Third Party Logistics: Many Advantages And Some Disadvantagesby Varsha Gaur teacher
For most manufacturers, looking into
warehousing and deliveries can cause a lot of hassles. Employing third-party
logistics can actually help them deal with this.
specializing in integrated warehousing operations and transportation
management, third-party logistics help ease the work of an organization by
customizing its operations to meet the organization’s demand. Thus the third party
logistics essentially deals with delivery fulfillment services including
warehousing and distribution.
referred to as 3pl, these Third Party Logistics India also offer a lot of value
added services wherein parts of an organization’s supply chain can also be
integrated into the system along with other production and procurement services
as and when required by the organization hiring their services.
Advantages of using 3pl
an organizational point of view there are several advantages associated with
the use of these third party logistics companies like:
and cost savings: Since these 3pl companies have logistics as
their core competency they:
Are much more knowledgeable about warehousing,
distribution and general logistics,
Have greater experience in dealing with
problems and hassles that crop up,
Operate through a global network which ensures
greater efficiency of work thus translating into time and cost savings and
Keep updating and adapting their systems to be
able to meet the demands of their customers.
the capital requirement: Outsourcing the logistics to third-party means
that the manufacturer or production company does not have any need for
investing capital in maintaining a warehouse or transportation facilities. This
enables the company to invest a lower capital into the business and fully
utilize the invested capital for its core competency which is manufacturing.
Outsourcing to logistics companies like the 3pl Logistics Companies in
Mumbai enables the manufacturing or producing
company to concentrate and focus fully on the manufacture and sale of their
products thereby ensuring effective utilization of both resource and capital.
Third-party logistics companies have greater flexibility in terms of geographic
distribution since they tend to factor in the distance to be covered when they
calculate the cost of shipping. In fact, most 3pl logistics companies have
something is known as zone skipping which results in the lowering of the
customer’s shipping cost due to the shortening of the distance between them
products to be shipped and the ultimate delivery destinations. With the
logistics being taken care of at lower costs, it becomes possible for the
manufacturer or producer to manage their workforce better and convert fixed
costs into variables.
Disadvantages of using 3pl
just as every coin has two sides, there are certain disadvantages associated
with the hiring of third-party logistics firms like:
of overall control: When logistics are outsourced, the third party
to whom the outsourcing is done starts to communicate and interact with the manufacturer’s
suppliers and customers. In fact, there have also been instances wherein the logistic company might also brand them as being direct representatives of their
clients thus resulting in a total loss of control for the manufacturer or the
of communication: Since the systems of the clients and the 3pl
companies are not interoperable, there are times when there is an absolute lack
of communication between the resulting in a delay in delivery and loss of face
for the manufacturer of producer employing the 3pl firm.
the above disadvantages can be worked upon and revered and are hence not
insurmountable obstacles. Thus it would not be wrong to say that employing a third
party to look after their logistics is actually an extremely viable proposition
for the manufacturers or production firms.
Created on Jun 18th 2019 07:35. Viewed 378 times.