What Does a Logistics Service Provider Do?
A logistics service provider (LSP) offers warehousing, distribution and transportation services. They also offer freight forwarding, customs brokerage and consulting.
LSPs often manage warehousing organization systems that catalog items and link them to specific orders. They can also process customer payments, ensuring that invoices are matched to order numbers before being sent to customers.
Incoming Logistics
A logistics service provider handles everything from shipment preparation — including packaging and labeling — to transportation. It’s important to find one that is well-connected, responsible and experienced with your specific type of cargo. The logistics company must also be flexible to adapt to changes in business management. For example, it must be able to adjust its inventory and delivery times based on seasonal demands and competitive influences.
Incoming logistics refers to goods and raw materials that are delivered from suppliers to a business. This process includes communicating with suppliers, placing orders and arranging transportation, as well as receiving, storing and managing the raw materials or supplies in warehouses.
A logistics service provider can help reduce incoming logistics costs by optimizing the logistics agency supply chain and fulfillment infrastructure. This can include negotiating bulk shipping rates with carriers, speeding up delivery times and reducing shipping costs by consolidating inventory in distribution centers. It can also increase efficiency by utilizing data to compare incoming inventory with demand trends and predict purchasing patterns, for example. This allows businesses to make more informed decisions and stay ahead of their competition.
Inventory Management
Whether an in-house shipping team is overwhelmed by high shipping rates, labor costs and packing materials or a growing business needs a more efficient warehouse management system, logistics service providers can take on the task. They offer warehousing procurement, expert customer support and expertise with new industry technology that is otherwise cost prohibitive for businesses.
A logistics service provider can also optimize the freight shipping process to minimize costs and speed up deliveries for both domestic and international markets. This may include optimizing less-than-truckload shipments, using multiple transportation modes such as planes, ships and trucks, known as multimodal transport, and route planning.
Another service offered by a logistics service provider is inventory management. This is the process of tracking and managing inventory from raw materials to finished goods. It can involve tracking shipments to ensure they match purchase orders, identifying items by trend and adjusting safety stock and reorder points, and working closely with suppliers to negotiate a negotiable minimum order quantity or taking back unsold products. This helps companies keep their costs low while providing enough inventory to meet demand.
Outgoing Logistics
The outgoing logistics of a business involves the delivery of finished goods to clients. It can include activities such as packaging, transportation and customer service. Businesses that choose to handle all outgoing logistics in-house are known as 1PL or first party logistics providers. They don’t outsource any steps in their logistics workflow and maintain full control of their supply chain.
Some logistics services providers offer courier services and are able to ship directly from warehouses to customers. This is a convenient option for small business owners who would rather spend their time growing their core business than taping up boxes.
Third-party logistics (3PL) providers manage both outbound and inbound transportation requests as well as warehousing. They also use their own fleet of delivery trucks for transporting goods. Some 3PLs will provide a customized logistics solution to their client, including the creation of dedicated shipping lanes and warehouse space. These services are typically billed at periodic intervals using service contracts and activity data within Oracle Warehouse Management (WMS). Fourth-party logistics (4PL) companies take a more hands-on approach, contracting with 2PLs and 3PLs to oversee supply-chain optimization.
Courier Services
Courier services are often the final step in logistics, directing shipments to customers. They provide reassurance to businesses by providing tracking updates, so customers can be sure their product will arrive as expected. For companies with large numbers of deliveries or time-sensitive products, routed delivery is a great option. This allows deliveries to be grouped together so that all products are shipped on the same route and will arrive at the same time.
As companies grow, they may need more scalable shipping options than their current staff can handle. Logistics service providers can help them expand without the stress and expense of hiring additional workers to keep up with demand.
This type of service can include optimizing less-than-truckload shipments, handling intermodal transportation (combining air and truck travel with warehouse storage) and managing customs forms and tariff payments for international freight. Some logistics service providers offer these services at the first-party level and retain complete control of their clients’ operations, while others use third-party vendors to perform these functions. They also can handle reverse logistics, where they return materials to suppliers after the client has used them.
Reverse Logistics
Whether it’s to repair damaged goods or repurpose reusable products, reverse logistics is an essential process for businesses to optimize. A good reverse logistics strategy is a win-win for customers and the environment. Repurposed items don’t end up in landfills and are used again, which reduces the cost of shipping new goods. It also creates customer trust and brand loyalty, as customers know that a business is committed to sustainability.
Returns and repairs are expensive for many ecommerce retailers, as well as manufacturers. These expenses are often incurred because of poor product design, manufacturing, and packaging. A logistics service logistics agency provider can help you save time and money by implementing an effective returns management process that streamlines the supply chain and ensures high-quality customer experience.
The logistics service providers can offer services for a variety of industries including automotive, furniture, paper, and electronics. They can provide warehouse and fulfillment, inventory management, kitting, repackaging, serialization and lot numbering, gift set and POS display assembly, and JIT delivery services. Using these services will improve the efficiency of your supply chain and increase revenue.