Third Party Logistic Provider

Roles

The capital needed for packaging, distribution and storage of manufactured goods is too high for most small or startup businesses. Building of warehouses and establishing a supply chain is a challenging, costly, and time-consuming task. Most companies with such problems tend to prefer outsourcing their supply chains department that is; they seek for a third-party company to distribute and supply their products. Third party logistic providers or the 3PL thus pays the role of being the intermediaries used by the company to supply their goods to the consumers (Ekeskär, 2016). Unlike in other supply chains, that all parties work together, the 3PL works almost independently in handling the logistics and supply chain of the business.

Advantages

The use of 3PL is beneficial to most small businesses. The key benefits involve expertise, an already established supply chain, flexibility, and promote optimization (Ekeskär, 2016). The companies operating as 3PL are efficient due to their experience in the industry. The ability to stay updated on any changes enable them to make better judgment and facilitate effective supply and branding of the products. The effectiveness of their supply chains is dependent on the time-spent building their goodwill, and due to the economies of scale, they can ship products at lower costs. The already established supply chain enhances result in saving time and costs of building a warehouse and establishing a supply chain (Rushton, & Walker, 2007). The 3PL expertise enhances their ability for continuous optimization of the products to enhance their markets as the more goods they distribute, the higher profits they gain. The dependency ensures the 3PL and the company have shared interests thus facilitating higher profits for the company. Lastly, unlike leasing or building warehouses, outsourcing 3PL provides flexibility in that a company can choose when to outsource and when to end the relationship.

Disadvantages

Although there are multiple advantages, 3PL is also detrimental in some essence. Outsourcing 3PL lowers the business’s authority over its goods, which can result in a decline in quality of the goods where the producers are far from all distribution activities (Rushton, & Walker, 2007). The producer’s failure to interact with the consumers limits quality improvements. In conclusion, it is clear that there are many benefits but the failure to interact with consumers can result to bad goodwill hence the need to weigh the pros and cons before outsourcing a 3PL company.

References

Ekeskär, A., (2016). Exploring Third-Party Logistics and Partnering in Construction: A Supply Chain Management Perspective . Linköping University Electronic Press.

Rushton, A., & Walker, S. (2007).  International logistics and supply chain outsourcing: From local to global . London: Kogan Page.