Logistics Management : Third Party Logistics

Due to the large quantity of freight and the long distance that it must travel to arrive to its destination exporters and importers alike have found logistic service providers essential to engage in international trade (Rodriguez, Comtois, Slack, 2013). While some Logistics service providers focus only on the area of transportation others specialize in freight consolidation, distribution management, and warehousing (Robinson, 2014). They have enough market knowledge, information and communication systems to offer supply chain solutions tailored to the specific needs of any company be it small or large (Rodriguez, Comtois, Slack,

Over time, new healthcare reform measures were causing fundamental changes in reimbursement for services to hospitals and IDNs. Consequently, healthcare providers had to establish financial stability. This opened the door for third-party logistics providers (3PLs) to establish a strong presence in the healthcare industry. 3PLs? offered solutions to mitigate transportation and supply chain expenses that streamlined the order-to-delivery process and reduced expenses.

The selected business functions that outsource to a third party has become a common practice in the corporate world. The function of logistics is often to outsourced and providing logistics service companies have evolved into providing a vast range of logistics functions including inventory management, transportation services and warehousing services. The companies which provides logistics services on contract to other companies are known as Third Party Logistics Providers ( 3PLs).

Let’s first have a look at the notion of logistics and then relate it with the operations management of a courier service such as UPS. Logistics is the deemed as the actionable process of transporting and temporarily storing different supplies. The category to which a company can efficiently and effectively do these mentioned duties can differentiate its overall place in itsrelative industry. These mentioned tasks related to transfer procedures are often a subset of the greatersystem of supply-chain-management.This system tends to track items and information among various categories of

Blanchard (2006) defined third party logistics as, “A single entity that coordinates all the logistics requirements for a given company/agency.” Today’s world business environment has become so competitive that companies in order to be successful in the market must deal with different resources for satisfying their customer need. In the past decade or so the competitive global market has made a big influence in the growing for external business. Third party logistics providers are more and more employing external companies for inventory management, transportation, warehousing, and other value added activities for customer services. Third party logistics ultimate goal is to provide a competitive advantage to the organization for which they are serving. According to Cardinal Logistics (2012), “Third-Party Logistics is an effective way to reduce operational costs, and allow a company to focus on their core competencies.

Indeed use of third-party logistics (3PL) firms in transportation helps firms to meet complexities of global trade, worldwide increased competition, as well as the constant downward pressure in terms of prices and margins. This is in a bid to build up better logistic systems that can fulfill their needs for better services at a lower cost. Among the reasons as to why companies use 3PL firms is to outsource non-strategic activities which enables organizations to concentrate on the major competencies as well as to exploit external logistics expertise, (Ivan Su Hertz, Susanne, 2009). These third party firms have the capability of developing unique assets, acquiring the necessary resources and achieving superior logistics performance using 3PL relations. Companies therefore find it efficient and effective method of achieving the needed service with no engaging so much in investing new capabilities and in assets upon entering into a relationship with 3PL firms.

Given these differences, there are some specific challenges that global logistics managers must consider. Figure 1, adapted from Helferich and Cook, illustrates some of the generic global and domestic institutions critical in supply chain logistics. These institutions are the organizations that must collaborate and coordinate to move product and information from the raw material stage to the ultimate consumer. To effectively achieve this objective, global logistics managers must manage the “Five V’s” across the top of the figure. The first challenge is to provide the consumer with better value in return for their dollar. While the firm may see global sourcing as a means to reduce material or component costs, the only value that is relevant for consumers is a reduction in total landed

Nowadays, logistics are constantly developing for meeting the growing requirements of international business. The innovations in logistics are crucial, which can not only stimulate the emergence of international business around the world, but also further promote its efficiency and scale.

Deal with the management of the flow of goods or materials from point of origin to point of consumption, and in some cases even to the point of disposal. Logistics is not confined to manufacturing operations alone. It is relevant to all enterprises, including government institutions such as hospitals and schools, service organization such as retailers, banks and financial service organizations. Logistics is dependent upon natural, human, financial and information resources for inputs. Suppliers provide raw materials, in process inventory and finished goods. Management actions provide the framework for logistics activities through the process of planning, implementation and control. The outputs of the logistics system are

Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the point of- consumption in order to meet customers ' requirements (Enarsson, 2015). Simply put, logistic means moving product from one point to another in the most effective way. The purpose of this assignment is to discuss the logistics activities, concept and technology because I know logistics is very important that is why I want to write more about it and explain each of the terms.

Logistics management’s primary focus is on optimizing the delivery of service to customers, by managing complex tradeoffs between customer service, transportation, warehousing and inventory. Some World Class companies have been able to reduce the costs of their logistics operations to 50% of the levels of their competitors.

Logistics management’s primary focus is on optimizing the delivery of service to customers, by managing complex tradeoffs between customer service, transportation, warehousing and inventory. Some World Class companies have been able to reduce the costs of their logistics operations to 50% of the levels of their competitors.

Source: Ballou, R. H., Business Logistics Importance and Some Research Opportunities, Journal of Logistics Management, Vol.4,

Most of the global companies are outsourcing the logistics services because of the numerous factors (Mitra, S. 2006). The most important factor is globalization, firms all over the world are rapidly increases their sourcing, distributing as well manufacturing the goods or service with a global scale by creating very difficult supply chains network. Yet, all these activities can outsource with the help of the capable 3PL service providers who having ability to serve in the global operations and they also offer detailed supply chain analysis with their expertise IT abilities and with the modern mode of transportation, material handling tools and warehousing facilities (Hwang, H. 2005). 3PL services are used to balance the various logistics processes with the businesses that do not have any capability and also to increase the geographical reach (Mothilal, S et al). When the organization or firm expands their business to overseas market, they are not aware of the various customs duties, tax system of the host country, rules and regulations, import and export policies of the government, political nature for the growth of business and culture of the overseas country. A 3PL provider, who had thorough knowledge about the countries operation system, will able to carry the operation at the domestic level than the logistic service provider. 3PL may not be the core activity of an organization. 3PL providers offering a number of services to their

Logistics cost is considered to be one type of the costs which can be used as a tool or an index to measure the efficiency of logistics management in the organization. Reduction in logistics cost will lead to reduction in total cost of goods and services, therefore, entrepreneurs have to improve their logistics cost management in order to survive in the highly competitive business world. However, efficient logistics management must not consider only profitability aspect but also other aspects such as capability to response to consumer demand, which the company at least should be able to maintain at the previous level after reducing costs.