As organizations grow and expand, they typically start offering new products and services in new areas of the market. It’s at times like these when they need to decide whether to outsource their transporting and order fulfillment processes. To satisfy their eCommerce fulfillment and customer demand, many turn to a third-party logistics provider (3PL) to manage their supply chain efficiently.
The decision to work with a 3PL company is based on several data points. First, it needs to take into account the financial aspect and whether it can benefit the bottom line. Second, does the business making the decision have all the resources in-house to manage all of its logistics processes? And third, will the 3PL be able to enhance the overall effectiveness? While every company is unique in terms of its needs and requirements, there are certain common aspects that can help with the decision-making process.
If, for instance, the organization is expanding quickly, labor, production, personnel, and shipping costs will also start to rise. A third-party logistics provider might help out and relieve several of these problems without the need for the organizations to compromise too many of its own internal resources. Simply put, outsourced logistics can save time, save money, and streamline the organization’s supply chain management.
What is a 3PL?
Third-party logistics 3PL provider services, as well as take part in some or all of a business’ shipping functions. They handle every aspect of the distribution network from the manufacturer or retailer to the end-user. These can include every part of transporting and fulfillment services, from transportation and warehousing management, stock management, shipping audits, customs brokerage, settlement, as well as shipping and delivery monitoring.
Typically, you’ll find organizations incorporating 3PL into their own storage facility and transport process improvements as well as to maximize efficiency in terms of their shipping and delivery workflows. Depending on the 3PL company, some will also offer domestic and global transport, trade compliance, and customs brokerage services. Others may provide strategic omnichannel planning alternatives for their clients.
More and more, companies are letting experts handle the logistics aspect of their business, thus helping them focus on other areas of their operations. Many 3PLs focus to increase efficiency in their own organization, which will often make their way to their clients. This will translate into higher service levels at a lower transport cost. If used wisely, a third-party logistics provider can help organizations gain a competitive advantage, boost customer service, and reduce costs at the same time. Below is a rundown on how all of this is possible.
A reliable transportation and logistics partner will offer a depth of experience that shippers may not have in-house. Supply chain logistics operations can be quite complex. Whether it’s fulfillment, the warehouse space, or shipping, all come with their own set of challenges.
3PLs will help their clients to better streamline these logistics processes. In addition, they can also give insight into issues regarding international shipping. Going from documentation, customs, duties, and other regulations, third-party logistics providers can help their clients navigate these compliance and shipping protocol issues.
3PL Resource Network
Many 3PLs have a vast distribution network that allows them to provide top-notch customized services to their clients. Say, a shipper needs to get a single item from point A to point B. In this case, they need to use one of their vehicles, which is highly inefficient. third-party logistics providers, on the other hand, can leverage their relationships, generate volume discounts, and consolidate freight. They can use cross-docking, for instance, to lower the overall logistics costs and improve on-time delivery. It’s for this reason why 3PLs make up a sizable chunk of the less-than-truckload (LTL) market.
Scaling and Flexibility
Plenty of shippers are looking for cost reductions by removing warehousing and transportation assets from their books. This is one of the main reasons they turn to 3PLs, in the first place. They also do so as a means of fine-tuning their business niche areas or when introducing a new product.
If an organization has a lot of seasonal products or is expecting increased demand, they can use the services of a third-party logistics provider to scale labor, space, and transportation in accordance with their inventory management. Third-party logistics companies also come in handy when entering new sales channels like e-commerce or expanding into new regions.
Traditionally, companies relied on paper-based inventory and route guides. In more recent years, however, the supply-chain management has become digitized and automated. Yet, for many, adopting the latest technology can prove to be costly and challenging. Professional 3PLs will typically have the necessary tools and technologies.
Their transport management software will monitor and analyze all supply chain procedures, identifying and eliminating inefficiencies in the process. The key is to synchronize the logistics provider’s technology with the organization’s existing in-house solutions.
Reducing Costs and Saving Time
Working with a 3PL can eliminate the need to invest in technology, warehouse space, transportation, and the manpower needed to handle all logistics processes. In turn, this allows organizations to focus their time and money on core competencies.
By outsourcing their warehousing, companies will not only cut their costs significantly but will also better manage changes in inventory levels, such as during peak demand. They can also avoid the costs associated with purchasing and implementing advanced tracking and delivery software. 3PLs will provide insights and expertise to further increase cost and time savings within the supply chain management.
Better Customer Service
Statistics show that around 83% of shippers and 94% of 3PL providers said the use of 3PLs has contributed to improved customer service. Boosting customer service should be a priority for every organization, no matter its size or industry. By working with a professional and reliable third-party provider, they can achieve this at only a fraction of the cost than they otherwise would.
Logistics managers collaborating with a 3PL company will make almost any organization’s work more efficient. This collaboration will help lower costs, improve your supply chain integration and customer experience, bring products to market faster, increase inventory turns and global capabilities, and adapt to market changes quickly and more effectively.
That said, companies need to collaborate with their logistics providers by sharing information and necessary resources. Logistics managers should ensure that top executives and other stakeholders look at their 3PL providers as a valued partner and not a simple vendor. They are, in fact, an extension of the organization, meaning that communication should be open at all times.
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