The success of any business depends on its ability to adapt to changing conditions that are beyond its control. As gas prices continue to rise, millions of American companies that rely on shipping have been forced to cuts costs at every leg of the supply chain. There is absolutely no way around the fact that gas prices have gone up by over 60 percent over the past two years. This means that transportation costs for every business that ships goods have increased. Whether they ship orders by truck, plane, or train, costs have gone up.
Is there an answer?
The only thing a company can do when outside forces back them into the proverbial corner is to improve efficiency on their end. They can make certain that money is not being wasted in purchasing and production. If gas prices are on the rise, they will invariably pay more for distribution. However, they can improve efficiency and lower costs by hiring a third-party logistics provider.
What do they do?
A company that handles every leg of the supply chain in-house is responsible for purchasing raw materials, producing their own products, and shipping or distributing them to consumers across the nation. As you might imagine, these companies are far more likely to suffer from certain inefficiencies along the way. Perhaps the production team is more efficient than the distribution team, or vice versa. The point is that companies that are responsible for the entire supply chain are generally less efficient than those that focus on only one stage or leg of the chain.
Third-party logistics providers focus solely on distribution. Because they often have several different clients, they are able to increase efficiency by doing away with waste, obviously. For example, most companies that ship their own products have to deal with less-than-truckload shipments (LTL). This is especially true if they ship perishable items, like fruits and vegetables. Since crop yields depend in no small part upon the weather, every now and then they have to send out temperature controlled transport trucks that are only half full. As you might imagine, this is an incredible waste of time and money.
But third-party providers don’t have this problem. Since they have many clients, if there is empty space on a temperature controlled transport truck after one client’s goods are loaded, they can simply fill it with the goods of another client and save both of them time and money.
Temperature controlled transport is one reason why food manufacturers rely on third-party logistics providers disproportionately. These trucks are not only expensive to run, but they must be serviced by experienced maintenance crews.
Most fruit orchards simply do not have the capital to hire drivers and maintenance workers. Not to mention the fact that they often need climate controlled warehouses.