The logistics sector is experiencing huge upheaval, with customers and clients now being able to receive products within timeframes as short as a single hour. While the general public will be familiar with third-party logistics leaders such as Deliveroo and Just Eat, those using 3PL fulfilment and logistics span a much larger spectrum of companies and industries. Such businesses enjoying the benefits of 3PL in supply chain management include consumer ecommerce, food wholesale suppliers and pharmaceutical providers to name a few.
However, outsourcing distribution isn’t for every company. Before making any financial commitments, it is imperative to have a comprehensive understanding of the benefits that a 3PL can offer to businesses and its relevance to your organisation specifically.
When assessing 3PL logistics services, it is important to bear in mind that setting up your new supply chain may incur a high initial cost. But get things right and select the ideal partner for you, and you will be able to manage higher inventory volumes more efficiently, scaling your business to achieve a higher ROI.
What is Third-Party Logistics (3PL)?
Before we examine the pivotal ways in which partnering with a 3PL can improve your warehouse efficiency and supply chain as a whole, it’s advantageous to develop a full understanding of what a 3PL is and how it will apply to you.
The most straightforward definition of third party logistics (3PL) is as follows:
“The outsourcing of logistics and supply chain management to a third party business, encompassing inventory management, warehousing, fulfilment, and often shipping.”
What Does a 3PL Company Do?
If you are considering a partnership with a 3PL for the first time or are new to outsourced distribution, you may be unaware of what exactly goes on behind the scenes.
Traditionally, 3PL companies are employed to support and carry out tasks to completion within a supply chain. This may include:
- A full suite of complementary services or an end-to-end solution for enterprise supply chains from packing and warehousing to transportation and order fulfilment, which may even include returns.
- Identifying weaknesses or gaps in your supply chain.
- Integrating best practices and ensuring compliance with current legislation, such as the latest food transport standards and regulations.
- Implementing technologies into your business operations to manage risks and complex product requirements, ensuring your logistics remain agile and responsive – a necessity in today’s booming, competitive market.
Most third party logistics providers own or lease warehousing to store their client’s products, pick orders or ship packages. However, whilst managing inbound and outbound transportation, fewer 3PLs own a fleet of distribution vehicles. Although, some (notably Amazon) provide last-mile delivery as part of their end-to-end distribution services.
The Difference Between Contract Logistics and 3PL
At this point, you may ask yourself – “What makes 3PL different from contract logistics?” Fortunately, this is a simple distinction.
Unlike third party logistics, which encompasses the supply chain from start to finish, contract logistics companies tend to focus on addressing specific aspects of the operations, namely delivery management.
10 Compelling Benefits of Third Party Logistics
1. Achieve Cost Efficiency
Partnering with a 3PL enables companies to achieve cost efficiency by outsourcing logistics functions to experts in the field. This collaboration eliminates the need for substantial initial investments in infrastructure and technology.
Instead, businesses can benefit from the 3PL’s existing resources, gaining access to established networks and optimising haulage costs, ultimately contributing to a more economical and streamlined supply chain.
2. Tap into Professional Expertise and Experience
Collaborating with a 3PL allows businesses to tap into professional expertise and experience that may not be readily available in-house. 3PL providers bring a wealth of industry knowledge and transport accreditations, staying abreast of the latest trends, technologies, and regulations.
With this invaluable insight, businesses can make informed decisions, implement best practices, and navigate complex logistics challenges with the support of seasoned professionals.
3. Concentrate on Core Strengths
With industry experts at the helm, companies can concentrate on their core competencies and primary business activities. Freed from the intricacies of supply chain management, businesses can allocate more resources and attention to product development, marketing, and customer relations, leading to improved overall results and competitiveness in their respective industries.
4. Streamline Operations Across the Board
Engaging with a 3PL allows businesses to streamline operations across the board. From inventory management and warehousing to transportation and order fulfilment, a comprehensive suite of services ensures a cohesive and efficient supply chain. This holistic approach minimises bottlenecks, reduces lead times, and optimises every aspect of the logistics process for enhanced operational performance.
5. Attain Flexibility and Scalability
One of the most powerful benefits of using a 3PL is that they provide businesses with the flexibility and scalability needed to adapt to changing market demands. As the business grows, a 3PL can seamlessly adjust logistics operations to accommodate increased volumes. Conversely, during periods of lower demand, companies can scale down operations, ensuring optimal resource allocation and cost-effectiveness.
6. Facilitate Company Growth and Market Expansion
Leveraging the capabilities of a 3PL facilitates company growth and market expansion by creating a more efficient and responsive supply chain. With a reliable logistics partner, businesses can confidently explore new markets, expand their customer base, and seize growth opportunities, supported by a robust and flexible distribution network.
7. Mitigate Risks
3PLs play a crucial role in mitigating risks associated with logistics operations. Through established procedures and compliance with industry regulations, a reputable 3PL helps businesses navigate potential challenges, ensuring the secure and reliable movement of goods.
8. Enhance Customer Satisfaction
Efficient order fulfilment, accurate deliveries, and timely responses to market dynamics ensure a positive customer experience, whether your operations are B2B or B2C. A well-managed supply chain, facilitated by a 3PL, enhances reliability and responsiveness, ultimately leading to higher customer satisfaction levels.
9. Keep Up with the Competition
Another of the benefits of using a 3PL in supply chain management concerns a business’ competitive edge. With the support of a knowledgeable distribution provider, companies can keep up with competitors by staying ahead of industry trends and adopting cutting-edge technologies. A dynamic logistics strategy, tailored to evolving market demands, positions companies as strong players in their respective sectors.
10. Enjoy Tailored Solutions
One of the major benefits of third party logistics is the opportunity to enjoy tailored solutions. 3PL providers can customize their services to align with specific business requirements, addressing unique challenges and optimizing logistics processes. This personalized approach ensures that businesses receive solutions that precisely fit their needs, fostering greater efficiency and success in the market.
Choosing a Logistics Option for Your Business
At this stage, you might be in something of a quandary, especially if your company is still young and growing. If you are able to manage and store your inventory in-house, is a 3PL even worth it?
Given our extensive list, it’s safe to say that there are many benefits of third party logistics. However, as we mentioned previously, a 3PL provider might not be the best match for your unique circumstances.
Before we conclude this article, let’s take a look at the conditions that are suitable for this logistics option.
When You Should Partner with a 3PL
It makes sense to use a 3PL when your time is consumed with running your other business operations or when the necessary infrastructure (warehousing and vehicle fleet), technology and training requirements will take a sizeable chunk out of your budget.
It’s also well-suited to enterprises that are growth-oriented, or looking to expand their customer base, venture into new markets and scale up their overall operations.
When to Partner with a Contract Logistics Provider
On the flip side, companies with pre-existing supply chains in place, particularly large businesses, may benefit from engaging a contract logistics company.
A reliable distribution partner will identify any weak points in the supply chain and work to resolve them. For instance, they can help companies achieve more sustainable logistics in terms of emissions and product management, ensuring an overall smoother supply chain.
Find Your Perfect Match
Now we have laid the groundwork for you to make an informed decision, it should be much easier to select the ideal distribution partner for your particular requirements. To learn more about outsourced distribution and contract logistics, get in touch with our professional team.