Third-Party Logistics: What You Need to Know
In recent times, third-party logistics have become more popular due to their usefulness in the supply chain. Many small businesses that had no provisions for a proper logistics department have realized the need for an efficient logistics chain and turned to third-party logistics (3PL) providers for help. Equally, large-scale businesses that desired to stand the test of time - by keeping an accurate inventory and benefitting from cost savings in terms of hiring fewer employees - have also had to rely on third-party logistics providers to run their business smoothly.
Whatever the case may be, 3PL has proven to be indispensable and has come to stay in the business world. Below, we'll explore third-party logistics in more detail and identify how the right partner can help improve your bottom line.
What Is Third-party Logistics?
Third-party logistics refers to the outsourcing of logistics and distribution to a third-party business. Over the years, the service offerings of 3PL providers have evolved to include services that go beyond traditional transportation and distribution needs.
What Services Do 3PL Providers Offer?
Essentially, third-party logistics services cover inventory management, warehousing, procurement, order fulfillment, transportation, and distribution. Another integrated service that some 3PL providers offer is IT systems integration. We’ll discuss these services in more detail below:
1. Procurement and Receiving Services
A 3PL provider helps in the procurement of goods based on order placement in the supply chain. Once the orders have been made, a 3PL provider can monitor goods and make arrangements for their transportation to warehouses, ensuring the management and storage of goods until they reach their final destination.
2. Order Fulfillment
Order fulfillment is another major responsibility of a 3PL provider. They can receive customer orders for goods, confirm the availability of the goods, and deduct them from stock. Next, they package the requested item and prepare it for shipping. After loading for shipping, the items are shipped and distributed to their various destinations.
Since 3PL partners are typically receiving multiple orders and streamlining the fulfillment process, they can help your business reduce its fulfillment costs.
3. Transportation and Distribution
If there's one thing 3PL providers are known for, it's the transportation of goods from suppliers or manufacturers to customers. They typically offer different types of distribution options, such as Full Container Load (FCL), Less than Container Load (LCL), Less than Truckload (LTL), Truck Load (TL), etc.
Unlike a freight forwarder which focuses only on moving goods between locations, a 3PL provider goes the extra mile to keep track of the goods using GPS and IoT.
4. Inventory Management
3PL providers understand the intricacies of the supply chain and can manage their customer's inventory. From when supplies are running low, the placement of orders with suppliers and manufacturers, overseeing order fulfillment, to every other process in the supply chain, third-party logistics providers assume the responsibility of managing inventory.
5. Warehousing and Storage
3PL partners provide warehouse space that ultimately saves you the stress of having to secure storage locations for your products, but that's not all. You can turn over every aspect of your warehouse storage and shipping to a 3PL provider so you can focus on other aspects of your business. This includes the receiving of goods from suppliers or manufacturers, as well as fleet management.
6. IT Systems Integration
Today, many 3PL providers offer various IT capabilities that improve the visibility of the entire supply chain, customer participation, and the shipping process. IT tools, like the Internet of Things (IoT) in particular, help streamline the management of orders and transportation services across different shipping zones. When these processes are efficient and timely, customer experiences improve.
When Should a Third-Party Logistics Provider Be Considered?
The simple answer is this: when you need some support with logistics management. Most times, it's when a company begins to grow and expand, as business growth may mean more customers, more sales, more deliveries, etc. And with all of these things, logistics functions become even more complex.
The changes that accompany growth can quickly move from being a "good problem" to a crippling challenge. And by all means, that factor needs to be resolved - quickly.
Launching a successful expansion into a new market, for example, may put a strain on a company that isn't well equipped to handle it. Third-party logistics help by taking care of the logistics of the new market, saving them the stress of handling it.
Growth is one indicator of the need for a 3PL partner, but there are many other indications that it may be time to consider a 3PL provider:
1. The Need for New Technologies
New technologies are always emerging, offering better ways of doing things. But investing in the latest, grandest technology solutions may go a long way to digging a hole in your budget. Third-party logistics providers offer integrated IT services, so leveraging this helps you save money while meeting your business (and budget) goals.
2. Inventory Inaccuracies
Having a balanced inventory is crucial. From managing fulfillment to shipping, transportation, and distribution, you're left with the options to either keep handling these responsibilities in-house or engage the services of a 3PL provider. 3PL service providers can unlock hidden insights and analytics that ensure accuracy in your warehouse.
3. Rising Costs
As labor, material, facility, and other costs continue to increase, outsourcing logistics operations to a 3PL provider can help streamline processes and reduce costs. Since 3PL companies can take multiple orders at a time, you can save costs in these areas.
4. Reduced Employee Productivity
In a bid to keep up with increasing orders and sales, it's important not to overburden employees. Once staff members begin to work on activities that go beyond their job descriptions, they may begin to experience low productivity. Having a 3PL company as your logistics manager takes the burden off your staff and ensures they're able to focus on the most important internal tasks.
5. Increasing Customer Service Complaints
With expansion comes an increased customer base. And to continue seeing great sales, keeping customers happy and satisfied should be a top priority. But as your business expands, it may not be able to provide the timely service customers are after.
Here, the need for an external logistics operation becomes necessary. Leveraging the expertise and capacity of a 3PL service provider in meeting the needs of your customers will ensure you maintain a satisfied customer base.
