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How do I choose the right third-party logistics provider?

sanjeev kumar mishra
17th Oct 2018
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Supply chain management is not a one time or a fixed planning. It keeps changing because demand prediction is not always accurate as it is supposed to be. Production and Procurement also vary without any prior intimation. Managing fleet to meet the regular and temporary requirement needs to have a thorough long-term as well as a short-term planning. An enterprise has to rethink their logistics management approach with a different perspective. Increasing transportation cost and evolving (keep changing) technologies forces an enterprise to go for third-party transportation services. Availing outside logistics service need to have a thorough and depth strategy. An enterprise needs to have a well-planned selection process for hiring a transporter which must add the value to their system, not another liability or problem. The following factors must be examined before selecting an outside logistics service provider:

1.   Prerequisite assessment 

The first step for an enterprise is to find out the exact requirement. Once the requirement is found or finalized then the remaining process will be streamlined accordingly in the timeline. The following factors help in deciding the exact requirement of the transportation:


  Surge/Ad hock demand

Irrespective of having own in-house transportation system an enterprise needs to look for outside transpiration facility to meet sudden ad hock demand. Ad hock demand can be planed like a seasonal sale or festival sale which is known in advance. Sometimes it comes suddenly like due to scarcity in the market (it may be artificial too), it can arise due to announcing sudden sales offer. So whenever a surge in demand comes, a company looks for outside transporter to meet the required logistics support. This logistic support includes vehicle, loader, tech etc.

   Dedicated vehicles

When a company decides either to go for full outsource logistics or a partial outsource logistics, then dedicated vehicles are required to full fill the need of fleet management. These dedicated vehicles are assigned to the company for a longer period of time by the logistics provider. The maintenance of the vehicle, driver management, loader management etc. are taken care of by the transporter.

   Mix type of vehicles (mix requirement)

An organization may require a mixed type of vehicles to meet their transportation need. Like Tata ace may for intracity and the big vehicle like lorry for intercity to cater their customers. 

   Loader/workforce requirement

Sometimes an enterprise manages its own fleet but needs to have the loader and required workforce assistance from outside. Managing loader and workforce are becoming more and more challenging day by day. So outsourcing these facilities has become a trend and need for an enterprise.

Technology enabled logistics software

Basically logistic is not a core competency for most of the organization except the logistic company itself. So developing in-house modern art technology infrastructure has been the biggest challenge for most of the enterprises. The technology also keeps changing which forces company to go for third-party technology based logistics software to run their own established logistic system. A logistics company like City Link is having its own in-house IT team to implement the latest technology and moreover, the logistics company are well skilled in transportation management system.

   The above findings help a company to find out which type and how a third party logistic system is required? A complete outsource logistics system is more preferable which adds a competitive advantage and enhances end-user satisfaction. 

2.   Selection of a Transporter/Logistics provider

  Skilled/Specialized service:

Technology driven and skilled based transportation service plays a significant role in managing the logistics system effective and at an optimal level. It enables an enterprise in the allocation of delivery points, giving chronicle order and much more controlling over the logistics system. Technology enhances the tracking facility to track the shipment. So technology-enabled service gives a full control of the operating system. It is important in the case of outsourcing logistics service because here logistic is not in hands of the company. Skilled and specialized logistics service reduces the overall cost and yield a very satisfactory result. 

   Whether authorized or not

There are many fraud companies in the market to provide transportation service. It is better to check whether they have a proper license to provide the service or not. Better to have a proper scrutinize in beginning itself.

   Existing and Past served company' feedback

Need to check what their customer says about their services? The feedback of another enterprise about the transporter gives a clear picture of their professionalism. There are many online and offline platforms to check the feedback. The pool of served and serving companies speak a lot silently about the Logistics Company.

   Reliability

Is transporter reliable or not? An enterprise must check the reliability parameters before selecting a transporter. The logistics industry is being organized these days so there are many unreliable players in the market. Who has the website and show the available services. But it has been seen bad experience in the end in some cases. Past record, served and serving customer details, transparency, approach, policies etc helps in checking the reliability of a transporter.

   Cost

The total cost of the service must be compared with others transporter before making the final call. Here cost means the affordability of the services. Sometimes cheapest transporter gives many problems in future like transporter will tell they do not provide this or that service because their service cost is less. So an enterprise must go for value for money and the solution rather than the cheapest.

   Customer-Centric Approach

The approach of the transporter must be customer-centric. The customer-centric approach means: it will add value and also competitive advantages to the system. The customer-centric approach of a transporter helps an enterprise to get things done smoothly and at the same time, it also helps in delighting the end customers whom the service is going to be rendered. 

3. Geography

Need to check whether the sought transporter is providing the required services in that area or not?

4.   Term and condition in detailed

Before finalizing a transporter an organization must read the term and condition in detail. If not provided detail must be asked. This helps in maintaining a good relationship in the future. A company must know how the transporter functions, what are the services are being rendered and how it is going to be rendered. Some legal aspect like what are the notice period to come out from agreement etc.

5.   Getting a contract done

The agreement must be done between the enterprise and transporter. So that all party will be governed by the law.

6.   Deployment of transportation services

Once the agreement is done next step is to get service deployed on time and in a proper manner. Here both the party must act as a unit to reach the common set goal. No need to play a blame game. It will lead nowhere.

7.   Tracking

Once facilities are deployed, track the service by accessing the dashboard or app which is provided by a logistics company. A company needs to have a close monitoring of the service because it is not in-house. Even though it is not in-house but an enterprise must treat it as an in-house facility to get the best out of third-party logistics. The technology and professionalism of the transporters facilitate a united team working culture these days.

8.   Maintaining the relationship

Relationship helps in smooth functioning. It also helps in solving the problem. Never hesitate to ask the question, need to be professional. A good relationship gives out of box approach to solve the issues and to get a great competitive advantage at the end.


Conclusion:

Going for third-party logistic system adds many more advantages like it reduces the transportation running and maintenance cost. It ads competitive advantage by providing on-time delivery with the tech-enabled approach. It also helps in meeting surge demand and many more thing. But at the same time, an enterprise must be involved in outsourcing logistics service. It must be treated a part of the enterprise in-house system to get full advantage of it.

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