Third party logistics (3PL)

What’s 3PL?

3PL is a service that allows you to outsource operational logistics from warehousing, all the way through to delivery, and ultimately enables you to focus on other parts of your business. 

Third-party logistics companies provide any number of services having to do with the logistics of the supply chain. This includes transportation, warehousing, picking and packing, inventory forecasting, order fulfillment, packaging and freight forwarding. Wondering if your business needs to use a 3PL provider? When in doubt, use a pro-con list - we got started on one for you.

What are the benefits of using a 3PL provider?

Using a 3PL provider offers lots of advantages. The biggest is that by handing over these logistics, you can focus on other aspects of your business such as sales, marketing and product development. Outsourcing 3PL leaves you with more time and resources. Here are a few other advantages:

• Cost reduction. 3PLs have more leverage with freight companies than individual shippers do. Working with carriers on behalf of multiple customers, 3PLs can negotiate pricing based on volume and order frequency. Using a 3PL to manage all or part of your supply chain also gives you the freedom to invest in other key areas to grow and develop your business.
• Scale up or down as needed: Most businesses experience fluctuations in demand throughout the year. Using a 3PL allows you to manage peaks and troughs more effectively without having to commit to capital when you don’t need to.
• Provide a better customer experience: Customers expect next-day or same-day shipping as standard. Using a third-party logistics provider allows you to offer fast shipping no matter where the order is being sent, thanks to having access to the 3PL’s wide distribution network.
• Test new markets: With an international 3PL, you have the flexibility to test the waters in new markets without having to commitment to any major investments like your own warehousing space or staff.
  
• Mitigate risk: Shipping delays can and do happen for a number of reasons. When unforeseen circumstances pop up, a 3PL is responsible for making alternate arrangements to fulfil your orders as quickly as possible. You’ll also be protected in the event of damage or loss of goods.
• Gain instant expertise and knowledge in the field. Especially if you’re just starting out, who better to take care of your logistics than a company that specializes in them? Fulfillment, warehousing and shipping come with major challenges of their own, so handing it off to the experts can really make a difference in the way you function - and it leaves you to focus on increasing your overall value to your customers.
• Get a handle on international logistics. If you’re selling internationally, 3PLs can take care of documentation, customs, duties and other issues that come up at the borders that can delay your shipments and result in high costs if not done thoroughly. Plus, you save time trying to work out complicated rules pertaining to different countries.
• Generate cost savings. When it comes to warehousing, not having to maintain your own space and staff can be a big cost-saving measure. Also, companies that provide good inventory forecasting can help optimize your inventory levels and save money on inventory holding costs.

What are the cons of using a 3PL provider?

A 3PL isn’t for every business. Here are a few drawbacks for you to consider. Would these impact your business?

• Lesser control over the delivery process. With a third-party taking care of your shipping, there can be challenges when there are delays or problems in shipping a customer’s order. The customer will be looking at you for the resolution, not your 3PL.
• Larger upfront investment. On the flip side of the cost issue, while hiring a 3PL can pay for itself in the long run, the investment can still be a large cost in the beginning.  If you don’t need a big warehouse or don’t have many orders, the cost of a 3PL can be prohibitive.
• More distance between you and your product. The 3PL you choose may position you far away from your products, which would be an inconvenience if you run into quality control issues, or need to physically inspect your stock for any reason.

Which 3PL company is right for you?

Because of the sheer number of options, choosing a final provider can be an overwhelming process. On top of that, you must gather detailed information about the real cost of 3PL for your business. 

Here are a few things for you to consider when choosing your 3PL partner:

1. Current and forecasted volumes. Choose a 3PL that can handle your current volume, but that also will be ready to handle your volume if you suddenly add a bunch of new stock, increase your stock volumes, or have a great spike in sales.  You want to choose a 3PL that can handle your business now and handle it when you’re at full speed! 

2. References and business performance. Check out references from other customers that use the 3PL provider and get a report on the company’s performance over the last few years. Seek out references and information about on-time deliveries versus delays, and how they compensate businesses when there are problems. See what their customers are saying about them - customer case studies and quotes are a good indicator of how the 3PL provider has built and maintained the customer relationship.

3. Compatible technology. If you’re using a cloud-based inventory management system, you should probably choose a company that is similarly cutting-edge and ready to integrate with your stock control software. Ensure that the 3PL provider’s technology works with how you work.

Learn more about what to look for in a 3PL, how to get the best out of your 3PL providers, or find the top 3PL providers in some key locations:

• 3PL companies in USA
• 3PL companies in UK
• 3PL companies in Canada
• 3PL companies in Australia
• 3PL companies in New Zealand
• 3PL companies in Singapore
• 3PL companies in Hong Kong

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What is 2PL?

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