Why Businesses Rely Upon Third Parties For Distribution Services

by Michael Kotendzhi | Trucking, Logistics
Why Businesses Rely Upon Third Parties For Distribution Services

In this day and age, importing and exporting products is unavoidable for most businesses. However much a business owner may want to keep all of their dealings within their own country, it’s difficult to avoid reaching out across borders. In North America, much of the importing and exporting of goods is done between the United States and Canada. As a matter of fact, the U.S. is Canada’s largest trading partner. However, transporting products between the two countries can be tricky, especially when businesses are handling that side of things internally. This can be particularly true when products are being shipped in and out food warehouses. Food and beverage logistics are complex, and only become more so when crossing the border is taken into account. Therefore, more and more businesses are biting the bullet, so to speak, and working with third party warehousing and distribution services, and in turn third party trucking companies. Let’s look into what goes into working with third party logistics systems, why businesses turn to them for solutions, and why these solutions often work out in the long term.

Shipping Products Internationally: What Are The Concerns?

Many companies are already using contracted food warehouses to store their food products; however, using a third party company can extend beyond food warehouses, and into the transportation of these products to other countries. Often, when overseas shipping doesn’t have to be taken into account, this is done via trucks. In 2012, it’s estimated that 90% of all Canadian foods and consumer goods were shipped using trucks. In the U.S., two-thirds of products were shipped in this manner. When trade is done between the United States and Canada, it’s often easier to work with trucks, as opposed to planes. Over 80% of all U.S. exports to Canada are shipped through trucks. Trucks can easily be checked, if need be, making the shipping process less complicated. There can be more restrictions when planes are involved, and for that matter shipping foodstuffs on planes, while not impossible, can be more complex than the process of shipping foodstuffs on trucks. In general, food products that are shipped internationally must be carefully inspected, even when they’re being shipped within the same continent. As it is, this can be a difficult process for the businesses to handle on their own terms. This is one reason why the business owners often end up using third party logistics systems to handle their shipping needs, just as they use them for food warehouses.

Using A Third Party: The Appeal For Business Owners

One of the main reasons why business owners occasionally hesitate over using third party logistics systems to fulfill their orders is that it can be difficult for them to understand their value, and therefore the value in paying for them. They may be tempted to handle these services “in house”. However, just as it’s often more worth it to rent or contract out a warehouse, it’s much easier to have trucking services handled by a third party than hiring a trucker and buying a truck on your own. Canada alone has a $65 billion trucking industry, with 260,000 drivers and 400,000 employees overall. A large number of truckers are needed to fulfill the needs of a single business, and furthermore, the systems that go into importing and exporting products via trucks are, as previously mentioned, complicated. 

Working With A Third Party: What To Expect

Third party distribution services are meant to make the distribution process as simple for business owners as possible. While it may be difficult for some business owners to let such important processes to be handled by third parties, as long as those third parties are carefully vetted they shouldn’t have anything to worry about. In fact, the work performed by a qualified third party service will be more reliable and of a higher quality than work performed “in house”, quite often. Ultimately, using a third party “expert” is always a better choice than attempting to cobble together a program independently.

Michael Kotendzhi is President of Operations & Transportation and a partner at 18 Wheels. Michael has over 15 years of experience and is equipped with a degree in Logistics from the University of British Columbia Sauder School of Business. As well as a background in logistics from XPO Logistics (formally Kelron Logistics), North America's largest contract warehousing provider.

Michael's experience includes supply chain management, reverse logistics, & domestic transportation. He has developed 18 Wheels' trucking solutions, effectively utilizing the sister company's vehicle fleet and building a transportation supply-chain network across North America.