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Advantages And Disadvantages Of Hiring A Third Party Logistics Company

Logistics management is an important task for companies operating in different markets. Some companies have an internal logistics departments while others hire the services of a third party logistics provider.

Hiring the services of a specialist logistics company has its share of advantages and disadvantages. Businesses must study the pros and cons carefully and make a decision about hiring a 3 PL.

Advantages of hiring a logistics company

Cost saving

Logistics companies maximize their efficiencies by following the economic principle of specialization. They invest in logistical infrastructure, warehousing mechanism and latest technologies that help them to maximize their efficiency.  These investments help the logistics providers to offer efficient and cost-effective services to their clients. Hiring a specialist logistics company is beneficial for smaller business units, who cannot invest huge sums in developing their own logistical infrastructure.

Increased capability

Small businesses cannot make huge investments in order to expand their logistics capabilities. Hiring the services of a third party logistics provider is highly beneficial for such businesses. Moreover, a 3 PL can provide scalable services to suit the requirements of a growing business. The business can benefit from the experience and expertise of the logistics company and dedicate their time to other important areas of the business like strategic planning and marketing.

Disadvantages of hiring a logistics company

No direct control

One of the main disadvantage of hiring the services of a 3 PL is the lack of direct control on the operations. The business has to rely on the logistics company for the delivery of the goods to the client. Any delay in the delivery of goods to the client results loss of credibility to the business and not the logistics company. The efficiency of the logistics company plays a major role in determining the customer experience.

Pricing model

When you hire a logistics company, the pricing is locked as per the specifications of the logistics provider. The business has to adhere to the pre agreed pricing model even when there are cheaper alternatives.

Dependency

Once you hire a specialist logistics company, the business becomes dependent on the logistics provider. Any delays in supply chain management could lead to loss of productivity and revenue. This dependency can sometimes prove as a hindrance.

Businesses should weigh both the pros and cons of hiring a specialist logistics company and take a decision that is profitable in the long run.

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