Choosing a Logistic Service Provider

Posted by sachin

Choosing and selecting the right service provider is very crucial for every successful business  involved with export and import trading.  Imagine a European retailer receiving all supplies from the Far East.  This means that the entire supply chain is dependent upon the performance of the logistics service provider. Without a reliable company to take care of these needs, the shelves in the European retailer’s stores will be empty, causing customers to return home without buying anything.  Selecting the right logistics service provider is very important and not a one-time job.  The hunt for a better logistics service provider should continue all of the time.

The first thing someone needs to consider is the cost and service level of a logistics service provider.  There are a few reputable logistics service providers operating globally who have different cost structures for their clients.  But, not all have the same or even similarly strong operational satisfaction rates from their customers across global regions.  A few may offer better service from a specific port to the destination ports of choice, but charge high prices and vice versa. So, one needs to check out the big picture to determine the individual factors involved.  There are two things to look for when selecting your logistics service provider: a) competitive service and b) acceptable cost.  It is quite difficult to nominate only one logistics service provider for a global operation.  One must consider what is required to reach the optimum level of the two tiers of cost and benefit.

Once the choice is made, there are certain other issues to consider.  Check existing channels and routes to see whether they fit with proper logistics operations or not.  If not, redesign them to fit the logistics service provider’s schedule.  Also, narrow negotiations down to specific regions since sourcing from other parts of the world is unlikely.  Explore any new opportunities and tap into them immediately.  Always ask for bidding instead of negotiation to ensure a competitive place in the industry.

Check the shipping lines’ connections and the reputation of the shipping lines for connectivity performance.  This is important for all sea freights.  Many businesses can be ruined if the logistics service provider does not have a strong hold or if they do not have the bargaining skills to negotiate under irregular circumstances.  Check up on the relationship with the shipping line and the performance of the logistics service provider.  Also, remember that on sea freights, there are two types of shipments — direct and trans-shipment. Not all ships roam around the world’s ports; most of the world’s seaports are planned as regional hubs and the goods get shipped from these ports.  Take Italy, for example.  Italy cannot send goods directly to any big container carriers, namely mother vessels, because their port level is not sufficient for such mother vessels to anchor.  Consequently, they load their goods onto smaller carriers or container ships, namely feeder vessels. These feeders then move to Germany or other places to load the containers onto the mother vessel which will, in turn, move to the destination port or regional hub.  The system operates in reverse in the same way. Therefore, establishment of connectivity is critically important.

These are some very basic considerations for choosing a logistics service provider. There may be other factors to consider as well.

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