Biographical Note Dr. Seyed-Mahmoud Aghazadeh
is in the Department of Business Administration, School of Business, State University of New York at Fredonia, Fredonia, NY 14063, USA.
How to Choose an Effective Third Party Logistics Provider
by Seyed-Mahmoud Aghazadeh Abstract The purpose of this article was to identify the steps that need to be taken when choosing an effective third party logistics provider. Based on the research completed, it was determined that third party logistics are beneficial to many companies. The use of third party logistics provides a competitive advantage in today’s business world. The optimal solution for a company choosing a third party logistic provider would be a five-step process. Introduction The intention of the research is to identify the most effective ways of choosing a third party logistics (TPL) provider. Logistics management consists of three core functions: transportation management, inventory management, and value added services. Third party logistics is defined as when a third party is brought in to help manage these functions. A TPL provider is an independent economic entity that creates value for its client. A trucking company, a warehouse operator, and a contract manufacturer can all be considered third parties. The TPL industry is constantly changing, although its existence is nothing new. The range of value propositions they offer today has changed dramatically in recent years. Global industry consolidation, technology integration, industry specialisation, and industry alliance networks have driven this change. TPL integrates expertise in transportation management, inventory management, and value added services. State of the art technology is a part of each of these functions. TPL create reliable distribution channels and thorough controls. TPL are highly efficient, and tap into highly specialised capabilities and functions that increase value for any company. TPL provide warehouse management, consolidate shipments, select carriers, provide logistics information systems and provide fleet management and operations. TPL also negotiate rates, manage product returns, help with product assembly and installation and provide order fulfilment, as well as replenish inventory. TPL have a significant impact on not only the past and present but also the future. TPL provide a wide range of benefits depending on the needs of the company. The advantages include lower costs, improved expertise, market knowledge, and data access. TPL also improves operational efficiency, customer service, provides an ability to focus on core business objectives, and provides greater flexibility. Today, more than ever it is essential for a company to create a competitive advantage either locally or globally.
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A successful third party arrangement consists of good communication, a commitment from both parties to succeed, a reward structure for the third party and a corporate chemistry. Corporate chemistry refers to two parties sharing common business beliefs and practices. Productive TPL requires good relationships between a company and its TPL providers. This relationship requires ongoing maintenance. A company can expect cost savings, productivity improvements, hassle free operation, and measurable service improvements when they find the right TPL provider that works. Communication is the key component in any third party logistics relationship. When looking for a TPL provider, companies should be up-front with their expectations. Companies should research a TPL provider’s ability to accomplish what the company wants. The requirements of the TPL providers from the company also need to be discussed. The focus of this article is on how to choose an effective TPL provider. TPL can be implemented and useful in nearly every industry, whether it is retail, service, manufacturing, etc. It is also possible for a company to use more than one TPL provider. TPL differs from...
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