A large portion of the goods we buy every day are perishable, which means that they will spoil or decay if not refrigerated. Fresh produce, meats, dairy products, frozen foods, medicines, and some beverages must be shipped via temperature controlled transport. In short, any product that has a limited shelf-life or an expiration date may require temperature controlled transport.
This can be a big expense for new businesses. Not only must they arrange for refrigerated trucks to ship their wares, but they must also rent or buy a climate-control warehouse. A citrus fruit company in Florida or a meat-packing plant in Texas must find a place to store their wares before they are shipped.
Companies that have been around for awhile often have their own distribution teams. That is, they own their own trucks and they employ drivers that are trained to operate temperature controlled transport, i.e., refrigerated trucks. But new business owners rarely have the capital to purchase or rent trucks and hire a team of drivers and maintenance workers. Not to mention the cost of renting or buying a climate-control warehouse to store items that must be shipped.
A third-party logistics provider offers its storage and shipping services to companies that cannot afford to create a distribution network on their own. More often than not, the firms that avail themselves of these services are small or medium size. However, some large companies hire third-party logistics providers when then need to ship goods outside of the US. Amazon.com, for example, outsources its temperature controlled transport in Canada.
What are the benefits?
For most new firms, the services offered by third party logistics providers are absolutely essential. Distribution is often the most expensive part or leg of the supply chain, especially if temperature controlled transport is required. Most new businesses make mistakes when they try to ship perishable items on their own. After all, most perishable products have a surprisingly short shelf-life. Meat, dairy products, and produce must be moved quickly and efficiently. Refrigerated trucks must be kept at the proper temperature for the entire trip. If the refrigeration unit is not properly maintained and it breaks down while in
transit, tens of thousands of dollars of product may be lost. A supermarket will obviously not accept wilted vegetables, bruised fruit, or rotten meat.
Outsourcing this service also give companies the ability to focus on their core competencies, i.e., the things they do best. A business owner who has no experience with distribution should not waste his capital or risk his reputation on shipping and warehousing. It is much easier and much cheaper to hire trained professionals to do the work. Food manufacturers, in particular, can save an incredible amounts of money if they hire a firm that offers access to refrigerated facilities and temperature controlled transport.