What is 3PL?
Third-party logistics (3PL) is a specialized service which allows companies to outsource different operational logistics tasks—starting from warehousing to delivery. 3PL partners are focused on simplifying the supply chain by taking over and managing transportation, storage, packaging, order fulfilment, forecasting, as well as freight forwarding.
To keep pace with the modern-day global marketplace, companies have to leverage 3PL partners to streamline their operations, primarily supply chain. Such a partnership enables them to meet the dynamic needs of consumers. 3PL benefits companies by providing several amenities, called “value-added services.” These services can include specialized product distribution, customized labelling and final product assembly.
When we talk about 3PL benefits, there are many of them to list down. If you are wondering what to look for in a 3PL partner, then you should check out the many 3PL benefits that they provide. You should ask two major questions:
- How 3PL partners improve supply chain operations?
- How 3PL improves finances?
Let’s answer these two questions here:
One of the most prominent 3PL benefits you can derive is flexibility. 3PL partners have a high degree of flexibility in terms of storage space, labour and tools and equipment. These aspects make them highly capable of responding to demand and order fluctuations. Some 3PL partners also offer extra space to their clients as a part of their value-added service. Such an offering proves financially rewarding for clients because they can pay for only the required amount of space.
The types of equipment in the arsenal of a third-party logistics provider are huge. These include shrink-wrapping machines, conveyor belts, pallet wrappers, automated assembly lines, box taping machines, blister packaging machines, and the likes. They help to speed-up logistical operations. They have experienced staff who can operate them with ease. As such, there are fewer costs incurred for damages, meaning companies can hit two birds with one stone- simplify operations and save money.
Third-party logistics can smoothen supply chain operations by providing you with a real-time view of every task. You can get a clear idea of their efficiencies, various moving parts, blockages, issues, and so on. Since almost all aspects of your supply chain operation would be managed by 3PL partners, you can get all the necessary data and updates about your products. You will get to know where they are, when they are packed and moved, and when they reach the final destination.
One key 3PL benefit of these service providers when it comes to transparency is their ability to communicate with their clients. No matter what happens, they will always keep you in the loop. They have a network of fulfilment centres that take care of your products while they are in transit. The data points they provide will offer you the much-needed insights to make necessary changes to your supply chain flow to maximize efficiency.
Reduced variable costs
If you are wondering how 3PL improves finances, then it’s by keeping your variable costs in check. Variable costs, in simple terms, include all those payments that you make for assets when they are put to use. It’s completely different from fixed costs or capital expenditure, which is incurred when you acquire an asset. Typical variable costs involved in the supply chain domain include that for labour, warehouse space and logistics equipment.
With 3PL partners, you can keep these costs under control. These service providers charge from clients when their services are used. For instance, you either pay a rate per square foot or the number of pallets while using their warehouse space. You don’t have to reserve the entire warehouse and incur a whopping cost for that.
No hiring costs
One of the most significant 3PL benefits is undoubtedly cost-savings. Following up with the previous point, 3PL partners have their own amenities and equipment. There’s no need for companies to hire an in-house team to manage their supply chain operations. The warehouse, labour and equipment are already in place. As such, capital investment is minimal for companies.
Hiring and training employees can be a huge expenditure for your company. Thanks to 3PL partners, you can do away with this cost. The trained and experienced staff of third party logistics partners can handle storage, transportation and distribution of your products, meaning you don’t have to get new employees on board.
Efficiency and ease
The bottom line of any business, irrespective of their nature and size, is to boost efficiency. 3PL partners can help you achieve this with their value-added services. The core competency of third party logistics lies in efficient logistics management—something that can enable you to run your supply chains more effectively. They are always on the lookout to better their performance by measuring KPIs. With boosted efficiency comes a huge saving of both time and money.
Not to forget, third party logistics is extremely easy to integrate. The value-added services provided by 3PL partners requires you to partner with only one service provider for all your logistics needs. Since they take care of end-to-end logistics, you can seamlessly integrate any updates or changes.
When you are thinking what to look for in a 3PL partner, you should look at the range of value-added services they offer. Valuable 3PL relationship include a trusting partnership, proper strategic planning and access to advanced technologies that can take your business to a notch higher and foster overall growth.
Here are 5 Ways To Find The Best 3PL Partner.