What Does a Logistics Service Provider Do?
Businesses that outsource their logistics operations to an LSP can scale their operations quickly and efficiently. They can also cut out shipping insurance, packing materials and other costs that eat into profits.
Warehousing is more than storage; it requires accurate cataloging and inventory management. If a company doesn’t have enough product to fill an entire truck, for example, an LSP may arrange to combine it with another client’s shipment to save on transport costs.
The inventory management component of logistics focuses on tracking and managing stock levels to ensure there’s enough product for orders to be shipped. It involves assessing demand, identifying and responding to trends, and determining optimal inventory levels.
This can be complicated by a variety of factors, including seasonality and supply chain disruptions. Many companies rely on a just-in-time inventory management system that aligns raw materials receipt with production schedules so that there’s no need to pay storage fees and a company’s capital remains free for reinvestment.
Warehousing is another aspect of this service, with a focus on organizing and cataloging goods. This can be especially important for multi-tenant warehouses where it’s critical that each client’s inventory is kept separate and accounted for. Some logisticians also provide item picking and label generation services to expedite shipping. This can include generating internal track-and-trace labels with “license plate numbers” to keep a close eye on the movements of inventory.
Shipping, receiving and warehousing are complex tasks that require specialized skills. Unless a business has the capital to invest in its own logistical capabilities, outsourcing these services is usually cheaper and more efficient. This allows a company to focus its time and energy on customer relations, market growth, and managerial investments. It can also help keep shipping costs low, which is a key factor in meeting growing ecommerce customer demands.
Order fulfillment is the process of processing, packaging and sending orders to customers. This can be done through a warehouse, fulfillment center, 3PL or through a brick and mortar store, known as B2C (business-to-consumer).
Logistics service providers can manage all aspects of order fulfillment, including receiving items into the warehouse and subtracting them from inventory, picking goods to fulfill an order, managing customer information, packing and shipping the item to its final destination. This process logistics service can also include barcoding, which involves embedding a code on goods that can be read by certain devices to identify the contents.
LSPs can also handle returns for their clients. Rather than have a company’s employees spend time refunding items, which is a major drain on resources, they can use their logistics expertise to provide faster and cheaper return-by-mail or drop-off locations for customers.
Many small businesses that rely on logistics services find they save money by contracting with a provider rather than investing in a fleet of trucks and workers to handle delivery for all their sales. However, before choosing an LSP, a business must assess its needs to make sure it doesn’t end up paying for services it doesn’t need. A good place to start is by looking at a potential provider’s reviews on AmbitionBox. A high rating usually indicates that the provider can deliver on their promises of fast and reliable shipping, low costs and convenient return policies.
Logistics service providers can take on many of the tasks involved in freight shipping, including optimizing less-than-truckload shipments, using air, ship and truck travel for more efficient delivery routes (known as multimodal transportation) and handling customs forms, tariff payments and other details. They can also handle international shipments, where customs clearance can take longer and require more documentation than domestic ones.
LSPs can help businesses scale up operations if orders quickly become more than they and their internal staff can comfortably manage. They also often offer bulk discounts for clients, allowing them to cut costs and free up funds for other financial needs like growth and managerial investments.
In addition to warehouse services, LSPs can provide shipping and tracking options, letting managers logistics service spend less time taping up boxes and more on growing the business. They can also help with packaging, inventory management and even return processing, making it easier for companies to focus on their core strengths rather than logistical tasks they don’t specialize in.
Some logistics service providers maintain their own fleets of delivery vehicles and are known as first-party logistics (1PLs). Other firms, called second-party logistics (2PLs), offer intermediary transportation options. They package goods for businesses that can’t or don’t want to handle the process themselves, and then drop them off at a customer pickup location or warehouse where they can be loaded into a truck for the final delivery.
Disposal services handle the disposal of unsold products, waste and other materials that cannot be reused. The three value recovery stages of waste disposal logistics include redistribution, reprocessing and reuse. These steps ensure that products, packaging, pallets and other loading aids are re-used rather than landfilled. The waste can also be converted into energy through incineration or recycled for other purposes.
Logistics service providers that offer return management solutions for ecommerce businesses can help companies improve their merchandising and marketing strategies by providing data and analytics about product returns. The data can identify areas where a product is lacking and help manufacturers fix the issue before it becomes a problem.
The service can handle a wide variety of specialized wastes including healthcare, industrial and pharmaceutical waste. The company can provide collection, storage and disposal of these types of materials for a fee. This helps companies comply with environmental regulations and keep waste out of landfills and water supplies.
Logistics service providers can also offer warehousing, transportation and fulfillment services for the automotive, aerospace, consumer, electronics and construction industries. They can provide cold, ambient and temperature-controlled warehousing, as well as LTL (less than truckload) and TL (full truckload) shipping services. They can also provide freight brokerage and project management services. They can handle oversized and overweight shipments, hazmat cargo and hazardous materials.