So in the last few videos, we were discussing a lot about third party logistic provider.
And that's why in this video we're going to talk about third party logistic business model.
Now, a third party logistic business is essentially when a business will outsource all of its product
distribution, warehousing and fulfillment to an external logistic company.
So let's say if you are a small business owner and you don't really want the headache of warehousing,
fulfillment, reverse logistic and all of these processes.
So you can completely outsource all these processes like distribution, warehousing and fulfillment
to a third party logistic provider like Shopbop.
So if you look at Shopbop as a company, they have all of these warehouses distributed across the United
States.
And our small seller can send all of their inventory or product to ship Bob in their warehouse and then
ship Bob can manage everything from warehousing to packaging the product to distributing that product
to the end customer with the help of other logistics provider like UPS or FedEx.
And they can also manage the reverse logistic.
So on every single order ship, Bob will cost you somewhere around 2 to $5 so that they can manage all
of this end to end process.
And that's your third party logistic business.
Now, before we dig deep into third party logistic business, let's understand about the different types
of logistic companies.
Now, apart from third party logistic, you have first party logistics, second party logistic and fourth
party logistic.
So let's understand about one PL two, PL three, PL and four PL in this video.
So let's say you are a TV manufacturer and you are manufacturing all of these products by yourself.
If you will manage every other process by yourself, like the packaging and the storing of this product,
then warehousing, logistic and delivery.
If you manage all of these process by yourself, then you are a first party logistic business.
Then we have to PL or second party logistic.
So let's say if your job as a manufacturer is to manufacture a TV and pack that product by yourself
and then you are only outsourcing the delivery part of the process, then you are a second party logistic
company.
On the other side, let's say if your only job is to manufacture the TV and you are outsourcing everything
else, like packaging, storing of the product and the delivery of the product, in that case, you
are a third party logistic business.
Then we have four.
PL So at four.
PL You will have companies like private label and white label and you don't really handle anything by
yourself.
Now the focus of this video is third party logistic business model and that's why we only go deep into
that specific part of the business.
So let's understand how exactly Ship Bob, which is a third party logistic company, goes from your
online store to the customer's door.
So a third party logistic business like ship Bob handles both the inbound and the outbound logistic
of your company.
And they handle things like warehousing fulfillment and the return of certain goods for free.
Let's talk about inbound logistic.
So as a business owner, let's say if you are procuring some product or material from one of your distributor
or supplier, then you also need a warehouse to store all of those product.
So inbound logistics include things like purchasing and arranging the transportation so that you can
pick all of your product from your supplier to your warehouse.
Second part of this process is outbound logistic.
So when your product is flowing out of the warehouse and you are delivering that product to the end
customer, that's your outbound logistic.
So ship will manage both your inbound logistics and outbound logistic.
Now, this is not a sponsored video, but let's understand how exactly.
She Bob, take your product from your online store and ship that product to the customer's doorstep.
The first part of this process is to connect your eCommerce store with Bob.
So whether you have built this eCommerce store using Shopify or WooCommerce or using Magento, you can
simply connect your store with Bob and then you can import all of your product.
And if you want Ship Bob to handle all of these processes by themselves, then you can also send your
inventory.
Now, once they receive your product in bulk quantity, then they will distribute all of your product
across all the fulfillment centers they have.
And every time you get an order from a customer, it will also reflect into the dashboard of ship.
Bob And they will simply pack the order and ship that order from the nearby fulfillment center.
So that's the business model of a third party logistic provider.
Now let's understand how different companies are using these third party logistics service.
So let's understand about the different types of third party logistic service.
At first we have third party procurement service.
So if you look at companies like Apple, they are assembling partner Foxconn will make sure that they
are handling the procurement service on behalf of Apple.
So they are procuring all of these different components of an iPhone.
Let's say they are procuring the display from Samsung, the memory chip from Toshiba, and they have
more than 250 component manufacturer.
And it's the Foxconn's responsibility to make sure that they are procuring all of these different components
from all these OEMs or additional equipment manufacturer so that they can assemble the product.
Then we have third party transportation service.
So we have logistic companies like UPS, FedEx, DHL or United States Postal Service who will handle
the supply chain and the shipment of the product.
Then we have third party distributor service, also known as third party logistic aggregator.
So you have these platforms like Ship Bob, who will handle all of your logistic operation like warehousing
and distribution and packaging of your product.
And they have tied up with logistic companies like UPS, FedEx and DHL so that they can ship the product
from their nearby fulfillment center to the end customer.
And in the end, we have cloud service and there are multiple digital marketing companies who provide
performance marketing service or let's say they manage the catalog for all these different reseller.
