What Is Third-Party Logistics: A Guide on Everything Worth Knowing

What Is Third-Party Logistics: A Guide on Everything Worth Knowing

Are you asking yourself the question, “What is third-party logistics?” Want to know how it can help your business? If yes, you should check out this guide on everything you need to know.

What Is Third-Party Logistics?

Third-party logistics refers to any business operations concerning storage and shipment of items. 3PL is either provided by transportation services, warehouse storage, or supply chain management.

3PL allows business owners to focus on other business aspects while you outsource other operational logistics from warehouse to delivery.

If your business takes an order, it will be the work of third-party logistics to fulfill them. It is more of a link between supply chain brands to distribution and fulfillment services. It also helps your business with a warehouse space in case you produce more than you can hold.

After your business makes an order, you leave everything else, including picking and packing, transportation, warehousing, inventory forecasting, and order fulfillment to the third-party logistics provider. This will give you the freedom to go back to other operations of your business.

How It Works

Now that you have some knowledge about 3PL, you must want to know how it works. Here is a good example that will help you understand the services better.

A fashion design company may hire tailors to make the designs and models to showcase the completed fashions. However, it may not want to deal with orders from consumers or transporting clothes to the customers. It will, therefore, need the services of a fulfillment company and a trucking carrier.

The tracking carrier and fulfillment company will be the 3PL providers in this scenario. They can also find a single company to handle both order fulfillment and transportation services which is also a much easier work.

This will save the fashion design company extra costs as it only employs the services of a supplier and distributor when needed. They also have no stress of dealing with several customer queries, orders, and complaints giving them an easier time to focus on production.

Why You Should Employ 3PL Services

Here are some of the benefits to expect when partner with a 3PL provider.

Save Cost and Time

With the services of a 3PL fulfillment provider, you will not need to invest in a warehouse, transportation services, technology, or additional employees to take care of all the logistic services. You also avoid supply chain mistakes that can cost your business a lot of cash due to risks involved.

Handling all the supply chain services is also time-consuming for a company. Using 3PL will help save this time and allow you to concentrate on other critical aspects of your business.

Flexibility

With 3PL services, your business is going to become more flexible and will be able to adapt quickly to market changes. You will be able to scale labor, space, and transportation according to the inventory your business is working on.

Your business will easily transition from seasonal periods to different transitions in the industry without affecting either the company or the employees. With 3PL, you will also grow and expand your market reach. They will provide all the expertise and the technology needed for the transition.

Good Customer Service

3PL service providers mostly concentrate on the customer to business relationships and therefore ensure the customers have the best experience. Customers want to get a same-day shipment, and with 3PL, this is possible. Customers will order from you again if you show them that you can provide fast shipment.

Expertise and Knowledge

When your business is just starting, you will appreciate the services of a third-party logistics because you need the expertise and industry knowledge. This is only available from a company with enough experience in the industry.

You need all these because there are a lot of challenges along the way that your small business may not be able to handle. Experts have come across these challenges and know how to handle them. You can only concentrate on building your business and reaching more customers.

Managing the International Markets

When your business expands to international markets, it will need the services of 3PL to take care of global fulfillment network. Your business gets added responsibilities, including a lot of documentation and accounting.

If you get a 3PL service provider to do the work, you will get the extra responsibilities off your shoulders. You will deliver in time, handle customer queries, and reduce the costs of international shipping.

Disadvantages of Working with 3PLs

While there are clear benefits of 3PL providers, you should not ignore the drawbacks you can encounter when working with them.

Hidden Responsibilities

Don’t be cheated that 3PL is going to shoulder all the responsibilities of your business. All customer interaction and inquiries will be on you. If a 3PL service provider makes a mistake, it will be you to answer for it and not the third-party logistics company.

Lack of Control

With 3PL controlling all your shipping and storage operations, you will not have any control over the process, which may not be all good for your business. When it faces challenges or delays in the shipment process, the customers will be on your neck.

Upfront Investment Costs

While your business is going to save in the long run, you must understand that the upfront costs can be too high, especially if you’re a startup. You should not take such a huge investment if you don’t have many orders yet and don’t need a huge warehouse.

Make the Right Decision

Now that you know what is third-party logistics and why your business needs it, the decision is now on you. You can either choose to have the 3PL services for your business or decide to operate everything within your company. You should, however, understand that big business will eventually need the 3PL company.

The right one can change your business greatly and make handling shipping and storage a walk in the park. A wrong 3PL service provider can destroy your business and make you lose a lot of your valuable customers. You should choose a 3PL provider wisely.