Third Party Logistics Essay

4769 Words Sep 18th, 2008 20 Pages
THIRD PARTY LOGISTICS
Introduction
Third party logistics is an important and growing development within the transport industry. It can be viewed from two perspectives viz. operational point and strategic point.

From an operational view, third-party logistics may include all logistics activities that are outsourced to a logistics service provider.

Third party logistics is defined as the use of external companies to perform logistics functions, which have traditionally been performed within an organisation. The functions performed by the third-party firm can encompass the entire logistics process or selective activities within that process.

However, third-party logistics has a strategic dimension, which gains increased
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Outsourcing is considered to be right IF:
 The process or activity to be outsourced is not core to the business; or if the process or activity cannot be performed effectively. Outsourcing should also be discussed WHEN:
• Your business world changes: new markets/channels; new products; new locations;
• The cost/service edge is deteriorating;
• The competitive gap is narrowing; and your company could benefit from deploying investment elsewhere.

"The worst reason to consider third-party logistics is when the hourly wage of that provider is less than what you pay."

The HOW of outsourcing can be tricky, as both the shipper and the provider must understand that they are working to create a business partnership. If the third-party provider is considered as just another vendor, and don’t share information about the business, then performance is being held back.

DO’s and DON’Ts in Third Party Logistics
Some do’s and don’ts for a successful third party logistics partnership are:
• Do listen to new ideas for processes. When you enter into an alliance with a third-party provider, aim high and learn from new ideas.
• Do establish objectives on day one and revisit them every six months. Redo the contract specifics based on mutual views.
• Do include your own customer in the process.
• Don’t limit your provider’s

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