Third-Party Logistics in supply chain management and logistics is the utilization of third-party companies to perform elements of a given supply, warehousing and fulfillment system. A company may employ third party logistics to include the transportation of goods from the manufacturer or supplier to the retailer or to the ultimate user. Third-party logistics may also refer to contract manufacturing or outsourcing. In many cases, the term refers to a relationship between a company and a third party company that allow for the transportation of goods but does not engage in the actual production of those goods.

One reason third party logistics is so common in supply chain management and other industries is because it is cost-effective. The company doesn’t need to build any trucks or storage spaces and the supplier simply pays for the transportation costs. In addition, there is a degree of customization that can be incorporated into a supply chain. For example, if a manufacturer needs certain flooring materials, it may contact a third party fulfillment company to determine if those items are available. If the third party logistics provider determines they are not available, they will invoice the manufacturer directly.

Another benefit to third party logistics services is the visibility it creates. When a company is involved in the supply chain, it needs to be visible to both customers and other producers. By having a logistics service company warehouse products and fulfill orders with a third party, the logistics provider becomes visible and the company can decide whether or not to sell those items. In some cases this results in increased sales, which is good for a company’s bottom line. The increase in visibility created by a third party logistics provider also creates a sense of security in the supply chain as it is less likely for a mistake to go unnoticed.

When choosing a third party logistics provider, it is important to find one with extensive experience in the industry. It is also important that the fulfillment center chosen specializes in what the company needs. A fulfillment company that is too general may not have the expertise necessary to meet the needs of a particular industry. Likewise, a company that is too specialized may be overloading the supply chain with unnecessary functions, which could result in a loss of productivity and lead to lower profits.

Many fulfillment companies specialize in a particular niche market. Some companies often have exclusive arrangements with manufacturers to provide them with products that cannot be found anywhere else. In these circumstances, the company can fulfill orders faster than competitors due to the specialized expertise. This advantage is especially important for companies that need to meet rush orders from overseas customers before the end of the holiday season.

There are many advantages to using a logistics provider that offers value-added services such as full-service contract packaging and full service freight insurance. These providers can also handle all aspects of warehousing. This includes receiving, packing, shipping and transportation to the customer’s door. If a company can manage all of these functions themselves, they will save money by not having to hire additional staff members to perform these functions. However, if they outsource these functions to a third party logistics provider, they can reduce their overhead by only paying for the amount of work that they actually require. Many providers can offer their clients a complete line of warehouse equipment, including forklifts, packing machines, pallet trucks and conveyor systems.

The benefits of using a logistics provider that offers value-added services include customer orientation. Often, providers who specialize in one area will be able to provide a better customer experience because they are fully aware of what the customer needs and how to best meet those needs. This customer orientation is often a significant competitive advantage.

Another advantage is the potential to save hundreds, even thousands, of dollars per year. For example, when a company needs to transport goods in bulk, it may pay a freight forwarder only $.10 for each load. However, if the same company also needs to ship products in smaller quantities, such as one product per week, it may pay far less for a third-party logistics provider because they will package, box, and send the product directly to the customer. In these cases, companies save a significant amount of money on shipping costs and even profit margins. This type of cost savings is especially important for small businesses that are just starting up or that are experiencing financial difficulties.