Which of the following best describes the result of the efficiencies created from FedEx's use of third-party logistics (3PL)?

• A. Reduced demand for logistics services
• B. Higher prices for end consumers
• C. Lower transportation and inventory costs for clients
• D. Increased barriers to entry for new logistics firms

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of third-party logistics (3PL). 3PL refers to the outsourcing of logistics and supply chain management functions to specialized service providers, which can lead to efficiencies in transportation, warehousing, and inventory management.
2. Step 2: Analyze how 3PL affects costs. By using 3PL, companies like FedEx can leverage economies of scale, expertise, and technology, which typically reduces transportation and inventory costs for their clients.
3. Step 3: Evaluate the impact on demand for logistics services. Since 3PL providers improve efficiency, they generally do not reduce the overall demand for logistics services; instead, they make these services more cost-effective.
4. Step 4: Consider the effect on prices for end consumers. Improved efficiencies and cost savings from 3PL often translate into lower prices or better service for end consumers, rather than higher prices.
5. Step 5: Assess barriers to entry. While 3PL providers may have some competitive advantages, the primary result of their efficiencies is cost reduction for clients, not necessarily increased barriers to entry for new firms.