A third party logistics company is an independent business that specializes in providing a specific type of service to a larger client.

The majority of companies focus on one aspect of the supply chain such as shipping.

The purpose of a third party logistics provider is to improve the efficiency of a client and to help control costs.

This is done through the economics of scale.

Logistics providers like supply chain consultants and couriers produce over $47 billion each year.

Areas like transportation and warehousing are growing annually at a rate of between 5 and 6 percent.

Third party logistics companies perform a number of different functions.

Many third party logistics providers offer some form of warehousing.

This means that a client business can hire the company to store products in a controlled facility that is managed by the provider.

This is an attractive option because it removes the need to lease a warehouse and pay employees who are only tangentially related to the core business.

The third party provider usually makes extensive capital investments in the warehouse allowing for increased efficiency through modern technologies.

Another advantage is that a provider might have warehouses in centralized areas that make shipping and receiving easier.

A number of third part logistics companies offer transportation services. This is one of the most common services provided.

Transportation involves moving goods between two locations. This could be from a coastal port to a warehouse or from one retail store to another.

Transportation does not usually include other services such as warehousing or consulting.

Transportation across different jurisdictions is normally an invaluable service since local businesses do not have the capital to invest in trucks and licenses that would allow for cross-country transport of goods.

Many transportation providers have large fleets of trucks available that can move goods between locations quickly and efficiently.

An increasingly popular type of third party logistics is fulfillment. This is a version of warehousing.

Fulfillment means that a provider stores items in a warehouse and then assembles different collections of items in a box or other container.

This is how orders are usually filled for ecommerce and catalog companies.

The warehouse maintains pickers, packers and other employees who can fulfill orders with a high level of accuracy and speed.

Most will also provide shipping services through another third party logistics provider. Fulfillment providers sometimes include value added services such as returns processing.

There are third party logistics companies that act primarily as consultants.

These companies do not maintain assets like a warehouse or a fleet of trucks.

The goal of these companies is to streamline the supply chain and sometimes to develop an entire efficient supply chain for a new business.

Supply chain consultants specialize in removing waste and overhead from the procurement, warehousing and transport of goods.

The knowledge and experience of these individuals usually results in a collection of asset-based third-party providers who can work together more efficiently than a group of random businesses assembled without the assistance of supply chain consultants.