When you are dealing with major companies as a partner or supplier, you will notice they may be using a free on board (FOB) basis. It implies that they will move the products to the point of shipment and after that, you shall be liable for the cost of shipment to the destination.
On the other hand, it may be your business that wishes to use the condition to lower your cost of operations. Irrespective of the arrangement, buying and selling goods will often require a form of shipment arrangement to ensure the products reach the destination in a timely and safe manner.
You might have to consider an agreement with a third-party logistics provider to handle your shipments and those of your clients. Here are advantages:
Increase Competitiveness without Resources
In the past, you had to have your fleet and use its effect to be competitive. Today, you can use third-party logistics to do the same and save money. You do not have to invest in a new fleet that would tie your working capital.
Instead, you can re-channel the money to other ventures for the business while still providing the logistics functionalities needed to move things forward. The 3PL company comes in between the seller and buyer and provides the logistic support at either the buyers or seller’s cost and ensures the transaction and performance of the contract occurs as planned.
Rely on Experienced Service Providers
If you were doing business in Melbourne, but your company has no local presence and does not know the intricate features of shipping to the city, then it would be great for you to use the 3PL service. You can safely handover goods to the service provider with certainty they will reach the client.
You can have several arrangements for pickup, packaging, processing and return logistics to ensure your business remains trusted by the clients because of timely and accurate fulfillment of orders.
Use Optimized Distribution Methods
You could save time with 3PL services instead of adding the burden of logistics to your business functions, which would require hiring managers and staff, then spending much time on strategy meetings. In a highly competitive industry, doing everything in-house might not be the best solution because it creates too much strain in the business. It would also make poor economic sense when a lot is at stake.
Distributing service and product delivery so that the company concentrates on its core functions where it is most competitive would be the best idea. Therefore, try and incorporate a 3PL service arrangement from an early stage of the company growth.
Reduce Liabilities and Unnecessary Expenses
You could buy insurance and make sure you are dealing with a reputable 3PL service provider. That way, you safeguard your interests and avoid the cost of potential risk events in logistics. You also save the business from the risk of losing a client.
You may also cut your involvement with the sourcing and shipping details, which reduces your exposure to losses as a business. Remember that minimizing losses in the industry is as important as growing revenues.