They also do a couple of designing job as well.
So you have all these different types of third party logistics service.
So let's go deep into all of these things.
Let's start with third party procurement service.
And if a company is providing third party procurement service, it is handling things like buying of
raw material or sourcing pre-made product, also known as semi-finished code.
Sometimes they are also negotiating the terms and condition with the supplier and they are also making
bouquets.
If the terms and conditions are aligning with the buyer or the product owner and they are also maintaining
all of these records.
So companies like Foxconn do all of these things by themselves on behalf of Apple.
Now, apart from procurement, service and sourcing the made product, sometimes these third party procurement
provider will also do a couple of more surveys.
Let's say they also handle the product development and they will assist the primary company in designing
and engineering of an item.
And sometimes they also help them secure a patent.
They also do a raw material sourcing, so they will help them identify the best raw material supplier,
which can supply them in large quantity, and that do add an affordable price.
They also work closely with these manufacturers and they can also schedule the manufacturing.
The fourth part is customization.
So let's say if a component is manufactured by an OEM and if they are working with different company.
So if you look at Foxconn as a company, they work closely with Apple, Samsung and with OnePlus as
well.
So if some level of customization is required with these different brands, they also work with these
OEM so that they can customize these components for different brands.
So that's your third party procurement service that will also do things like product development, raw
material sourcing, scheduling of manufacturing and few other things.
Let's talk about the second type of triple service.
That's your transportation service.
Now you have multiple companies that will help you in transportation service, like finding the right
carrier to ship your product.
How can you streamline the paperwork?
They will also facilitate your schedule and they will also accomplish all of these process cost effectively.
A simple example of this process is companies like Ship Bob or Ship Rocket, who work closely with FedEx,
BLUEDOT and DHL so that they can ship your product to the end customer.
Now, if you are selling your product in a single country, then one or two transportation service provider
is more than enough.
But if you are selling internationally, in that case, you have to closely understand the different
types of transportation service.
So you have to work closely with logistic companies like UPS that can get you the best deal on domestic
US rail and truck feed.
And they can also manage your pickup and delivery schedule.
The second thing is import export.
So if you are exporting your product to a different country or let's say if you are importing some raw
material from a different country.
In that case, you also need a logistic provider that can handle all of your paperwork or duties or
transportation cost.
And in that case, you can reach out to companies like FedEx because FedEx has the largest logistic
network in the world.
The third one is you have to look for an overseas shipping provider.
So you have to look out for a shipping provider who can help you get the fastest air transportation,
transoceanic transportation, and free shipping at the lowest cost.
So let's say if you are only distributing your product in a single country, in that case, let's look
at all the third party distribution service.
So let's.
Understand if you only want to focus on manufacturing your product or let's say selling your product
online and you want to outsource things like warehousing, packaging, fulfillment and reverse logistics.
Then you can reach out to companies like Fulfillment by Amazon or Ship Bob.
And their main job is to make sure that they have multiple fulfillment network.
So that they can reduce the delivery time.
So every time you ship your inventory in bulk quantity to these warehouses, they will distribute that
specific product equally across these fulfillment center.
And any time a customer place their order, they will fulfill that order from the nearby fulfillment
center.
The second thing they do is that they provide a fulfillment platform so you can transparently see everything
that is going on in your business.
So you can see that how many orders you got in a single day and from which state or area you're getting
the maximum number of orders.
And that's how these third party distribution service provider can also allocate their product across
these different fulfillment centers.
The third thing these distribution provider provide is customization, so they can customize these packaging
bags for you, so you can choose the different material type of these packet.
You can do some branding if you want.
So these distribution partner or aggregator can handle things like warehousing or inventory management,
product packaging, order processing, assembling the product and customizing the product based on the
customer need.
They can also do batching and kitting.
They can pack your order.
They can do the bulk shipping for B2B client.
These are all the full range of services that is provided by these distributor partners or aggregator.
So if you're running a small business as a three part business owner, you need the four type of service
and that is your growth service.
So let's say if you are a single business owner and it is getting difficult for you to do everything
like designing the label of your product or maybe handling your website or let's say maybe running a
performance marketing campaign on Facebook and Google.
In that case, you can take help from these broad service provider or a digital marketing company by
making sure that they have a proper branding strategy so they can design a new logo for you.
They can improve the brand messaging, copywriting or the packaging of your product, and they can also
manage multichannel platforms like Amazon, eBay or Facebook sales apart from developing and managing
your online store or website.
And in the end, they can collect and analyze the data and maybe they can pass on the feedback so that
you can understand what's going on in your business.