Third Party Logistics: Many Advantages And Some Disadvantages

Typically specialising in integrated warehousing operations and transportation management, third party logistics help ease the work of an organisation by customising its operations to meet the organisation’s demand. Thus third party logistics essentially deals with delivery fulfilment services including warehousing and distribution.

Commonly referred to as 3pl, these Third Party Logistics India also offer a lot of value added services wherein parts of an organisation’s supply chain can also be integrated into the system along with other production and procurement services as and when required by the organisation hiring their services.

Advantages of using 3pl

From an organisational point of view there are several advantages associated with the use of these third party logistics companies like:

·         Time and cost savings: Since these 3pl companies have logistics as their core competency they:

o   Are much more knowledgeable about warehousing, distribution and general logistics,

o   Have greater experience in dealing with problems and hassles that crop up,

o   Operate through a global network which ensures greater efficiency of work thus translating into time and cost savings and

o   Keep updating and adapting their systems to be able to meet the demands of their customers.

·         Lowers 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 utilise the invested capital for its core competency which is manufacturing. 

·         Focus: Outsourcing to logistics companies like the 3pl Logistics Companies inMumbai, enables the manufacturing or producing company to concentrate and focus fully on the manufacture and sale of their products thereby ensuring effective utilisation of both resource and capital.

·         Flexibility: Third party logistic 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 known as zone skipping which results in the lowering of the customer’s shipping cost due to the shortening of the distance between the 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

However, just as every coin has two sides, there are certain disadvantages associated with the hiring of third party logistics firms like:

·         Loss 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 producer.

·         Loss 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 delay in delivery and loss of face for the manufacturer of producer employing the 3pl firm.

However, 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.