Third Party Logistics

August 6, 2009 5:44 AM

How does a third party logistics provider typically charge their customers?

We are looking at starting 3rd party logisitics functions for a supplier. This will involve holding the stock and shipping upon instruction from the supplier. Is there a typical model for charging for this service, such as per shipment, flat fee for the service, % value of goods moved?

posted by Frasermoo to Work & Money (3 answers total)

Best answer: There are a few different models. The two I've worked with in the past and seem to be fairly common are:

* per-unit pricing (you'll have to agree on the unit, obviously)
* cost plus a margin (i.e. total cost + 15%, but that's usually for shorter term agreements)

Many times, a client will prefer to have a cost plus period for the initial phase (three or six months, for example) while you work together negotiating the final per-unit prices. This allows the 3PL to get the processes worked out and provides a bit of a cushion during startup. Once the account is running somewhat smoothly you move to per unit pricing and begin really tweaking your processes to minimize your cost per unit.

MeFi mail me for more details, if you'd like.
posted by cdmwebs at 6:33 AM on August 6, 2009

Where I worked, we negotiated a significant discount with all the carriers and then split the discount with our customer. eg. if we negotiated 40% off on a given courier, we'd give our customer 60% of the 40%, or net 24% off the regular rate and we'd keep 16%.

Then we'd invoice them bimonthly with a list of all their shipments, along with their acquired savings.
posted by jmmpangaea at 6:45 AM on August 6, 2009

Response by poster: thanks for the feedback.
posted by Frasermoo at 7:50 AM on August 10, 2009