Contract logistics: Entrusting operations to a strategic partner

The contract logistics business model enables companies to delegate part of their logistics processes to a specialized provider. It allows them to focus on adding value in their core areas while continuing to meet customer needs. In this post, we explore the meaning of contract logistics, how it differs from 3PL, and look at some examples.

What does contract logistics mean?

Contract logistics refers to outsourcing part of an organization’s logistics activities to an external provider. These services cover areas such as supply chain planning, warehousing, order processing, customer service, and intermodal transportation.

For example, contract logistics businesses ensure that inventory from online stores reaches all necessary points in the supply chain as needed. They act as intermediaries focused on optimizing and making their clients’ logistics operations more efficient.

Relying on these types of providers can be helpful for outsourcing certain stages of the supply chain or managing specific requirements. Contract logistics operates under an agreement between two or more parties and is typically based on long-term collaborative strategies.

Differences between contract logistics and 3PL

Third-party logistics (3PL) providers and contract logistics companies are often confused since both often handle tasks like delivery management. However, they don’t always offer the same range of services. The key difference lies in their scope.

Contract logistics businesses generally help organize transportation resources and plan delivery routes. In contrast, a 3PL provider may offer a broader set of logistics services, including warehousing, order fulfillment, and automated shipping.

Benefits of contract logistics

One of the main advantages of contract logistics is its flexibility. Both the services provided and the length of the agreement can be tailored to an organization’s particular needs. But contract logistics also offers other key benefits:

• Access to cutting-edge technology. Leading contract logistics providers use sophisticated supply chain management tools, including warehouse management systems (WMSs), transport management systems (TMSs), and distributed order management (DOM) systems.
• Market insight. Companies entering new regions or sectors can benefit from a contract logistics provider’s knowledge to support a successful expansion. This expertise enables them to build a truly global logistics network.
• Scalable logistics solutions. With the right logistics partner, an organization can tap into the contract logistics provider’s distribution network to reach new customers, such as in neighboring countries. This fosters scalability without major upfront investment.
• Stronger focus on value creation. By outsourcing logistics operations to a specialized provider, businesses can concentrate their resources and staff on the areas that add the most value to their processes and core offerings.
• Lower initial investment. Contract logistics companies enable their clients to fulfill orders without having to invest in their own warehouses or transportation assets.
• Risk reduction. Outsourcing certain logistics activities makes it easier to adapt to demand fluctuations. Flexible, seasonal contracts help businesses scale operations as needed and avoid unnecessary expenses.

Contract logistics examples

Several major logistics providers around the world offer their clients these tailored services, with or without their own warehouse infrastructure. Among the most well-known internationally are Kuehne + Nagel, a Swiss company with a strong global footprint in ocean and air freight, and DHL, the German multinational known for its end-to-end logistics solutions. DB Schenker manages every stage of the supply chain, from suppliers to final delivery, while CEVA Logistics delivers logistics services to some of the world’s most recognized brands. Other major players in the contract logistics space include UPS, FedEx, and XPO Logistics.

The role of contract logistics in ecommerce

While contract logistics companies work across a wide range of industries, a large portion of their clients are in the retail and online shopping sectors. These providers take on essential tasks like product storage, inventory management, packaging, optimized route planning, reverse logistics, and last-mile delivery.

Contract logistics offers a strategic advantage for ecommerce retailers: it helps them meet rising customer expectations, lower costs, and stay focused on growth. It also enables faster deliveries, better handling of demand spikes, customized packaging, and more efficient returns management.

Supply chain optimization through contract logistics

Many businesses can benefit from contract logistics services. They’re a key strategy for organizations looking to streamline their supply chains without losing sight of what drives the most value. Logistics providers can enhance their clients’ decision-making around storage, order picking, and shipping by leveraging advanced tools like Easy WMS. Its WMS for 3PL module keeps operations in sync between these companies and their clients, ensuring greater visibility and efficiency.