Third-party logistics is a viable means of saving resources and labor costs

Third-party logistics is the use of third-party companies to perform components of an organization's logistics, inventory, and order handling functions. The use of such logistics may include the use of outside shipping companies to handle the shipping of the products to the customer or the use of a distribution company to place the order with the manufacturer. In some cases, such logistics providers may perform functions that are similar to those of the distributors or stores in which the products are placed. Thus, third-party logistics provider offers many advantages for businesses looking to reduce their overhead costs and improve their overall business performance


One way to manage the risk of outsourcing the logistics function is to contract the function to a separate company that is capable of fulfilling the outsourcing contract. One of the common practices used is to contract the warehousing and transportation of the products to the same third-party logistics provider that handled the overall supply chain. This helps to cut down on the overall cost of contracting such a logistics provider.


Outsourcing the transportation, warehousing, and fulfillment of products is an excellent strategy when an organization is trying to decrease the overhead costs of its business. While such logistics services have their value and can help to streamline operations, the practice of outsourcing Logistics to help cut costs is not without risks. For example, one of the main problems with outsourcing Logistics is the inability to guarantee that the consortia will be able to deliver the quality of service that has been contracted for. In addition, this logistics often face stiff competition from the so-called "big shots" in the supply chain.