Many businesses today are taking advantage of third party logistics provider services. These companies also go by the name 3 PL. However, many people don’t know what the terms “logistics” and “third party” actually mean. Learning about these terms helps you understand 3 PL principles and benefits. Here is a simple explanation to help familiarize you with the concepts.
Logistics
Logistics is all about moving resources to and from your business. It also involves organizing the people involved in the process. Logistics includes taking in raw materials, manufacturing, warehousing, inventory, and shipping products to customers.
3rd Party
Third party services are “intermediary” businesses. For example, an insurance broker finds the best policies and rates for people needing insurance. The broker represents the customer to the insurance company. This saves the customer all the work of comparison shopping and finding the right coverage. A third party logistics provider acts as a broker between businesses and shipping carriers. Some providers also offer inventory management and warehousing solutions.
Why Choose Third Party Services?
3rd party services (like freight brokerages) are not like typical third party services. For example, a product distributor buys goods from a manufacturer or other distributor and sells them to customers. They must mark up their prices to make a profit. Brokerages find the best services for their customers. Because they understand the business, they have many contacts. They often find special deals and receive volume discounts, which they pass on to their customers.
Why Not Do It All Yourself?
You could negotiate with carriers and check out all the available shipping services. This takes a lot of time and resources. Also, when you go it alone, you probably do not qualify for volume shipping discounts. You don’t pay extra for a professional third party logistics provider, and they are always there for you with 24-hour service.