Supply Chain Management is a relatively new system that was developed in the 1980s. The concept is quite simple. Using a standard supply chain diagram, a product is followed from the original supplier to the consumer. Breaking different processes into different parts or legs of the supply chain gives the producer more control of the overall process. In particular, he is able to
identify inefficiencies more easily. For example, if there is a problem in the shipping or transportation leg of the supply chain, a manager can address it without delay.
Because they do not have the capital to finance every leg of the supply chain, small and medium-size businesses often have to outsource essential services. More often than not, they will make a product on their own, but they may not ship it. The growth of e-commerce has had a positive effect on the third-party logistics industry.
The final leg of the modern supply chain is distribution. Because it is labor intensive, this stage is often the most expensive. It includes packaging, storing, and shipping goods. As you might expect, a company must rent or buy a warehouse for storage and rent or buy trucks to transport items to consumers. Since most small and medium-size companies cannot afford this final leg of the modern supply chain, they hire third-party logistics providers to do it for them.
Outsourcing any essential business process has its share of pros and cons. On the plus side, the third-party provider may be able to cut costs and increase efficiency, since they have more experience in the industry. But on the downside, they may hurt customer service. After all, if a company is not responsible for packaging and shipping, how can it address customer service
complaints?
With that said, third-party logistics providers have been a godsend for companies that have special shipping needs. We are speaking specifically about temperature controlled transport. When a company ships items that are time-sensitive, like
produce, meat, and dairy products, they must arrange for temperature controlled transport.
The cost of these vehicles is prohibitive. Not only do they require licensed truckers to operate them, but they also need a team of mechanics to perform regular maintenance on them. For this reason, many new businesses hire an outside provider to satisfy their temperature controlled transport needs.
Distribution costs are often the key to maximizing efficiency and reducing the cost of the supply chain. Bottlenecks and waste can be addressed with the help of a third-party logistics provider. Temperature controlled transport should be considered if a company ships perishable items. Maintaining and operating refrigerated trucks is a job that is best left to experienced professionals.
