offers advantages on in-house supply chains. By the use of a 3pl’s resource network, every phase in the supply chain can be carried on in the more effective and in an effective cost way. 3PLs can influence associations and volume discounts; which may result in reduced overhead and the speeds up possible service. Selecting a 3PL provider gives your firm in benefiting from resources that are unavailable in-house (Lai, 2004). Disadvantages of Third-party logistics to the business Cost; the convenience of 3PL comes at a quiet expensive price; the general cost of using a system is greater as compared to when you manage your logistics by yourself (Skjoett-Larsen, 2000). Loss of direct control; you are depending on the aptitude, reliability and integrity of the 3PL and their staff, and should think that they are aware of what they are working on and are ever acting in your best welfare (Hertz, S., & Alfredsson,2003). Distance; you may be far the distance away in accessing your warehouse and merchandise, which can be a critical problem if, for instance, there are problems of quality that are related to the batch of your product. In addition, if you are concerned or having some complaints relating to the service, you are restricted to communicating via phone and email (Lai, 2004) Potential loss of reputation; the 3PL is accountable for one of the most vital functions of your business. Their mistakes are reflected straight on you and your customer as it will not allow you to pass the buck to your subcontractor (Hertz, S., & Alfredsson, 2003). Providers of Third-party logistics may be very essential to the small firm’s operator, specifically to those who are both home-based and beginning out. An ordinary method is the use of a 3PL in the premature phase of the business. Ahead of going on in setting up a warehouse after the further responsibility of doing it is justified by the decreasing operational costs in your business (Lai, 2004) The IT systems of the 3PL provider and that of the client are supposed to operate mutually. Conclusion This study best suits the person who is running firms that deals with the import and exports of products in the market. As for which they will require somebody else to work with the warehousing services on their behalf. This business phrase is commonly used and is essential in different ways and therefore more adaptive. Although it has a more positive side but also the negative side should also be considered, because since it is time saving also it is costly and it highly depends on the IT process. References Berglund, M., Van Laarhoven, P., Sharman, G., & Wandel, S. (1999). Third-party logistics: is there a future?. The International Journal of Logistics Management, 10(1), 59-70. Hertz . S & Alfredsson, M. (2003). Strategic development of third party logistics providers. Industrial marketing management, 32(2), 139-149. Hertz, S., & Alfredsson, M. (2003). Strategic development of third party logistics providers. Industrial marketing management, 32(2), 139-149 Lai, K. H. (2004). Service capability and performance of logistics service providers. Transportation Research Part E: Logistics and Transportation Review, 40(5), 385-399. Lieb, R. C., & Randall, H. L. (1996). A COMPARISON OF THE USE OF THIRD-PARTY LOGISTICS SERVICES BY LARGE AMERICAN MANUFACTURERS, 1991, 1994, AND 1995. Journal of Business Logistics. Sheffi, Y. (1990). THIRD PARTY LOGISTICS--PRESENT AND FUTURE PROSPECTS. Journal of Business Logistics, 11(2). Sink, H. L., & Langley, C. (1997). A MANAGERIAL FRAMEWORK FOR THE ACQUISITION OF THIRD-PARTY LOGISTICS SERVICES. Journal of Business Logistics. Skjoett-Larsen, T. (2000). Third party logistics-from an interorganizational point of view. International Journal of Physical Distribution & Logistics Management, 30(2), 112-127 Read More