Third party Logistics (3PL):
Third party logistic is a concept in which a company outsource its logistics to another company or makes them a strategic partner whose core competency is providing a logistic support.
This has multiple benefits such as:
- Less or no investment in working capital. This means that the company’s do not have to invest on procuring vehicles, other stuffs related to logistics, as this has a high fixed cost. Therefore, these companies can outsource their logistic parts to those logistic companies who have already invested in their core business.
- Since the logistic company’s core competencies is to provide smooth and efficient logistic support, therefore this automatically enhances the performance of the partner company.
- The logistic company properly utilizes its assets pertaining to the concept of low container load or full container load, depending on the volume stocks to be transferred.
- Since, the partner company do not have to invest in fixed cost, therefore this also helps then in saving / reducing prices of their products and hence they can also focus more on production, which is their core competency.
The services provided by the logistic unit should be reliable, which means quality and quantity should both exist together. If the services are reliable then this means that the services are readily available when required and there is a timely delivery of the product without or minimum level of damage.
Dimensions of a product Quality:
The dimension of a product quality depend on two things:
- Aesthetics: Visible criteria, for example it beauty, its packaging, etc.
- Conformance: Which states that is a product developed according to the pre-defined specifications or not.
Logistic Service standards:
Following are some key important standards that needs to be included in a service level agreement which outsourcing logistic services:
- No stock out should occur. This means that your product stock should always be available where required.
- Order size constraints is another important factor. Minimum order for delivery should be as low as possible.
- There should be technological integration using IT services in order to automatically gauge the requirement for logistics. Some of the example can be using ERP system.
- Frequency of the delivery should be predefined.
- On time delivery of the product.
- Make simple and easy methods for any claims.
TOSS (Town wise order split system):
Toss is basically a calculation that decides which distribution routes should be used in order to stocks with respective to towns.