What’s the Role of a Third Party Logistics Company (3PL)?
When logistics is not your company’s main skill, it can help to hire a sub-contractor who specializes in shipping and distribution to assist with those tasks. But making the decision to outsource work from your business can be a difficult job. Choosing the correct provider who will meet all your needs, work within your budget and schedule, and help keep your company running smoothly can take some time. Knowing the pros and cons of using a third-party logistics company (3PL) will make the selection process easier and help you pick the right company to trust with your inventory and your business.
What’s the Role of a Third-Party Logistics Company (3PL)?
Third-party logistics companies provide supply chain processes for a variety of industries. These companies specialize in procurement, transportation and distribution functions and can customize their services to meet each client’s needs. 3PLs take the burden of inventory management off of their customers’ shoulders and use their logistics skills to allow their clients to focus on their own products and services.
Instead of worrying over the costs of labor, storage and technology related to receiving and fulfilling orders, you can hand these tasks over to a 3PL. A 3PL can save you time and money by supplying staff for handling inventory and shipping, and usually offers better prices due to bulk discounts on packing and other logistics needs.
How Does a Logistics Company Work?
Logistics companies use their knowledge of supply chain processes and procedures, along with their network of inventory and shipping contacts to take this work off of their clients’ hands. The main services most 3PL companies offer include:
- Receiving – The 3PL will have your products and inventory shipped to their warehouse. They will store the goods for you and handle all the details of handling and organizing your items.
- Picking – When you have an order, the 3PL will collect or “pick” the items for the order and organize them for each client.
- Packing – Once an order has been “picked”, the 3PL will securely pack the items for shipment. The 3PL will supply all of the packing materials, such as boxes, packing tape and bubble wrap so you don’t have to!
- Shipping – The 3PL will handle shipment of your orders to your clients. Working with a variety of carriers, your orders will be expertly labeled and sent to your customer in whatever manner they choose.
- Returns – Many 3PLs offer services for handling returns. If a customer needs to send an item back, the 3PL handles the process, returning the goods to inventory or disposing of them if you prefer.
Some 3PLs also offer inventory management, quick-turn-around shipping times and other services business owners might need to help with managing their supply chains.
Third-Party Logistics Examples
How can third-party logistics really help me, you might ask? Here are a few examples of businesses that benefited from hiring a 3PL to assist with their logistics needs.
Sara’s new t-shirt business has really taken off in the last few months. Her sales have sky-rocketed and she is even getting overseas orders. Keeping up with her inventory has become overwhelming for her. The small storage room in her company’s office can’t hold all of the shirts she and her employees are creating, and trying to get shipping labels printed, packages assembled, and orders sent to the correct locations is taking too much of her designers’ time. She needs some help! After researching the benefits of using a third-party logistics company, she has decided to use Acme Logistics to handle the supply chain process for her t-shirts. Acme can store Sara’s shirts, take care of packing and shipping all of her orders, and their network of contacts will get her the best possible prices for domestic and international distribution. Sara can now focus on continuing to build her business and channel her energies into creating more great shirts
Mike has expanded his family’s candy business since he took over five years ago. When he started, it was a small group of people who were able to run a small store inside the candy factory, and delivery was confined to the local area. Since Mike added online ordering to the company’s services, he is having a hard time keeping up with the demand for shipping candy across the country without it spoiling or melting. When he found out that the Mega-Logistics Company offered refrigerated storage and shipping, he contacted them right away. Mega-Logistics was able to better organize Mike’s inventory and keep the candy fresh from receipt in their storage warehouse through travel and delivery to his customers.
Third-Party Logistics Advantages and Disadvantages
While there might be a few drawbacks to outsourcing logistics for your company, there are numerous advantages to using a 3PL for your supply chain needs.
- Cost and time savings
- Flexibility and scalability
- Access to logistics experts
- Low capital commitment
- Simplification of logistics processes
- Ability to focus on your business
- Lack of control over logistics and delivery functions
- Lack of contact with customers
- Larger up-front investment
- Distancing from products
- Disagreements over the level of service provided
When Would a Company Choose to Contract With 3PL Companies?
If your business has grown and the work of shipping, receiving and inventory control have gotten beyond your control, it is probably time to look into hiring a 3PL. 3PLs have the professional expertise to take on the tasks – and the cost – of storing, packing and delivering your products. Outsourcing your supply chain processes can simply your operations, save your company time and money and take the burden of logistics off your mind.