What is logistics? Business experts define it as the management of the dissemination of goods between the producer and the consumer. In other words, goods are shipped from the people who make them to the people who buy them. The term dates all the way back to the battlefields of Ancient Greece where military strategists determined the quickest and most efficient way to get medical supplies, food, and weapons to soldiers in the field. It comes from the word “logos,” which means reason or rationality in Greek.
In the ancient world, an effective logistics team could be the difference between life and death. But today logistics simply means the difference between the life and death of your business. Every company that ships goods must create or hire a competent logistics team. This team will be responsible for a number of supply chain management functions. The standard logistics team will take care of warehousing, inventory, packaging and transportation.
Third-party logistics providers offer substantial savings to companies of all sizes. Most managers mistakenly assume that only small to medium businesses can benefit from outsourcing these essential services. But the truth is that some of the world’s largest corporations rely on third-party logistics.
Did you know, for instance, that one of the top sellers on the Internet, Amazon.com, relies on third-party logistics for its Canadian operations? That means that they do not have to pay for warehouses, trucks, and drivers who deliver their goods in Canada. They simply pay a company to take care of storage and delivery for them. Because their third-party logistics provider does their job better and more efficiently than Amazon.com could in Canada, they save the company money.
Third-party logistics is particularly attractive to companies that ship perishable items. Produce, frozen foods, meats, dairy products, and some beverages must be shipped via temperature controlled transport. Refrigerated trucks ensure that time-sensitive items are not be spoiled in transit.
What to look for?
The most pressing concern of companies that hire third-party logistics providers is the lack of inventory control. If another company is responsible for warehousing and shipping, the client cannot easily track shipments and packages, which may compromise customer service. This is particularly true with regard to perishable items. When temperature controlled transport misses a beat, an entire shipment may be destroyed.
Should you trust an outside provider?
The answer is that you may have to. Most new companies simply do not have the capital to purchase temperature controlled transport. Not to mention the fact that they may not have the money to hire drivers and mechanics to maintain the trucks. Third-party logistics providers should always offer their clients tracking software so the company can provide shipping information directly to their clients.