What is 3PL in supply chain?
3PL or third party logistics is a service that enterprises avail of to outsource their logistics processes and employ third-party businesses to carry out tasks to completion in their supply chain. 3PL providers provide comprehensive and even one-stop solutions for enterprise supply chains in packaging, warehousing, transportation as well as order fulfillment. They essentially allow you to outsource operational logistics from warehousing, all the way through to delivery and ultimately empower you to focus on other areas of your business.
These third-party logistics companies can even identify the gaps in your supply chain and fill them. They can make an enterprise’s supply chain more efficient, agile, and responsive by integrating their expertise, best practices, and technologies into your business processes and solving some of the toughest challenges in logistics and supply chain management.
3PLs can even scale and customize services to meet your specific needs in the best way possible. They can offer you one single specific service or provide you with a bundle of services that extends across several aspects of your supply chain. These services provided by third-party logistics companies can work with your processes to boost your supply chain visibility.
Why do companies use 3PL?
Companies use 3PL providers because it just makes the logistics and supply chain process much easier for them. Working with a 3PL can help these organizations increase their operational, financial, and end customer performance.
Companies work with 3PL providers because they have knowledge of the issues that come up in shipping and have the expertise to handle them. They are experts at what they do and even have the industry connections that they need to streamline the process.
They also have insights into international shipping and can aid you in complying with international shipping regulations.
They can help get items delivered faster and even reduce or eliminate the need for businesses to invest in warehouse space, technology, transportation, and employees to carry out logistics processes, enabling them to have a deeper focus on their core competencies.
3PLs also have a better understanding of the supply chain mistakes that could be expensive and risky. Through industry forecasting, third-party logistics providers also aid in optimizing inventory levels to save on inventory holding costs.
Outsourcing their supply chain operations with a 3PL provider also gives businesses the flexibility to scale up during peak seasons and sale down during the seasons in which there are lower levels of demand.
How does a 3PL work?
3PL providers work by offering you one specific service or an entire bundle of services that could streamline your supply chain management. These services could include warehousing, intermodal shipping, expedited freight, etc.
They also handle export and import transportation requirements, domestic or local freight, etc. You could even have a 3PL partner to handle product kitting and packaging, order packing and processing, parcel shipping to customers, management of order returns, as well as freight shipping to other retail businesses.
What are the benefits of 3PL in supply chain management?
There are several benefits that a company could gain by making use of a 3PL provider. The most significant of these advantages and benefits is that by outsourcing your logistics and supply chain processes, you get to focus on other aspects of your business like sales, marketing and product development. Hiring a third-party logistics provider leaves you with more time and resources on your hands.
Here are some of the other benefits of 3PL in supply chain management:
Since 3PL providers work with freight companies and carriers on behalf of several companies, they have more leverage with these freight companies and carriers than individual companies do. They are able to negotiate greater economies of scale based on volume and order frequency. Working with a third-party logistics company and letting them manage all or part of your supply chain enables you to invest your resources in other key areas to grow and develop your business.
Most businesses tend to face demand fluctuations throughout the year. Working with a third-party logistics provider allows you to scale up or down according to your needs and the demand levels so that you can navigate your demand peaks and troughs in a more efficient way, without needing to invest more capital when you don’t need to do that.
Allows you to test new markets
When you work with an international third-party logistics provider, you can test new markets and see how your products perform there without needing to make major investments in getting your own warehousing space or staff.
Shipping delays can be caused by unpredictable reasons. When you work with a 3PL provider and unforeseen circumstances cause delays, they take responsiblity for making alternate arrangements to get your orders fulfilled as quickly as possible. You also get protected in the event of damage or loss of goods.
Expertise and knowledge in the field
3PL providers are a great bet for companies that are just starting out and don’t have a lot of experience in supply chain management. There are some major challenges that your business could have to face in fulfillment, warehousing and shipping, so it makes a lot of sense to let experts take care of that for you. They help you deal with these issues with great ease. They’ll even help you work out international shipping rules pertaining to different countries.
Create a better customer experience
Working with a third-party logistics company empowers you to offer fast shipping no matter where the order is being sent, due to you now having access to the 3PL’s wide distribution network. Now your customers won’t have to wait and wonder when their order will arrive.