Background / My best girl accidentally called in to ask for some speech about logistics. I don't have any knowledge in the field, but I said I'd help. So here's the work.
How Third-Party Logistics Helps Middle and Small-sized Enterprises
The modern business world is led to a more de-centralized way of expansion. One symbol of which is the boom of the number of middle and small-sized enterprises. Compared to traditional large companies, these companies cover more than 60% of the total market share in all industries but critical ones such as energy supply.
Modern logistics is the result of advanced management theories and information technology. By conducting contracts, third-party logistics can nowadays offer enterprises within the supply chain with services of designing logistic plans, EDI, reporting, transferring, and dealing with the custom house, freight negotiation and payment. In other words, with third-party logistics, it's possible for a company to deal with manufacturing only and get rid of the following troubles coming together with the goods' needing to be transferred to the demand side.
On the supply side, a supplier can either choose to keep a warehouse and logistics system on its own or choose third-party logistics. Since modern businesses tend to expand their deals countrywide or even worldwide, more segments are involved in the logistics chain. Most manufactures tend to keep a professional team on their own for fear that third-party services might run out of control or increase costs. However, that should be an idea of the past. For manufacturers, it's even more costly to maintain a warehouse and transfer system since freight doesn't constantly flow in huge amounts. Lacking properly maintained logistics services actually slows down the cash flow which leads to even greater costs other than hiring third-party logistics.
Moreover, middle and small-sized enterprises also face the dilemma of small quality orders. Purchasing materials and transporting small amounts to various locations countrywide can be especially costly. The scale effect in third-party logistics can easily handle that by consolidation, which by the way saves great resources.
Modern logistics, if taking full advantage of information technology applied to dispatching, is highly capable of providing professional, high-performance and low-cost services.
Third-party logistics need to satisfy the demands of 3 requirements: low cost, guarantee of efficiency and a universal network. Information technology has already boosted the trade segment with EDI and instantaneous payment systems, meanwhile further proving the perfection in social division of labor. Third-party contracts provide the next and seemingly, the only solution to lighten enterprises and encourage the boost of middle and small-sized enterprises.
If we see through the development of modern enterprise management theories, we can see a lot of successful stories about how third-party logistics manage to help manufacturers concentrate on their core values. Compaq, which was later merged by HP, used a series of quality control measures to fit in the new modern logistic system. This has greatly accelerated the cash flow of the company, which obviously eased some pressure on storage and maintenance. Working with third-party professionals makes every penny predictable with precisely controlled workflows.
Alibaba, the company which has just went public and led by Jack Ma, is also expanding its territory in logistics. Alibaba has constantly been working on helping middle and small-sized enterprises expand their business with ease and low costs. Through this new division of logistics, Alibaba has connected another dot along the overall supply chain. Now Alibaba does have the power to lead a trend of China’s future development in e-commerce, logistics must be another economic growth point in the following decade.
