Tuesday, November 29, 2011
Business models of all sizes have complications. The goal of businesses in terms of logistics basically narrows down to having what the consumer desires, at a price they are willing to pay, in the quantity they wish for when they want it. That isn’t too much to ask right? Companies with issues in logistics are continually searching for freight management solutions often times turning to companies that specialize in providing this service for companies big and small.
This is done in one of two different ways; third party logistics or fourth party logistics. Third party logistics uses outside companies to carry out the various logistic operations that have are accustomed to being done internally. An example of this is when a company that has its own storage facility decided that it will now use an outside transporter to carry out distribution. Distribution was previously done by the company but in evaluating it was determined to be more cost effective to bring in a third party for this sector of the supply chain. This was determined to be an effective freight management solution.
Fourth party logistics is somewhat of a new concept. This is when a company determines that the freight management solution they desire is one in which the whole logistics procedure is outsourced to another party. This company has a sole purpose of providing logistic solutions to companies. They bring together their companies resources and technology and pair it with other organizations to plan out, operate and maintain a fully functioning supply chain.
The main difference between the two; third party logistics and fourth party logistics, is that the third party is specifically targeting one function of the supply chain solution where as with fourth party they manage the entire process from beginning to end. In general a fourth party logistics provider is a contractor serving the entire logistic needs for a company.
Fourth party logistic providers are the future of freight management solutions. Consulting companies are now offering so much in the way of cost savings and services to companies that they are becoming hard to live without. It is easy to see how needed a fourth party logistics company is when examining inbound logistics and outbound logistics. In smaller companies especially it is important to have support that specializes in all aspects of logistics. To pay specialized logistic personal to be on staff would not be nearly as cost effective as hiring companies, with a system already in place to help manage that piece of the business puzzle.
Inbound logistics is a basic process in the business equation which includes purchasing, arranging the movement of materials coming in, parts and finished inventory from suppliers to manufacturers, assembly plants and stores. Outbound logistics is related to storing and moving the end goods and information from the end of production to the end user.
The field of logistics is complex and absolutely integral to a business’s success. Without the proper logistics in place a company could be losing money with increased shipping costs or improper communication throughout the supply chain. In order to give the client what they want, when they want it, at an acceptable price and time a highly functioning freight management solution should be maximized.
Logistics has been known to make or break a company. When people think of a company’s logistics division they should not think only of the shipping and receiving elements. Instead it should be thought of as a process involving the entire company, external companies, vendors, carriers and end users. It is a process that revolves around the movement of products from your suppliers through to the end user.
In order for a company to have a successful logistics division, working successfully for the client and the company there are several key elements involved to ensure that the company is efficient and effective while keeping customers satisfied with the end result.
The first issue and one most widely accepted as a company’s logistics program is the movement of goods. In order to effectively ship products to end users the shipping strategy used should be one in which is in complete line with the philosophy and strategy. Yes, many times emphasis is on speed but to be honest that component will come if everything else is in line. It is important that the pieces work together. Goods must literally float through the supply chain. Goods should maneuver to vendors, manufacturers, warehouses and end users flawlessly. In order to be successful hiccups should be minimized throughout the process.
Sharing information is an understated component of logistics management. It is actually one of the most important pieces of the puzzle. Communication is an element that needs to be included in every step of business and freight management is not secluded from this. It is important to know where products are, what levels inventory is kept and exactly when an error has occurred so that immediate action is taken to solve problems. Getting the information in a time effective manner will alleviate small issues from growing into irreversible problems. It helps to ensure proper decisions are made in a timely fashion.
Communication throughout the process includes personal on all levels to be working in conjunction with one another to create a flawless system of product movement. Order takers, production managers, suppliers of materials, distribution, financial means and sales forecasters need to have flawless communication representing the exact need/want for the right number of products to be manufactures and sold without excess which results in a loss.
Time verse service is another area of logistic services. Freight can only be shipped if the product is available and better yet if it is a desirable product. This means that you need to be a top producer of fad items before they become fads. Forecasting is used to see what trends are developing and need to be addressed in order to get shipments where they are wanted in a timely fashion. We see this often in the industry. If a company cannot keep up with the demands placed on them and back orders exist customers will simply find new suppliers. If a company needs a certain wood from you to create a product they are selling and the wood is delayed which in turn delays them they will seek alternatives. It is a simple formula that supply must meet demand and now not days from now.
Financials are involved in every aspect of a firm. Costs drive businesses all around the world. Profits high and cost low are a priority of all businesses. Although costs are important it is worth recognizing that often times low costs relate to sub par service. However, higher costs don’t always equate to better service. It is all a matter of balance. It is important to keep an eye on costs associated with every aspect of the logistics process, eliminating costs that are irrelevant and keeping costs within control of the company.
Many companies find it impossible to manage freight shipping logistic services and in turn look to outsourcing to companies who are capable of handling this aspect of the business with lower costs than the company can manage internally. Logistics, in order to be done properly, needs to be an integral part of all aspects of the company. Each individual piece lends to the success and competitive nature of the market place today.