Evaluate third-party logistics services

When a business chooses to use third-party logistics services they are outsourcing elements of the supply chain to a specialist logistics firm. The level of service these companies provide can vary greatly. Normally one or more of the following will be included:

• Inbound freight and customs management
• Warehousing, packing and storage of goods
• Fulfilling orders
• Distribution of outgoing freight
• Door-to-door delivery service

The main reason that businesses use third-party logistics companies is to achieve superior customer service by improving efficiency and productivity. A specialist logistics company will be able to offer expertise that may be lacking within your own company.

A good logistics company could add value to your company in the following ways:

• Using their expertise to focus on the entire supply chain will enable them to achieve best practice performance
• By outsourcing your logistics requirements you will be able to focus on your core business activities
• A third-party company will have a lot of their own resources and facilities. As they are specialists in the area of logistics, their investments are likely to be far greater than your individual company could justify
• A smaller company may be less competitive due to having smaller volumes to deal with. A third-party company will be able to merge transportation of goods with other smaller companies so that they each benefit from bulk discounts

Despite these advantages in using a reputable logistics provider, it is always necessary to exercise a degree of caution when selecting a company to entrust with your logistics management. Certain checks will need to be carried out:

• Ensure that the carriers used by the company have satisfactory clauses if goods are lost or damaged. Will they pay you the full invoice price or the manufactured cost?
• Is this provision subject to a maximum liability per shipment?
• Is the intended company fully aware of all legal and regulatory constraints that you or they are bound by?

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