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Contract Logistics

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Contract Logistics

The term contract logistics generally refers to complex logistics services within the framework of supply chain management. Here, a contract in the form of a service agreement is concluded between a goods manufacturer or trader (principal) and a logistics service provider. This individual contract regulates a long-term cooperation between the business partners based on the division of labour. The monetary scope can be very large, and with the partly individual design of the cooperation, a quick change of the contract logistics service provider is rather difficult. So the cooperation is designed for both partners for the medium to long term; a short-term change of service provider is associated with considerable effort due to the dependency. The service provider also invests time, money and personnel in the business relationship.

Areas of application of contract logistics

The contract logistics service provider takes over the logistics tasks that in earlier days were performed by in-house departments of the manufacturer or retailer (outsourcing). The logistical tasks consist not only of the transport, handling and storage of goods, but also include other activities such as picking, shipment tracking, fulfilment, customs clearance, quality inspection, etc., which do not always have to be of a logistical nature and can also be interlinked. This is why we also speak of a full-service provider.

This requires a longer period of coordination between the contractual partners until the worthwhile and desired savings can be achieved. Other goals can range from performance improvements in logistics to increased flexibility and the concentration of resources on other areas. This coordination is partly necessary for each individual product of the manufacturer or retailer and determines the duration and success of the cooperation. The complexity of the task for the contract logistics service provider depends on the requirements. For a company seeking to outsource logistics services, it is important to select the appropriate logistics service provider. The geographical proximity between the client and the logistics service provider is also very important.

Development or differentiation of contract logistics/logistics services (1PL-4PL)

First Party Logistics (1PL) Provider (carrier)

In this case, the situation described above exists that logistics is still an internal area of a company. The company's own departments are responsible for the fleet and storage areas as well as the handling. External service providers are only called in for special tasks. Regionally operating transport and logistics service providers also fall under this term. (70s)

Second Party Logistics (2PL) Provider (freight forwarding)

This is where the outsourcing of certain parts of the logistics processes begins, e.g. storage areas, transports, but also other tasks such as packaging. Specialised logistics service providers that fall under 2PL no longer work only regionally but move within a larger radius, e.g. CEP services (CEP stands for courier, express and parcel services). (80s)

Contract logistics
Kontraktlogistik, Lager, Warehouse

Third Party Logistics (3PL) Provider (Contract Logistics Provider)

Through better structuring of the work processes in the companies, due to the increasing use of software solutions, it is now possible to identify the entire area of logistics and also services beyond that. The transparency now makes it possible to outsource far-reaching work processes to an external logistics service provider. The company can thus concentrate on its core business. The logistics service provider offers an individual solution tailored to the needs of the customer. (90s)

Fourth Party Logistics (4PL) Provider

Here the focus is on the term supply chain management (SCM), in German also value creation theory. Supply chain management is to be understood as complex and dynamic supplier and customer networks. Its precise observation enables the coordination of these processes. A 4PL service provider analyses precisely these processes of all participating companies in this network and offers a far-reaching and optimised solution for the value creation system. This service provider does not have to have transport facilities or storage space itself, but buys these services on the market, i.e. from a suitable logistics service provider. If the service provider uses its own capacities, it is also called a lead logistics provider.

 

Statistical studies show that outsourcing complex and extensive logistics services can increase the success of logistics and, consequently, the success of the company.

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Logistics Industry Guide

The logistics industry guide from LAGERflaeche.de informs you about the most important aspects of contract logistics - also for your industry! LAGERflaeche.de offers you a comprehensive overview that specifically relates to warehousing and logistics in your industry and helps you decide on the right solutions. Find the best warehousing and contract logistics solutions with LAGERflaeche.de and get a head start!

Read overview

eCommerce logistics, contract logistics
Chemical logistics, contract logistics
FMCG

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