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Third Party Logistics Overview

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Trying to handle a business is one major undertaking. You have to be concerned with manufacturing products, making sure the products are tested before leaving your factory, assuring on time delivery, and of course billing the customer. All these activities are known as logistics. Dealing with the logistics of the business is very time consuming. It takes effort and expertise. What if there are a lot of returns? Is the business prepared for that? Because of the amount of work involved, many businesses take these functions or the whole logistics functions to a third party. This way they can focus on running and growing the business. Being this is the case third party logistics (3PL) firms have grown dramatically over the years, especially the last two to three years. Just what is involved in hiring a third party logistics firm and why should they be used? First, what type of outsourcing is available for companies that want to go in this direction? To consider this we need to look at what levels of outsourcing are available:

• Transactional outsourcing: This type of outsourcing is based on a per transaction basis with no type of long term contract involved. The third party logistics company just comes in when necessary, performs the job, and completes the assignment. That’s it.
• Tactical outsourcing: This type of outsourcing is more on a long term basis. But the contracts can be negotiated. Also, all IT systems that are used are integrated to make free information available to all parties.
• Strategic outsourcing: This is based on a long-term relationship where the third party and the company work together harmoniously. The 3PL literally becomes a partner to the company. And handles all their supply chain management systems.

Next Page: How is 3PL (Third Party Logistics) Defined and Why is it Used?

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