The Value of Third-party Logistics Services

The Value of Third-party Logistics Services

2022-11-25 13:54:20

1. Challenges faced by third-party logistics providers


The challenge faced by third-party logistics providers is to provide higher value than the customers' own logistics operations. They not only consider the competition of providers of similar services but also consider the internal operations of potential customers. Third-party logistics providers generally need to create operational value from four aspects: improving logistics operation efficiency, customer operation integration, horizontal or vertical integration, and development of customer operations.


2. The value of third-party logistics


(1) Improve the efficiency of logistics operations

The improvement of logistics operation efficiency means the development of each activity that ultimately forms logistics (such as transportation and warehousing, etc.). For example, the efficiency of warehouse operations depends on adequate facilities and equipment and skilled operation skills. Another more advanced role in the scope of operational efficiency is to coordinate continuous logistics activities.


In addition to operation skills, coordination and communication skills are also required. Coordination and communication skills are largely related to information technology. Coordination and communication are generally achieved through information technology. If there are favorable cost factors and the company's attention is focused on logistics, it is very possible to provide better services at lower costs.


(2) Customer operation integration

Another way to add value to third-party logistics services is to introduce multi-customer operations or to share resources among customers. For example, if a multi-customer integrated warehousing and transportation network use similar resources, the integrated scale efficiency will become an important aspect of improving efficiency.


The complexity of third-party logistics operations is very high and requires more information technology and skills. The integrated value-added approach is also applicable to the uneconomical transportation and warehousing network where a single customer performs internal operations. Therefore, the economic benefits of scale are increasing. If it works well, it will lead to a competitive advantage and a larger customer base. Of course, some large customers with a large amount of cargo flow often invest in coordination and communication skills and assets to integrate the company's logistics resources by themselves.


(3) Horizontal or vertical integration

The previous discussion is mainly about the improvement of efficiency brought about by the outsourcing of internal operations of third-party logistics customers. In fact, from the perspective of third-party logistics providers, resource integration and business outsourcing are also required.


For third-party logistics providers whose intangible assets are mainly based on the management of external resources, the skills of such companies to create value for customers are strong information technology and logistics planning management and implementation skills. Through vertical integration, it can purchase one-way logistics function operations or resources with cost and service advantages, and develop a relationship with a single logistics function provider. It is also a way to create value so that logistics providers can focus on themselves and their new ability to serve. Horizontally, if third-party logistics companies can combine similar but not competing companies, they can jointly serve customers and expand the geographic coverage provided to customers.

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