Third party logistics (3PL) involves the outsourcing of multiple components of a supply chain to a 3PL company that is capable of managing customs, distribution, inbound freight, warehousing, order fulfillment, and outbound freight to clients’ customers.
Some companies will provide an all-encompassing service to customers, which others may offer one or more logistics services. Depending on your needs, you may benefit from these services from a trusted 3PL provider.
What Can a 3PL Company Provide?
A full-service 3PL provider can provide a wide range of services for your company. You can take advantage of outsourced operations in nearly every aspect of storage, transportation, and delivery to maintain efficiency.
Warehousing for Physical Goods
Many merchants don’t necessarily have a physical shop to store their products, requiring the use of a warehouse to store them. Normally, 3PL companies will be able to provide warehousing services that include either a shared or dedicated warehouse for storage, along with all of the required technology to handle and transport products throughout the warehouse. Because of the many companies that might use the same warehouse for storage, you can save money with a split overhead cost.
Businesses need to be able to fulfill orders effectively, or they can’t survive. Unfortunately, many e-commerce companies often suffer from invalid order fulfillment, but a 3PL service provider can make sure that customers receive the right goods on time and in good condition with every order.
Another service that most 3PL companies offer is consolidation, wherein e-commerce suppliers send small goods to the same location, consolidating these goods into a single shipment to lower prices.
Supply Chain Management Services
To make each order a success, companies need to effectively maintain their supply chain. A 3PL company can help manage all or part of your supply chain, taking care of your inbound freight delivery specifications.
Main Reasons to Use a 3PL Service Provider
There are many reasons to turn to a reliable third-party logistics provider, including:
- You can get comprehensive supply chain support when testing new markets or countries
- 3PL providers enable you to scale your labor, warehousing space, and transportation for full support during busy periods
- A provider can help you identify inefficient areas of operation and management of inventory to improve upon them
- You can take advantage of lower transportation costs that third-party logistics companies provide
- Lower risk means that you can quickly build a multi-location distribution network.
Benefits of Working with a 3PL Provider
The upsides of choosing a 3PL provider to manage certain aspects of your company can make it incredibly worthwhile. You’ll be able to see a variety of improvements in various areas of your business, including:
- Improved customer service, with a better relationship with your customers resulting from fast and efficient service
- Increased flexibility and scalability, with the ability to scale back operations over varied time frames.
- More resources through a larger resource network compared to in-house supply chains, further increasing efficiency and effectiveness
- Saved time and money without the need to invest in multiple areas of your business while experiencing higher returns
- Professional services that keep your business consistently updated to stay in line with current trends and new technologies in logistics
- Improved responsiveness thanks to increased flexibility, enabling you to respond quickly to varying business environments and changing market trends
The Different Types of 3PL Providers
If you decide to use a 3PL company, there are three main types of providers to keep in mind, including:
- Asset based – These providers utilize their own warehouses, personnel and equipment to operate
- Management based – These companies offer management and technology to operate logistics functions of clients, using the assets of other companies without actually owning them
- Integrated providers – These providers tend to be either asset or management based, supplementing services with others based on clients’ individual needs.
Selecting the Right 3PL Company
It isn’t always easy to choose a third-party logistics provider because of the many different aspects revolving around them. The first thing you should do when considering 3PL services is to determine exactly what types of services your company needs, as this can affect the type of provider that’s ideal for your business.
Before beginning your search for the perfect 3PL provider, analyze your accounts and determine how well your company is performing. Then you should outline your current supply chain costs and examine existing relationships with your carriers, along with any advances or allowances that might be made in the future. You should then ask the 3PL provider for a request for information (RFI), which provides you with a detailed plan that the provider has for your company.
RFIs should cover a wide variety of aspects, including:
- The overall scope of the contract such as locations, departments, and amenities
- The required performance level
- Information on volumes such as warehouse sizes, number of items, and number of deliveries
- The total number of logistics tasks that will occur
If a plan seems like it will work for your company, the provider in question may be the right choice.
Questions You Should Ask a Third-Party Logistics Provider
Prior to making your final decision on a 3PL company, you should ask certain questions that provide you with all of the information you need.
Some of these questions may include:
- Is the company located near your business?
- Does the company support customers’ demands and priorities?
- Is the provider capable of scaling operations as the client changes and expands?
- Are both direct-to-retail and direct-to-consumer fulfillment and distribution services available?
- Does the company have multiple warehousing and transportation options available?
- Is the provider financially stable?
- Is it possible to view a list of previous partners?
- What type of history does the company have with past partners?
- Is there a track record of providing top-quality services?
- Are there many long-term clients?
- Does the provider have reliable industry references?
- Does the company have the required expertise to help your company’s logistics succeed?
Once you have chosen the best option for your business, you’ll be able to experience the many benefits such as lowered costs and higher returns, with more efficient warehousing and transportation of products.
If you would like to get an instant rate quote for logistics services and benefit from a reliable 3PL provider today, use our instant freight rate engine.read more