What is Third-party logistics?
Third-party logistics: Hiring another company to handle storage and delivery.
Where Third-party logistics fits
Third-party logistics is part of Logistics in Supply Chain. Logistics moves goods from supplier to customer: procurement, warehousing, freight and last-mile delivery. Safety stock guards against surprises; just-in-time cuts inventory.
Practical tip
Balance service level against holding cost.
Related terms
- Supply chain
- The network that moves a product from raw materials to customers.
- Just-in-time
- Receiving goods only when they are needed, to keep stock low.
- Lead time
- Time between placing an order and receiving it.
- Procurement
- The process of finding and buying what a business needs.
- Safety stock
- Extra inventory kept to avoid running out when demand or supply surprises you.
- Inventory
- Goods a company holds to sell or use.
- Warehouse
- A building used to store goods.
- Distribution center
- A facility that receives goods and ships them to customers.
Formulas you will use with it
Test yourself
Which term means: “Hiring another company to handle storage and delivery.”?
Distribution center · Supply chain · Third-party logistics
Answer: Third-party logistics
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