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It may surprise you to learn that many of the world’s largest companies rely on third party logistics. These are businesses that have the funds to establish their own logistics networks but choose not to. In this article we are going to discuss the many advantages of outsourcing this essential service.
But before we begin, it may be a good idea to explain exactly what logistics is and how it is used in modern business. The simplest definition of logistics is that it is a system of management that ensures quick and efficient delivery of goods and services to customers. To assure that everything is running smoothly, professional logisticians will oversee every leg of the supply chain from production to storage to transportation and search for inefficiencies.
Why do companies outsource their logistical systems? For small and mid-size companies the answer is simple. Building your own logistics network is expensive. Not only must you hire a team of logicians, but you also need a warehouse and a fleet of trucks or a transport company. In the end, few small and mid-size companies can afford such a substantial investment.
But large companies can afford to build their own networks. So, why are they outsourcing the service with increasing frequency these days? One fairly obvious explanation is that logistics is not a core competency for most companies, i.e., it is not what they do best. So, rather than investing huge sums of money on a new logistics network that operates inefficiently, they hire companies that specialize in this vital discipline.
Another explanation for the growing popularity of third party logistics providers is the general acceptance of outsourcing as an essential management tool. Years ago, outsourcing was viewed as a failure of the company to provide a particular service. But in time, business executives realized that it was far more profitable to focus on what their companies do best and let specialists handle the rest.
Most companies that switch to a third party logistics service report greater profits, performance and efficiency. Most of these savings are due to the fact that these businesses have more experience and they know how to cut costs and improve performance at every leg of the supply chain, including the transport company.
Are there risks? Of course there are. We have all heard the expression if you want something done right, you have to do it yourself. Well, that also applies to business. For this reason, it is always best to contact a logistics consultant first. These experts know the industry inside and out and they will thoroughly examine all of your logistical needs and match you with the right service provider.