The Advantages of a Third-party Logistics Provider
Logistics operations are often the least concern of many companies, specifically because of the intricacies involved. If you require solid logistics provisions yet don't want to go through the work of running one in-house, outsourcing to a third-party logistics service provider will be the best way to solve your problem. Regardless of the size of your business, there are many ways a 3PL partner can help.
Here are some of the top advantages of collaborating with a third-party logistics provider:
Third-party logistics companies are created to focus solely on logistics. Due to this specialization, engaging the services of a third-party logistics provider enables your internal team to concentrate on their core competencies.
2. Access to Advanced Technology
As a growing business, accessing and funding the best technology may not be realistic in-house. This is where 3PL providers come in. 3PL companies are usually equipped with the latest and great technology that helps save time and ensure customer satisfaction through route optimization, real-time tracking, and more.
3. Access to Experts
3PL providers have experts on their team with thorough knowledge about supply chain management and operational systems. They also have years of experience in terms of delivery and customer experience, so they can provide you with expert advice and solutions for your logistics and fulfillment operations.
4. Access to Facilities
When logistics are done in-house, you need to own or rent your own warehouse, hire teams to staff the warehouse, and manage all the costs that come with it. In contrast, third-party logistics companies will provide distribution centers and warehouses coupled with fully staffed experts to operate them. Many 3PLs also use Warehouse Management Systems (WMS), which involves the use of integrated services to ensure accurate inventory, storage, and distribution.
5. Cost Savings
Every business is searching for ways to save costs. If you outsource your warehousing, technology, fulfillment, and inventory to a 3PL partner, you can save costs in all of these areas and instead channel funds toward other core business processes. Many 3PLs also offer multiple services at a discounted rate, further reducing total service costs.
6. Improved Customer Satisfaction
Some customers expect next-day or same-day shipping, while others don't mind later deliveries. Meeting these different needs may prove challenging, but a third-party logistics partner can remedy this by offering same-day or next-day shipping at affordable rates.
A third-party logistics company also has supply chain management professionals that understand the navigation of supply chains effectively. This means that they're in the best position to ensure customer expectations are met. Customer satisfaction equals good reviews, repeat orders, and recommendations.
How to Choose the Right 3PL Partner
Choosing to outsource your logistics to a 3PL company is a big move, and you need to be very careful in deciding which one to partner with.
The first step is to figure out why you need third-party logistics; this will help you set clear goals and expectations that a 3PL will help you achieve. Then, it's time to find a 3PL company. It's important to note that not all 3PLs offer the same services, so it's important to choose one that offers services that best suit your business.
Some of the factors to be taken into consideration in picking a 3PL partner include:
Effective communication is the basis of any business partnership. It's important to adequately communicate what you need out of a 3PL partnership, and just as important that the provider understands and can meet these needs.
Communication also extends to the periods of order fulfillment, transportation, and delivery of orders. Regular communication helps ensure the service provider is right on track with the agreement and you're able to monitor performance as needed.
Ensure that any 3PL partner you're considering has strong communication practices in place.
A key point of maintaining an effective, productive partnership is to ensure that every party involved understands their roles. This is especially true in the logistics industry, where operations require careful and advanced planning.
You'll need to work with your 3PL partner to decide on the precise roles that each party is expected to follow through, to curb any form of assumption or unrealistic expectations.
As we've touched on already, the right 3PL partner will have strong knowledge of the industry and experience successfully managing other businesses' logistics operations. The best 3PL providers are also aware of their own strengths and weaknesses and are regularly adding new and improved services to their offerings to provide the best customer experience possible.
You should be able to trust that your 3PL company can keep both your goods and data safe. Ensure that they have reliable security measures and policies in place, and confirm that they comply with any applicable regulations.
We've touched a lot on how the right 3PL partner can help you provide your customers with a better experience, but it's also important to consider how a 3PL partner's interactions with you - the business - will be. This includes things like communication practices, meeting service agreements, and more.
One of the things to consider would be if the 3PL provider comes with good reviews from its previous customers; they should be able to boast of good customer service, especially in terms of strong communication and timely fulfillment solutions.
A 3PL service provider should offer a range of services based on your needs. And as your business grows, it's important that they can continue to support you. Ensure that they have infrastructures and systems that can accommodate your increasing production needs.
Along with scalability, ensure the 3PL partner has technology that can keep up with the increasing needs of your business. Also, ensure they have a team of IT professionals that can quickly tackle any problem that arises.
Investing in third-party logistics is one of the best decisions you can make for your growing business. The right 3PL partner can provide you with efficient services that would otherwise result in a staggering accumulation of costs and time if you were to perform them in-house.
The right partner can also handle a crucial part of your business that may otherwise prove burdensome for you and your company. This, in turn, affords you the comfort of running your business seamlessly, focusing internal efforts where they matter most.
Operate More Efficiently with Ziing
If you're on the verge of taking your business to the next level, Ziing can help. We offer flexible and customized third-party logistics services to help business owners reach their desired goals.
We take the time to really get to know your business so we can provide you with the services that meet your logistics needs and improve efficiencies in all areas of the process. We're also data-driven, meaning we can provide you with critical insights into your business.
We offer scheduled delivery, scan packages at each stage of the delivery journey, offer real-time tracking, and use only the best technology to optimize routes, keeping you informed every step of the way.
To learn more, contact us today.