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Third Party Logistics

04/19/10

Permalink 12:00:30 pm, Categories: efficiency , Tags: third party logistics

Business is all about cutting costs and running a well-oiled machine. An effective way of saving costs is by hiring a third party logistics company or firm to handle this particular aspect of the operations. What is a Third Party Logistics company?

A Third Party Logistics (3PL) is an outsourced provider that manages all, or a significant part of an organization's logistics. These logistic services may include transportation, warehousing, distribution management, freight consolidation, invoicing, receivables, payables, and value added services such as packing, e-commerce support (manage your EDI), inventory management, and dealing with vendors.

Deciding to a use a 3PL company depends on a variety of factors that differ from business to business. The decision to outsource certain business functions will depend on the company’s plans; future objectives, product lines, expansion, acquisitions, etc.

Once a decision has been made to outsource, a company will begin a search for the right 3PL that fits all their requirements at the best possible price. There are three types of 3PLs that operate today.

  • Asset Based
  • Management Based
  • Integrated Providers

Asset Based 3PL Companies use their own trucks, warehouses, and personnel to operate their business. Management Based companies provide the technological and managerial resources to operate the logistics functions for their clients, but do so using the assets of other companies and do not necessarily own any assets. The third category, integrated providers, can either be asset based or management based companies that supplement their services with whatever other services are needed by their clients.
There are of course advantages and disadvantages to contracting with a 3PL provider. Here are a few:

Advantages:

  • Cost reduction
  • Improved efficiency, service and flexibility
  • Freeing up resources
  • Better cash flow
  • Access to resources not available at one’s own organization
  • Risk-sharing
  • Elimination of infrastructure resources

Disadvantages

  • Loss of control over logistics functions
  • Distance from clients – loss of personal touch
  • Difference of opinion in perception of the service level
  • Impact on in-house workforce

More and more companies need to have an extremely lean, efficient supply chain to achieve successful integration into new markets. 3PL providers can help provide services to these companies, and can also help companies to cut operational costs. The amount of services being offered by these providers continues to grow each year.

3PLs are more than just transportation providers these days; they are becoming involved in the long-term strategic direction of their client companies.

TruckMaster®'s Transportation Management System accommodates companies with options. First; if a company chooses to manage their own logistics program, TruckMaster® provides the systems and integration needed for complete corporate visibility of the logistics operations. Second; should a company wish to take advantage of a 3PL service or perhaps only allow a 3PL to manage a part of their logistics operations, again; TruckMaster® administers the systems and expertise to allow control and visibility of logistics operations even with a 3PL. This flexibility is paramount in today's consistently changing economic environment. Visit the TruckMaster® Freight Brokerage Software website or call us at 888-891-9550 today and request a demo.

Donna Bratton
TruckMaster® Solution Provider
TruckMaster® Your Freight Brokerage

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