The Pros & Cons of Third-Party Logistics Services

A third party logistics provider is an organization that handles all or some parts of another organization’s supply chain. A company’s supply chain includes functions like storing inventories, transporting cargoes, packaging and distributing stored finished goods.

logistics management

Of course, a company can handle all these functions all by themselves but by choosing a third party logistics provider can more lubricating for the complete system as a whole. A third party logistics service provider can offer all or some of the functions mentioned before.

On the other hand, when a company chooses to go third-party, it does not need to choose all the services provided by them. Instead, they can choose a single or a combination of functions to be performed by the third party.

Pros and Cons of Third Party Logistics

Now that we understand a little bit more about the concept, let us take a deeper look at the advantages and disadvantages of this system.

Pros of Third Party Logistics third party logistics

  • Choosing a third party for handling logistical functions is extremely flexible for the hiring company. The employer can always walk out of the contract whenever they want and pay only what they had asked for. This is especially convenient for new and small businesses that cannot afford to rent a whole distribution warehouse California and handle the distribution process simultaneously.
  • A third party also makes the whole business process more convenient. Storing inventories, checking and maintaining them properly and delivering them to ordering customers are of course vital parts of a business but they can be quite distracting since they require a lot of professional expertise. External logistics service providers take care of all of these and make it much easier for the employer.
  • Third party logistics providers specialize at performing specific jobs related to supply chain management. In addition, they always possess more advanced tools and technologies to perform those jobs swiftly and flawlessly that individual businesses cannot possess due to their costs.
  • A third party’s transportation rates are always better than that of an individual business since they can transport and distribute goods of multiple employers simultaneously and thus can distribute the total costs among all the employers. This way, each employer incurs rates that are much lower than what they had to pay for themselves when handled personally.
  • Finally, an employer of the logistics company can learn a lot about warehousing and similar supply chain functions from them as well. This can be very helpful if they wish to handle all the processes all by themselves in the future.

Cons of Third Party Logistics

  • The costs of hiring a logistics provider are COMPARATIVELY cheaper. This means you would still have to pay more than what you had to if you had handled the functions personally.
  • You somewhat lose some direct control over the functions since now you have to rely on the competency and skills of another. Some consider this highly distracting, while others find this one of the biggest advantages of logistics services
  • Sometimes it is difficult to find completely reliable companies near you and/or your business. When that is the case, distance becomes quite a problematic factor especially if you need to check the quality of the stored products at a regular basis.
  • If the company turns out to be not-so-good at what they do, you risk losing the reputation of your whole business.

Remember, you must always make informed decisions when it comes to selecting a good third-party logistics for your company.

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