Every successful business needs to have a solid supply chain. The movement of products from manufacturers to warehouse, store shelves and customers is vital. Not all new businesses or existing businesses have the resources available to maintain the employees and facilities that are necessary for effective logistics. The costs can become prohibitive in certain areas and industries. This is where a third-party logistics provider comes into play. These services supply a number of options and benefits for businesses.
Minimal Startup Costs
Starting a new business that deals in the distribution, manufacture or sale of goods requires a strong infrastructure to ensure that products move reliably along the supply chain. The initial investment in equipment, warehouse space and personnel is generally overwhelming and could take years to reclaim if the company is successful. Third party logistics providers remove the need for a large capital investment in infrastructure. The services are leased or contracted as needed. This also helps with budgeting in the future because the cost of the provider is consistent and predictable.
Economics Of Scale
Most third-party logistics providers supply services to a number of different businesses. This allows the provider to focus exclusively on warehousing, shipping or assembly and packing. Logistics providers can invest heavily in systems, labor and technology as more clients start to use the service. This makes the provider more efficient. Through the economics of scale, the clients that are using the third-party service will benefit because of lower overall operating costs and distribution of cost across many different businesses. This also allows the provider to improve systems constantly in order to increase efficiency and offer new services.
Experience And Expertise
Every business has a core area of expertise. This could be manufacturing, marketing or sales. Most businesses do not have a strong expertise in all of the areas that are required for success. A third-party logistics provider focuses exclusively on warehousing, shipping or other functions. There are no other areas of the business to draw attention or resources away from logistical operations. This expertise allows clients of the providers to avoid some of the common mistakes and pitfalls that would otherwise reduce revenue and cause problems throughout the supply chain.
The employees, equipment and facilities that are available will limit a business that has established a private infrastructure for logistics. If increases in business require more shipping or storage capacity, then this will require another large capital investment in order to expand the facility and hire new staff. This also requires time. A third-party logistics supplier provides seamless scalability. If the business requires more storage or a higher shipping output, then the provider will be able to accommodate the request transparently.
No Human Resource Issues
A third-party logistics provider is responsible for all of the operational issues related to the work that is performed. This means that the provider handles hiring, human resources and efficiency monitoring. The client business never needs to deal with individual employees or workplace issues in a third-party warehouse. This saves a large amount of money and time. The salaries and benefits of workers will not need to be paid. Human resource departments do not need to spend time dealing with a separate logistical area of the business.
Elliot Foss is a freelance writer. He has worked with the team at 3PL Links and highly recommends it if you or your business requires logistics or supply chain assistance.